Ghana – Government seeks $5.5 billion to settle remaining clients of defunct FMCs

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The government of Ghana is seeking the approval of US$5.5 billion to complete payment of the bailout packages to the remaining customers of defunct fund management companies who are yet to be settled.

“Mr. Speaker, for the Securities and Exchange Commission to fully settle investors of the remaining 17 AMCs [asset management companies], an amount of GH¢5.5 billion (1.3% of GDP) is required. For this reason, we have come to this august House once again to seek for your approval to raise an amount of GH¢5.5 billion in 2021 to complete the asset management industry bailout,” the interim Finance Minister, Osei Kyei-Mensah-Bonsu appealed to Parliament on Friday, March 12.

The Securities and Exchange Commission in November 2019 revoked the licences of 53 Fund Management Companies following the companies’ failure to “return client funds which remain locked up and in a number of cases, have even folded up their operations.”

This action was part of measures to clean up the financial sector of the country and was taken pursuant to Section 122 (2) (b) of the Securities Industry Act, 2019 (Act 929) which authorizes SEC to revoke the license of a market operator under some circumstances.

In the 2021 budget statement, Mr. Kyei-Mensah-Bonsu, who is also the Minister for Parliamentary Affairs, during the presentation, announced to the House that “the resolution of the banking industry has been completed”.

Giving updates on the payment of bailout packages to the customers of these collapsed firms, he explained that as of “the end of December 2020, government had provided an amount of GH¢3.4 billion for the payment of validated claims to investors of 30 AMCs for which liquidation orders were obtained”.

But in order to settle the payment of monies to the remaining companies, the government will need a total of US$5.5 billion, hence the call to Parliament to approve the said amount of money.

He listed Gold Coast Fund Management Ltd (now Blackshield Capital Management), First Banc Financial Services Limited, Liberty Asset Management, Beige Capital Asset Management Ltd, Ideal Capital Partners Ltd, and Frontline Capital Advisors Ltd as the companies to benefit from the payment should the House say yes to the request.