5 reasons why Menzgold needs to start cooperating with regulators

The gold trading activities of Menzgold was halted by the Securities and Exchange Commission in the month of September with a suspicion of their activities being capital market business. I strongly believe the path Menzgold is taking is a dangerous one and I hereby enumerate five reasons why they should avoid the games and work on being cleared by the regulator.

1. The Minerals Commission can’t shield them any longer

Menzgold has been hiding under the umbrella the Minerals Commission for the lawfulness of their activities. This seem to be the initial story until actual word hit the market they are licensed to buy gold from small scale miners and not individual investors. The cover story for their initial license seem not to hold since most the clients receiving extra values from their offices seem to be stating their actual professions as nurses, unemployed graduates, taxi drivers and the like. The directive to halt operations came after several engagements with their regulator who seem unwilling to bring them to order on the breach of their activities. The umbrella rock under which they hid as Menzbank, to Menbanc to Menzgold and now in trouble Menzgold seems to be gone. They are now facing two regulators who will tolerate little of games in Bank of Ghana and Securities and Exchange Commission.

2. The contradictions are becoming excessive

Menzgold’s first reaction to the SEC directive was “business continues as usual”, they then later decided to have a meeting with the regulator whiles halting their operations for an amicable solution to the problem (1st Contradiction). Whiles this solution was being pursued but customers were unable to receive their dividend, another contradiction came with a statement stating the ban by SEC as the reason for their inability to pay customers extra values (2nd Contradiction). I find intriguing to believe this after the SEC directive specifically stated “No new contract should be created and all advertising of the investment business halted with immediate effect”. It doesn’t take a magician to know that, Menzgold is plying on the ignorance of Ghanaians and painting a picture of SEC locking the tradable gold in a cage. The directive was basically to stops taking of new investments. SEC also stated that “anybody dealing with them was doing so at their own risk”, which is to allow individuals who believe SEC statement to go for their funds which Menzgold is deliberately trying to prevent (3rd contradiction). I only ask two questions

a. How on earth would a ban that does not freeze companies accounts prevents people from withdrawing their investments?

b. How on earth would you investment in gold which is in trade fail to earn a return because the company was asked to halt activities of signing up new clients?

People in my line of work will conclude, they are just losing it.

3. The legal way is not the best for Menzgold

An analysis of the Menzgold situation by Bright Simmons which relied mainly on the Securities Industry Act 2016 (Act 929) and the Menzgold contract for their gold trading activities revealed two main projected facts. Their activities defined currently falls under SEC regulations in commodity trading, a second disguise of their activities would lead them to Bank of Ghana’s door step which is worse. The gold contracts describes Menzgold in various contradictory capacities. Provider of a gold trading platform, an agency service provider, a gold dealership firm are some of the capacities Menzgold refers to itself in just one contract. This the lawyers say is legally incoherent. An action by employees of Menzgold to restrain SEC and BOG would only make sense if they are procedural delays to buy some time for the firm. From and incoherent contract, to a regulatory questionable model, to unrealistic returns are a few reasons why the court should not be a place for equity. Since the ones coming for equity don’t have clean hands.

4.The back end investment activities

SEC in their engagement with Menzgold, would be looking at the back end of their activities since a directive has already been given to halt the front end of activities. SECs questions will mainly be around sustainability, ascertaining funds with Menzgold, as well as matching those funds with a reasonable availability of similar funds with high returns being earned on the books of the firm as investments or placements. A delay by Menzgold not to supply such information within the reasonable period brings more doubt into their activities and their ability to keep records of their trading activities. When this test is passed, SEC would likely consider them for an investment banking license with stricter regulation.

5. It can get uglier

Menzgold should be careful not to invoke the wrath and power of SEC. SEC can close them down, compel them for information with court orders and even sue directors for breach of duty among others. I don’t believe Menzgold would want to invoke such wraths of the investment regulator. I still stand by my assertion “you should always be careful how you treat your father-in-law before you marry his daughter”. SEC and Menzgold in a best case scenario will be in the same industry and the bridegroom should just be careful of the father-in-law before the wedding, since one word from his mouth might mean no marriage takes place.