The head, Department of Finance of the School of Business of University of Cape Coast, Prof. John Gati Gatsi says, the Securities and Exchange Commission did not use the right approach in ordering for the immediate suspension of the gold deposit-taking business of Menzgold.
According to Professor Gatsi, the Securities and Exchange Commission should have considered the impact of their order on market players before leaking any documents to the public.
He believes what SEC did can affect customers’ confidence which can lead to a serious economic backdrop for MENZGOLD.
According to Prof. Gatsi, once majority of Menzgold operations were within the remits of the law it would have only been appropriate for the regulator to allow them apply for a license.
Responding to the possible impact SEC’s order could have on MENZGOLD on Radio Ghana yesterday, Professor Gatsi said the regulator should have used the principle-based approach to regulate money in dealing with the situation.
“In the financial market, we have what we call Product Innovation that will bring about new products and new transactions so MENZGOLD activities seem to be some kind of new or innovative transaction within the market. Looking at it critically, there are some potentials risks which are embedded in the transactions that they engage in so it is possible that when new transactions emerge, they may not be very clear to the regulator and it takes time for the regulator to find out where they have faulted. I believe, so far, that is what has happened but the problem has been that the posture of the regulator has been that of confrontational and I don’t think that should be the case.
When it happens like that, even when this issue is resolved, you have already dampened the confidence of those within the banking sector so it becomes difficult to regain this confidence.
That is why I say that, we should be mindful about the way we go about it, bearing in mind that, the whole issue is about whether the activity falls under banking or it falls purely under capital marketing transaction and we have come to the conclusion that it falls under capital banking transaction so we plead with the regulator to give them time.”
According to Professor Gatsi, the order given by SEC is likely to have a heavy toll on the company as many of the customers will be pushed to withdraw their money.
“The truth of the matter is that the regulator is there to protect the interest of the participants in the market so the whole issue is a signal for the regulator to know that there is a problem somewhere. The regulator should have been mindful to apply what we call Principle-Base Approach to regulate this issue and I believe that if that were to be employed, this issue would have been dealt with, without even the public knowing.”
Going forward, Professor Gatsi advised regulatory bodies to be circumspect in their dealings with financial institutions and ensure public confidence in them rather than doing anything that will affect their operations. He also charged customers to be mindful of where they invest their monies.
“I insist that, customers should know signals that will indicate to them that this place is not good for them to put their money and also regulators should be mindful of their utterances especially when their utterances are negative.”