The Financial Sector Conduct Authority (FSCA) has imposed an administrative penalty of R100m on MET Collective Investments (METCI), following an investigation into a 66% loss in one of its unit trust funds in December 2015.

The regulator rejected arguments from METCI that the losses between December 8 and 11 in the Third Circle MET Target Return Fund were due to “an unforeseeable ‘black swan’ event” — the dismissal of then finance minister Nhlanhla Nene by former president Jacob Zuma.

METCI was found to have breached various sections of financial sector laws, among others being Section 4 of the Collective Investments Schemes Control Act, 45 of 2002 (CISCA) and Board Notice 90 and 92.

FSCA commissioner Abel Sithole said in his 52-page determination that METCI contravened the relevant provisions of Board Notice 90 to a “very material extent before the dismissal of Nene”. The breaches occurred on December 7 , 8 and 9, while Nene was only fired on the evening of December 9 2015, he said.

The FSCA found that METCI did not have proper risk-management processes in place to manage and exercise proper control, oversight and governance over the fund.

It also found that the extent of the fund’s exposure to derivatives was contrary to the prescripts of the relevant financial sector laws, as well as the fund’s own investment policy statement and mandate.

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