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Banks colluded to close Sekunjalo accounts



Sekunjalo Investment Holdings, which has interests in Independent Media, Ayo Technology and Premier Fishing & Brands, told the Competition Tribunal this week that the major banks colluded to close their bank accounts between 2020 and 2022.

The responding banks hit back, saying there was no collusion and their decision was based on reputational and commercial risk to continue doing business with Sekunjalo, which is chaired by Iqbal Survé.

In late 2020, Absa sent letters to inform Sekunjalo related entities that their services would be terminated within 60 days. Other major banks, including Nedbank, Investec and Standard Bank, followed suit by closing accounts or revising the accounts.

Some 36 applicants in the case, collectively known as the Sekunjalo Group, filed a complaint with the Competition Commission against nine banks in December 2021.

The group asks the tribunal for interim measures against Standard Bank and Nedbank, banning them from ending their relationship with Sekunjalo until the main conspiracy charge is decided by the committee.

Sekunjalo is also asking the tribunal for a preliminary measure that would force seven other banks to restore their bank accounts. The seven banks are FirstRand Bank Limited, Absa Bank Limited, Mercantile Bank Limited, Sasfin Bank Limited, Investec Bank Limited, Bidvest Bank Limited and Access Bank Limited.

Attorney Vuyani Ngalwana, who represents Sekunjalo, told the tribunal that the banks had taken a “rude and untrustworthy” stance in relying on media reports to allege potential reputational risk by maintaining a banking relationship with Sekunjalo.

The photo

The banks appear to have soured with Sekunjalo after a commission of inquiry led by Judge Lex Mpati report in 2020, governance at the Public Investment Corporation (PIC) will expire, with the finding that the PIC had invested in Sekunjalo companies, often against the advice of investment advisers, due to the close relationship between the PIC’s then CEO, Dan Matjila, and Surve.

The PIC is filing a lawsuit to recover money that it claims was irregularly handed over to Sekunjalo.

Ngalwana noted that the PIC has substantial stakes in each of the major banks as part of its job of investing public sector employee pension funds, and that there was a concerted effort to deny banking facilities to a black owned and managed company. .

Sekunjalo then hired retired judge Willem Heath to carry out an “independent report of factual findings related to the Mpati Commission and the Sekunjalo Group”.

Standard Bench

Standard Bank, represented by attorney Steven Budlender, argued that it was investigating Sekunjalo’s accounts and had provided it with extensive opportunities to submit information about the concerns it raised. Sekunjalo had not yet provided all the requested information. The bank had not yet taken a decision on whether or not to terminate the banking relationship.

“We argue that the request against Standard Bank is not only unfounded, but also abuse of process,” the bank argues in its argument. Sekunjalo has not provided any facts to support its claim that a decision to end the banking relationship can only result from collusion with other banks. The group used competition law to force Standard Bank to continue providing banking services, potentially circumventing the bank’s contractual right to close a bank account.

Ngalwana responded back, saying that contract law cannot escape constitutional scrutiny, while the Financial Intelligence Center Act (FICA) allowed bank account closures only under very specific circumstances, such as the inability to verify a customer or perform ongoing due diligence. to feed.

Nedbank

Nedbank, represented by attorney Alfred Cockrell, argued that Sekunjalo was trying to end the common law principle that a bank has the right to terminate its contractual relationship with a customer within a reasonable time. Nedbank had nothing to gain by engaging in the anti-competitive behavior it is accused of since closing Sekunjalo’s bank accounts would not allow it to increase the price of its services or foreclose competitors.

Nedbank says it asked in good faith with Sekunjalo in 2021 about certain transactions, but the information provided was insufficient. In February 2022, the Western Cape Supreme Court rejected a request by Sekunjalo to ban it and Nedbank Private Wealth Stockbrokers from closing its bank accounts pending the outcome of the case now before the Competition Tribunal.

Following that ruling by the Supreme Court of Western Cape, Nedbank closed the bank accounts of several of Sekunjalo’s corporate accounts.

“For several years, the Sekunjalo Group has been the subject of allegations of inappropriate behavior. [Sekunjalo] tries to characterize itself as the victims of a widespread media conspiracy,” Nedbank argues.

“It is therefore a common reason that there are widespread allegations of felony on the part of the Sekunjalo Group. These allegations have been referred to and investigated by the Mpati Commission. The Mpati Committee had some negative things to say about the Sekunjalo Group.”

Ngalwana replied that the banks had repeated certain defamatory comments about Sekunjalo, citing reputational risk as the reason for ending the banking relationship with the group. While this was a potential risk, there was a much greater risk to the 200 entities under the Sekunjalo umbrella and the approximately 8,500 people employed there, as well as to the SME suppliers who depended on the group for business.

Nedbank relied on a Supreme Court (SCA) case in which banks have the right to close a customer’s account within a reasonable time, without having to show a good reason. If a bank discovers reputational and business risks associated with a customer, a bank may close the account provided it complies with the notification requirements in the contract with the customer.

Ngalwana replied that the SCA case brought forward by Nedbank did not help her, as the Bill of Rights was not an issue in that case. In the Sekunjalo case, the Constitution was invoked in various ways. Closing her bank accounts had the effect of suffocating her business, despite the banks’ claim that alternative banking transaction facilities are available to her.

FirstEdge

FirstRand also argued that Sekunjalo had failed to prove that it engaged in a prohibited practice, and this should deprive it of the interim order it is seeking.

absa

Absa was the first to end its banking relationship with Sekunjalo in August 2020 on the grounds that it “posed unbearable reputational, commercial and legal risks” according to the bank’s arguments. The group had failed to convincingly argue to the tribunal that the bank was engaged in a restrictive practice.

Ngalwana replied that Absa was the first to “activate the guillotine” when it closed Sekunjalo’s bank accounts.

Absa argued that it had done this unilaterally, without consulting other banks, and that in any case there was no shortage of alternative banking solutions for the group. Ngalwana rejected this argument.

commercial bank

Mercantile Bank claimed that Sekunjalo named the wrong party within the banking group. “This is a technical gimmick. We all know who the interested respondent is in this case. These are the kinds of legal fallacies that the Constitutional Court should guard against,” said Ngalwana.

Ngalwana also rejected those benches, arguing that the tribunal cannot decide constitutional matters.

“There is no constitutional challenge in this case — all we ask is that the tribunal interpret the law through the prism of the constitution.”

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