IRBA Newsletter Issue 53

Issue 53 | January-March 2021 16 LEGAL DISCIPLINARY COMMITTEE Matters Referred for Disciplinary Hearings Currently, there are 21 open cases that have been referred to the Legal Department for disciplinary hearings, and three of these were referred in the current quarter. The various matters are at different stages of the process. Matters Heard by the Committee During the period under review, two matters were heard by the Disciplinary Committee, with one matter pending a ruling and the second one remaining part-heard. Part-heard Matter: Sharemax The previously part-heard disciplinary hearing, which was convened to consider the allegations of improper conduct against the then partners of ACT Audit Solutions in relation to professional services rendered to Sharemax, resumed on 25 January 2021 and was scheduled to proceed until 19 February 2021. Notwithstanding the above, the matter was adjourned on 17 February 2021. This followed an application brought forward by the respondents, for the recusal of two Disciplinary Committee members on allegations of actual conflict of interest, bias and/or the perception of bias. The committee, on 19 March 2021, issued a ruling dismissing the respondents’ application for the recusal on the basis that a proper case had not been made out for the recusal of the two members. In the premise of the above, the hearing will be rescheduled for continuation. Finalised Matters Two matters were finalised during the period under review. One was finalised following the acceptance of a consent order previously recommended by the Investigating Committee and approved by the Disciplinary Advisory Committee; and for the other, this was after a dismissal of the respondent’s leave to appeal the Disciplinary Committee’s ruling. Below is a brief overview of the matters. IRBA vs K The respondent failed to report a number of reportable irregularities relating to breaches of the Companies Act, the Income Tax Act and the Value Added Tax Act. The respondent admitted guilt to the charges and was sentenced to a fine of R100 000; no cost order; and publication by the IRBA in general terms. IRBA vs Mr Mukhtar Ahmed Ismael Shaik Dawood Mr Mukhtar Ahmed Ismael Shaik Dawood, the respondent, who was formally registered as an auditor with IRBA, was charged with four charges of improper conduct, following an investigation by the regulator. The charges against the respondent emanated from a complaint received from the Department of Trade and Industry via Cipro in relation to investments made to development entities and intermediary companies, to which the respondent was a director. In addition to his directorship, the respondent was a trustee and a direct beneficiary of two trusts. Jazira Holdings Limited (Dubai) UAE Inc. (Jazira) invested significant funds in property projects located in KwaZulu-Natal. Jazira entered into a joint venture with two South African entities, one of which, the respondent and his brother were representatives thereof. Representatives (excluding the respondent) of these two entities travelled to Dubai to provide one Mr A Bagash with an opportunity to invest in the KwaZulu-Natal property market. Jazira invested several million US dollars in one of the development entities in Indaba Investment in terms of a Profit Sharing Loan Agreement, which was intended to relate to an investment in a property development known as Umdloti Property. Mr Bagash was under the impression and understanding that the Jazira funds would be utilised for the purchase of the Ridge Property and Umdloti Property land to be developed. Further, his understanding of the overall structure was that he would provide the initial capital investment and the development of the properties would be pursued and managed by the South African business partners. Instead, the intermediate entities purchased properties from third parties, with the investment capital that Jazira had invested in terms of the Profit Sharing Agreement. They then proceeded to sell these properties to the development entities, within a short period of time, at inflated prices and significant profit margins. The respondent had not disclosed to Mr Bagash that he was a director at both the intermediate entities that had sold the properties and the various development entities that had bought them at inflated prices. Despite Jazira being a shareholder in the development entities, it was not a shareholder in any of the intermediate entities; therefore, it did not receive any of the profits made, notwithstanding that Jazira’s money was utilised for the initial purchase of the various properties. The intermediate entities made secret profits in the amount of R39 722 807.02, before conveyancing costs, taxation and expenses. In light of the above, the respondent was charged with the following counts of improper conduct: 1. Failure to act with honesty and integrity in dealing with investment funds, including theft, fraud and forgery in relation of the investment funds.