Fund Managers Under Investigation Say Guernsey Regulator Erred

David Cosgrove and Cobus Kellermann, fund managers under investigation by authorities in at least three jurisdictions, said the Guernsey regulator reached mistaken conclusions in an April affidavit that noted alleged failings.

“The Guernsey regulator may have been fed misinformation by their sources and reached erroneous conclusions,” Cosgrove and Kellermann said Wednesday in an e-mailed response to questions through their South African lawyer, Johan Theron. “There was a clear lack of evidence or any proof” in the Guernsey document, they said.

The Guernsey Financial Services Commission suspended funds linked to Kellermann and Cosgrove this year and is investigating whether they were correctly valued and if the men failed in their duties as managers. There appeared to be systemic failings in corporate governance, Paul Yabsley, senior analyst at the commission, said in an April 22 affidavit. South African and Mauritian regulators are also probing funds linked to the men.

Kellermann is still in South Africa, according to Theron, and was an employee of Lancelot Management Ltd. in Guernsey from 2008 to 2012. While Guernsey’s regulator questioned the net asset value of funds linked to Kellermann and his colleague Cosgrove, the pair said through Theron that “the NAV prices are calculated by an administrator and checked by the custodian with the result that pricing errors are highly unlikely.”

“It is critical and important to note, that despite all the noise created by some with less than honourable objectives, no alleged victims have come forward,” they said.

Guernsey Response

The Guernsey regulator said in an e-mail Wednesday that “matters remain ongoing and the Commission is therefore unable to provide any further comments at this time. When and if appropriate, the Commission may issue a further statement.”

MMI Holdings Ltd., the South African insurer that contracted companies linked to Kellermann to oversee some mutual funds, said that while investors withdrew money even after MMI ended the association, no customers made losses. “We have had a lot of disinvestments because of Kellermann,” MMI Chief Executive Officer Nicolaas Kruger said June 5 in an interview in Cape Town.

The Guernsey commission said in April Deutsche Bank AG had provided internal reports on some of the funds to the regulator. The bank had met with Kellermann’s company Lancelot and had started asking questions after a South African investments executive, Julian Williams, was murdered, the document shows.

Williams was chief executive officer of Basileus Capital Ltd. in Cape Town. In July 2012, he was shot dead by his former business partner Herman Pretorius, who then shot and killed himself.

Deutsche Bank said the issues raised by the Guernsey authorities are unrelated to its operations in South Africa.

“In 2012 we raised concerns with the Guernsey Financial Services Commission about irregularities with funds managed by Lancelot Management, to which we provide custodian services,” Deutsche Bank said June 9 in an e-mailed statement. “We are committed to the highest standards of governance and compliance and are cooperating with the regulatory authorities in their investigation.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE