Interfin Securities had virtually turned itself into a bank — taking money market deposits at unsustainably high interest rates and engaging in high margin, risky lending — some of it to entities and individuals related to Interfin Securities such as founder Farai Rwodzi, businessdigest has established.
Documents seen by businessdigest show that Interfin stockbrokers was engaged in a high level of money market dealings in direct contravention of both the Securities Act (Chapter 24:25) and the Banking Act (Chapter 24:20).
Investors could have been prejudiced by as much as US$5,3 million. Interfin Securities was last week stripped of its securities dealing licence by the Securities Commission of Zimbabwe (SECZ) after an investigation by the regulator found the firm to have breached various laws by engaging in non-permissible activities. The commission found that Interfin Securities was securing funding from institutions and individuals and on-lending these to third parties, thus abusing its securities dealing licence.
While indications are that Interfin Securities had been engaged in the illegal activities since 2009, records show that from January 2010, the company was taking deposits from various investors at interest rates ranging from 18 to 32,4% per annum and on-lending the monies to various struggling companies at interest rates of between zero percent and 1 080% per annum.
Several loans were issued at interest rates of up to 900% per annum. Some of the depositors appearing on the schedule with substantial deposits are Kingdom Asset Management, MBCA Capital Management, Infinity Asset Management, Interfin Group member companies Altfin Insurance and Altfin Life Assurance, and Messina Investments, an investment company linked to British business tycoon Nicholas Van Hoogstraten.
On January 2 2010, Lobels Bread borrowed US$200 000 from Interfin for two days payable on January 4 2010 at an astounding 1 080% interest rate. The interest charged for the two days was US$12 000.
On the same day, TN Capital was advanced US$33 000 at 900%, US$500 000 at 288% per annum and a further US$200 000 at 260% per annum.
The records show that while other borrowers were paying through the nose for loans, a Godfrey Njanike was advanced a loan of US$1 307 at zero percent on January 2, 2010 and a further US$4 173 on Jan 15, 2010 at an interest rate of 138,5%. Njanike is believed to be related to Raymond Njanike, who is the MD of Interfin Banking Corporation.
Another major beneficiary of the facilities offered by the firm was listed as Aucyn Investments, a company owned by Interfin major shareholder Farai Rwodzi and his wife Lorah.
Aucyn accessed several loans in January and February this year, the latest of which include US$122 560 borrowed on January 3 and US$219 500 on January 5, 2012. Both loans were at a favourable rate of 24% per annum.
The cumulative advances to Aucyn in January 2012 were US$506 851. TN Capital remained a large beneficiary of loans and was lent a total of US$937 950, while Remo Stockbrokers and their associate company, Zimslate Enterprises, borrowed totals of US$947 503 and US$1 999 706, respectively.
However, TN Financial Holdings CEO Tawanda Nyambirayi said the transactions between Interfin Securities and TN Capital were in fact above board. He said: “Interfin (at the time) was a very reputable stockbroking firm. TN Capital did a lot of share purchase and sale transactions with them. In circumstances where TN Capital had excess investment funds, or pending settlement of share purchase transactions, TN Capital invested the surplus funds with Interfin Securities in the ordinary course of business.
“In turn, Interfin Securities also invested surplus funds with TN Capital in the ordinary course of business. When TN Capital became aware of the challenges, TN Capital ceased dealings with Interfin Securities and recovered all the shares that were held on its behalf by Interfin Securities. As matters stand, neither TN Capital nor any member of the TN Holdings Group is exposed to Interfin Securities.”
Interfin’s illegal activities came to light when Remo sued Interfin for failing to return shares that had been lodged as security for the loans, prompting an inquiry by the SECZ and the Reserve Bank of Zimbabwe.
The investigations led to the suspension of Interfin and Remo from trading on the Zimbabwe Stock Exchange, while the enquiries into the scandal and the liquidity problems at Interfin Bank have led to the temporary closure of the bank announced by the central bank this week.