IT'S agonisingly hard to be a regulator at times. When there's
enforcement action, complaints of heavy-handedness and unfairness are
almost inevitable. However, if things go wrong and people suffer losses
because somebody hasn't played by the rules, there will be this
automatic question: “Why didn't the authorities prevent this?”
Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/10/6/business/12129701&sec=business
Published: October 07, 2012
The
Genneva Malaysia case is an unusual example of a regulator's dilemma
because a business being investigated by several government bodies has
many stakeholders who would be a lot happier had there been no such
intervention.
Maybe dilemma isn't the right word. There was no sign of ambivalence when the police, Bank Negara,
the Domestic Trade, Cooperatives and Consumerism Ministry and the
Companies Commission of Malaysia carried out joint raids on Monday on
several premises of Genneva Malaysia Sdn Bhd and on the homes of its directors.
A
multi-agency strike like this is both rare and impressive. It's
impossible to miss the point that the Government is putting in a lot of
resources in acting on the suspicion that Genneva Malaysia has broken
the law.
That strategy has since widened in scope. Yesterday, the
police, Bank Negara and the Ministry of Domestic Trade, Cooperatives
and Consumerism conducted joint raids on three other companies Pageantry Gold Bhd, Caesar Gold Sdn Bhd and Worldwide Far East Bhd.
Like
Genneva Malaysia, the trio are classified as gold investment companies
on Bank Negara's Financial Consumer Alert list, which identifies
companies and websites that are “neither authorised nor approved under
the relevant laws and regulations administered by Bank Negara”.
On
its website, Genneva Malaysia describes itself as “the leading gold
bullion trader in Malaysia” and claims to have more than 50,000
customers and 6,000 consultants in the country.
These customers
and consultants are a frustrated and worried lot since the raids on
Monday. They are convinced that the company isn't doing anything
illegal. They would have been far less upset if Genneva Malaysia's
operations had not been halted.
It didn't help that the
authorities were initially unspecific about the reasons for the raids.
In a press statement on Monday, Bank Negara said these were for
“suspected offences under the laws administered by the respective
enforcement agencies”.
It was only four days later that the
central bank offered more details of the suspected offences. These
include illegal deposit taking, money laundering, tax evasion and
avoidance, false description (including misrepresentations), appointment
of agents without licence and failure to lodge statutory documents.
“Relevant
assets and documents of the companies seized from the raid will be
preserved for the purpose of facilitating the investigations. The
relevant enforcement agencies have mobilised the necessary resources to
expedite the investigations,” added the central bank in a statement on
Friday.
This addresses the customers' concerns that their gold
and money held by Genneva Malaysia will be frozen for an unduly long
time while the investigations are pending.
But there's still the
perception among the customers and consultants that the authorities were
wrong to suspect Genneva Malaysia in the first place, and that the
raids may have ruined a good business and the healthy returns the
customers had been enjoying.
Supporters of Genneva Malaysia
praise the company's business model and deny that it's a Ponzi scheme or
a get-rich-quick scheme. Some go as far as to say the company deserves
recognition for its innovativeness and for its ability to expand abroad.
There
are also suggestions that the probe is the result of other financial
industry players feeling threatened by the success of Genneva Malaysia.
The letters-to-the-editor page of The Star
yesterday carried several examples of such thinking. Says a customer
who goes by the name Kim Meng: “Genneva Malaysia's business is the new
age business model. And what started as a Buatan Malaysia five years ago
has since grown into one of the leading gold bullion traders across
Asia with businesses in Singapore, the Philippines, Hong Kong and China
(where Genneva has a 30-year operating licence in Beijing).
“Anything
new takes time to understand and lots of resistance to change,
especially when there are incumbents whose business will be affected by
such change and new models.”
Another person known as Flower Rose,
in response to a previously published letter that welcomed the raids,
wrote: “Please get your facts right before saying anything. You have
upset many customers that see Genneva Malaysia as a platform that is
holistic and sincere in providing the rakyat with a legal and steady
cash flow that even helps to boost the country's economy with the extra
disposable income.”
The schism over Genneva Malaysia is strange
because the enforcement agencies, according to Bank Negara, have acted
to protect the interest of investors and the public. Can the regulators
and the very people they want to help, be so far apart in what they
believe?
It's a situation that demands patience and calm. The
most important thing now is that the investigations are thorough yet
speedy.
The Genneva Malaysia consultants and customers should
have no problem understanding this. After all, if they're right about
the superiority and legitimacy of the company's business model, all will
not be lost. There will be no charges brought against the company and
it will be allowed to resume operations.
Best of all, it should
be able to bounce back with a fantastic (but unintentional) endorsement
from the authorities. What can be a stronger certificate of deemed
approval than having cleared high-profile investigations by several
agencies? Let's wait and see.
Executive editor Errol Oh is
still trying to figure out how Genneva Malaysia generates the profits
that it shares with its customers. He needs to know more than what's on
the company's website: “Experienced and dynamic management team with
more than 100 years of combined experience in gold trading, gold mining
and marketing.”
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