The Securities and Exchange Commission (SEC) has ordered gold trading investment firm, Menzgold, to shut down its operations in the country immediately.
It has also asked the company which has been on the warpath with the Bank of Ghana, not to take new contracts (investments) and also halt the broadcast and publishing of all its adverts forthwith.
According to SEC, evaluation of Menzgold’s documentations show the company does not have the licences to trade in gold, and that, its operations are in breach of Act 929 “as well as a threat to unsuspecting and uninformed investors”.
SEC in a suspension notice dated September 7, warned it will be compelled to take “measures under the law” to enforce the directive if Menzgold fails to comply.
“This directive does not preclude you from continuing your other businesses of assaying, purchasing gold from small scale miners and the export of gold,” the directive signed by Paul Ababio, Deputy Director General of SEC explained.
The Bank of Ghana on August 6 issued a warning to the public against making cash deposits and engaging in any form of investment with MenzGold Ghana Limited.
BoG said it was putting in places measures to take action against the firm for breaching the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).
“The Bank of Ghana is in discussions with other relevant regulatory authorities towards the taking of appropriate action against the company,” it said in a statement.
According to BoG, the carrying out of unauthorized transactions by Menzgold, was in breach of Section 6(1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).
It therefore warned the public to desist from transacting business with the company which deals in gold buying in Ghana.
In May 2018, Governor of the Bank of Ghana, Dr. Ernest Addison said the Bank of Ghana was collaborating with the Lands and Natural Resource Ministry to bring Menzgold to book on its unauthorized taking of deposits.
Chief Executive Officer of Menzgold, Nana Appiah Mensah has on several occasions denied claims that his firm takes deposits.
But BoG insisted the gold firm does so despite several cautions to the company.
Again in early August this year, Managing Director of the Precious Mineral Marketing Company, Opare Hammond, said the licence it granted MenzGold to buy and sell gold in 2014 has been revoked, thus making it illegal for MenzGold to do business.
“The Minerals Commission would usually give you the license and there is a small clause that says ‘you buy gold for export’ and I don’t know if that is what they [Menzgold] are relying on to do this. If that is what they are relying on, then they are doing the wrong thing. One is supposed to buy and package the raw gold before exporting it,” he explained.
But Menzgold issued a statement to deny the claim stating it only trades in gold and does not take deposits, a transaction the PMMC has challenged.
Lawyer for MenzGold, Kwame Akuffo, in another interview said the claims are untenable.
According to him, the Association of Gold Exporters of Ghana took up arbitration against the Bank of Ghana and the PMMC and it was that the arbitrator “held that the parties have agreed that the Minister for Lands and Natural Resources shall then nominate the PMMC as the government’s independent at-sale-laboratory.”
“So immediately this occurred in 2015 there was no need to renew the license with the PMMC”, he said.
On August 27, this year, SEC met with the Minerals Commission (NINCOM) over the matter, and on September 3 wrote to the Commission to inform it “Menzgold has a licence of NIMCOM to purchase gold from licence sellers and to export same”
“However, since 2016 or thereabouts, it has come to our notice that Menzgold, in addition to its primary business of assaying of gold and export of gold, also sells (through its agent Brew Marketing) and purchases gold collectibles from the general public”.
SEC said Menzgold is paying monthly returns of between 3 and 10 per cent on the collectibles, adding “it is unclear the nature of trading conducted to achieve such returns and our opinion is that the return offered does not communicate the true nature of risk investors are assuming”
Further, it claimed Brew Marketing, which sells the gold collectibles to the public, does not have “any form of licence from the Minerals Commission”, and yet it is the same gold that is deposited with Menzgold for trading.
At a meeting between SEC, BoG, Menzgold and the Minerals Commission in August this year, it was concluded, “Menzgold’s activities appear to go beyond the mandate authorities in its licences”.
However, Menzgold in another meeting with SEC on August 23, 2018 held its purchase of gold from the public was “a legitimate activity since they are purchasing collectibles”.
But SEC argued in the September 3 letter to the Minerals Commission that Menzgold’s purchase and deposit of gold collectibles from the public “amounts to dealing in securities” as contained in the Securities Industry Act of 2016, Act 929.
It said Menzgold does not have the licence to deal in securities, adding the firm’s invitation to the public to invest in Menzgold’s business is in violation of Section 216 of the companies Act of 1963, Act 179 as variously amended and section 207 of Act 929 as well as regulation 40 of L.I 1728.
SEC thus asked the Minerals Commission to call Menzgold in order but before any action could be taken, SEC on September 7 wrote to the owner of Menzgold Nana Appiah Mensah to shutdown the operations of his company.
“The SEC hereby directs Menzgold Company Ltd to shut down immediately, the business of trading in gold collectibles with guaranteed returns to cleints which constitutes in essence, dealing in securities with neither the necessary licence nor disclosures authorised by SEC”.