DEALSTREAM FRAUD

2011-12-13T21:13:00.001-08:00

ALEC HOGG: David
Shapiro, you know the
top story today – Dealstream.
DAVID SHAPIRO: I heard.
ALEC HOGG: Dave, you came
out, you spoke about what
caused the Dealstream
disaster, in your opinion. We
are going to have more on that
tomorrow, I think. We've got
Mr Leigh working on a whole
bunch of new questions,
including those that you posed.
DAVID SHAPIRO: Ja. For
those who haven't read the
story, my biggest concerns
were his back office. And,
having been in broking for so
long, very difficult to run a
trading operation without the
logistics behind you – and
looking after clients’ money.
You know, that’s the MS Global
[story] at the moment – you
know the whole issue that’s
happening there. It's the same
thing. Suddenly, when clients’
money is shifted from Peter to
pay Paul it's a major concern.
But Alec, my biggest concern,
and something that still has
not been answered, is how he
managed to operate outside of
regulation. There’s no
regulation or Act that governs
those kind of operations. That
to me is the biggest concern,
and it's still going on. Under
what jurisdiction or regulation
do CFDs operate?
ALEC HOGG: It is quite
incredible. You’ve got a
Financial Services Board,
you’ve got the Johannesburg
Stock Exchange in this case.
You have the Financial
Services Board in the
Sharemax case. There were so
many articles written by the
late Deon Basson about
Sharemax. I do recall engaging
with the people at one point in
time and finding them rather
odious characters – but I hadn't
done the work Deon had done.
He came up, pointed a lot of
fingers. Julius Cobbett of
Moneyweb has been pointing
fingers for years, and nothing
happened. And now we've got
a disaster of R4.5bn, 35 000
people scrambling around
trying to grasp any straw to
see if they can get some of
their money back.
DAVID SHAPIRO: Alec, what
people assume on the outside
is that these are controlled and
regulated bodies because, if
you look at banks, they are
tightly regulated. We know
how our banks held up against
the crisis. The stock exchange
– and you can ask Russell
Loubser – is a very, very well-
run body in terms of controlling
its members. But I felt that
maybe they knew, because
back side of the deals were
coming from Dealstream onto
the single-stock futures or onto
those markets, because he had
to in some cases regulate
them or hedge them. So he
was doing it through the stock
exchange, through the back
end…
ALEC HOGG: Are
investigations still going on
there?
DAVID SHAPIRO: If they do it
thoroughly, I think there are
going to be a lot of people who
were in high positions who will
have to answer to how an
operation of this magnitude
was allowed to continue
without someone clamping
down on them.
ALEC HOGG: Russell Leigh
reckons there was just
excessive gambling. He is
sitting in Israel, ran away from
South Africa, so I guess you’ve
got to take what he says from
that context. I don’t think he is
saying he was innocent, but I
think he is saying he’s not the
only one who caused the whole
disaster and others should also
be exposed.
DAVID SHAPIRO: Of course.
I'm sure there will be others.
But excessive gambling –
that’s up to you, and that’s up
to the regulatory body to make
sure – when I said Russell was
overtrading, it means that he
never had the right capital
against the kind of deals that
he was doing, which happens
in every other regulated body.
ALEC HOGG: What about the
Sharemax story, David? Have
you been on it?
DAVID SHAPIRO: Not as
closely as you have. But this is
the property one. This is one
you exposed – how many years
ago? How many years ago did
you have them in the studio
asking questions which were
never followed up?
ALEC HOGG: I also was
talking to a lawyer friend of
mine over the weekend, and
he said what is happening at
the Fidentia issue is
unconscionable. The lawyers
and other people are feeding
at the trough, and grabbing
fees out of this thing, and of
course the losers are the
poorest of the poor. The
widows and orphans are blue-
collar workers. These are
people who had only a few
thousand rand to rely on,
anyway, and those are going
up in smoke with the lawyers
who are, according to my
lawyer friend, fiddling by the
day as the day goes on. All of
this is unconscionable.
DAVID SHAPIRO: But it takes
so long to bring it to court or to
get it sorted out. In America,
the MS Global issue, Jon
Corzine is in front of Congress,
straight away, right away,
asking questions, and it will be
sorted out soonest. But here it
just goes on and on.
ALEC HOGG: I guess the
lobbyists here are within the
professional bodies, not within
the polictical bodies. But we'll
get there. We will get there.
There are developments, Vavi
now calling for those politicians
– how crazy is that? You are in
politics, but you can do
business with the government.
DAVID SHAPIRO: Ja, I know.
ALEC HOGG: That’s absurd.
DAVID SHAPIRO: It just
shows you that people want to
go into politics so they can do
business. It just gets them in.

LATEST UPDATE on LIQUIDATION for defrauded investors

2011-12-08T13:00:00.000-08:00

From: Elmerette Maidment
Cc: Michelle Morris
Subject: Dealstream Securities (Pty) Ltd (In Liquidation)

The liquidators are still busy collecting outstanding debts and busy with further investigations. We also applied for an extension to lodge the First Liquidation and Distribution Account until end May 2012. At this stage, there are no further developments. The liquidator will do a circular to creditors as soon as there are any further developments.

Kind regards.

Elmerette Maidment

INDEPENDENT TRUSTEES (PTY) LTD

Corporate Recovery Advisors

Clearview Office Park, Unit B5

Wilhelmina Ave, Constantia Kloof

P O Box 21341, Helderkruin 1733

Tel No 011 991 5500

Fax No 011 991 5506

e-mail : elmerettem@corprecover.co.za

website : www.corprecover.co.za

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Russell Leigh breaks the surface of his cave in Israel to give us some wisdom.

2011-12-08T12:03:00.000-08:00

Talks for the first time about the Dealstream collapse.

Well it wasn’t quite what I’d hoped for. A direct discussion is always preferable. But Russell Leigh, kingpin of liquidated derivatives trading business Dealstream, was prepared to engage via e-mail on Monday. And for the first time since the collapse of the company over three years ago, Leigh has started to offer his side of a saga that cost traders and the banks hundreds of millions of rand and had a debilitating impact on a number of JSE listed companies including gold miner Simmers and IT group Vox. Neither company survives as an independently listed entity.
Here’s our initial “conversation”, which I’m hoping to follow up on Tuesday after doing some more research into the three year old saga.
HOGG: What in your opinion caused the collapse of Dealstream?
LEIGH: Simply, like every other collapsed banking institution in 2008: bad debts. BD [bad debts] from Dealstream’s client base or inability to collect the debtors fast enough to meet our creditor, the daily Safex margin call where 100% of our business was executed.
HOGG: Were client funds used in an attempt to trade out of underwater positions?
LEIGH: No, we only ever traded liquid accounts on mandate, the rest of the trading was executed by liquid clients through DMA.
HOGG: Did the FSB, JSE and the banks which were involved – Investec and RMB – act responsibly and rationally during the episode?
LEIGH: Investec really shouldn’t be grouped with the rest, they are totally innocent of everything. As for the FSB, RMB and the JSE, I don’t believe they operated responsibly or rationally.
HOGG: Were shareholders in Dealstream like Ernst & Young and the IDC approached to assist during and after the collapse came? How did they react?
LEIGH: The investors’ non-executive Dealstream director sat next to me almost every day during the last year of the company and was guiding me in every aspect of management of the company, We were joined at the hip – it was communicated to me that this was all they could actually help me with and I took all the help I could from them. They understood that our debtors were the cancer.
HOGG: People like Doug Reed of Vox Telecom accuse you of destroying his wealth. You agree?
LEIGH: Did he really say that? If you can show me that he did say that, I will show you his trading account at Dealstream and you can decide who and how he lost his money. Alec, I have only seen editorial from you and other editors, which pretty much line for line has been inaccurate. I have only seen words from people like DR admitting to their own mistakes and how they have grown and learnt from Dealstream. I haven't see them say what you and other editorial has said.
HOGG: It was reported that you left the country when the collapse happened, going to Israel. Is this true?
LEIGH: Not exactly, it’s very complicated – see below. I actually found myself in Israel months and months afterwards while persuing [sic] a business interest.
HOGG: It was reported that you would not return to SA to assist in the probe into the collapse because you feared for your life. Were there threats on your life?
LEIGH: Yes, they are ongoing with case numbers. Israeli police are very efficient and are actively working on ongoing threats. We know everyone who was involved in every aspect of everything regarding the threats, names places and people. In any event I offered all the assistance I could from the first day of the collapsed, but no one wanted anything from me. My exact contact details have always been available to the curator and then the liquidators who met with me in Tel Aviv in the summer of 2009 (N Hemisphere summer) and I stood by the white board teaching them everything they needed to know.
HOGG: Where are you now and how are you earning a living?
LEIGH: All I will say is that contrary to all the editorial of what has been written, I haven’t traded one thing in the market for over three years. Having no interest.
This article first appeared on Alec Hogg's daily blog

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If anyone knows the whereabouts of Russell Owen Leigh in Israel - kindly let us know. There is a reward available for his capture.

hopefully after Osama Bin Laden and Gaddafi, this one wont be too difficult to hunt down.

www.twitter.com/dealstreamfraud

Russell Owen Leigh Speaks from his cave in Israel _article

2011-12-08T11:55:00.000-08:00

Vox Telecom CEO Doug Reed accused by Leigh of gambling with shareholders' money, and worse.

After yesterday’s broad questions, Russell Leigh invited more in-depth discussion. I took the opportunity to dig deeper into the biggest financial scandal of 2008 with the man who until now hasn’t been prepared to engage in a public forum. What he is alleging is dynamite. Leigh’s version of the truth paints Vox Telecom in a most unflattering light and uncovers a default by Regiments Capital and provides inside information on roles of the Financial Services Board, Ernst & Young, Simmers and others.
We’re still in e-mail only discussion. So what follows are Leigh’s answers to a list of questions. I’m expecting that we will engage in some follow ups over the next few days. For those only now stumbling onto the story, Dealstream was a derivatives trader that went into liquidation three years ago, with losses for thousands of clients running into hundreds of millions of rands.
HOGG: After the collapse the FSB claimed that it had instructed Dealstream to stop making misleading claims. If so how many times was this done and what sanction was threatened?
LEIGH: I remember the FSB speaking to us once, we explained the situation to the tee, implored them to come and visit us, do a full audit and sit on our desk and go through our processes (I have all this in email exchanges). They called us back saying they approved everything as we were a SAFEX derivatives broker regulated by JSE. They had been prompted to call us from a complaining client, a lawyer who owed us money on a margin call and was trying to attack validity of our claim. They had asked us to stop trading in unlisted securities without an FSB license and when we explained our situation they gave us approval.
HOGG: After the collapse it emerged that Dealstream’s registration with the FSB as a financial advisor had been cancelled. Were you aware of this and if so when?
LEIGH: We never actually ever made an application to become an FSB financial advisor, we were intending to open up a new line of business for which it was required. When you tell the FSB that you want to apply, they give you an application number and send you the documents. Due to volatility of financial markets from mid-2007 onwards, we never expanded our offering from being a SAFEX regulated derivatives broker and we never submitted an application.
HOGG: The FSB claims since its formation in 2004 no financial accounts were prepared by Dealstream. When was the most recent set of audited accounts produced?
LEIGH: Never. Although we had signed off provisional accounts from our auditors for the first two years. I don’t know why they were not submitted by them as final. Our systems actually gave us a real-time picture of the company’s financial situation, so they were easily enough done.
HOGG: In its report the FSB said R134m was “missing” from Dealstream clients’ accounts. What happened to these funds?
LEIGH: Absolutely all clients’ funds at Investec went out to RMB’s SAFEX clearing account.
HOGG: Vox Telecom says cash of R30m held in trust on its behalf also disappeared. Its MD Doug Reed said in a recent interview with me that the losses were “R60m maybe more….” How was this money lost?
LEIGH: Vox gave us cash and shares to in their words, “boost your capital” as a result of a margin call against various Vox directors, staff and their family as a result of their own trading and failure of the Vox share price below 212c. A margin call is lost money paid to replenish lost equity. The capital was also given to Dealstream to finance a share buy-back program that was losing money for them. Did anyone ever ask them this question or ask them why DS had that money?
HOGG: Did the Vox executives lose their money gambling on other shares? How did the relationship with Vox’s executives work? Was there a similar relationship with the executives of Simmers?
LEIGH: Vox and Simmers are really two very different stories.
Vox executives, staff and their families lost all the excess capital we wanted them to hold with us as a condition for us leveraging their Vox shares by trading many other shares and their own shares in the market.
Simmers was just one share in which many of our non-Vox clients and many Vox executives, employees and their family lost their capital. Simmers was introduced to us by ex-VOX FD, Mike Von Holdt. His father Chris Von Holdt had initially made a lot of money buying Simmers at Dealstream and instructed Mike to buy some. On the day Mike instructed us to follow his father and buy Simmers, he made maybe hundreds of thousands and possible millions on the transaction. That presumably hooked all his Vox colleagues in because they all bought and that’s partly how they lost their capital. In 2008, Investec share price halved, Anglo American had a R300 trading range so losses were made everywhere by Vox people.
HOGG: Doug Reed says that you met with him on the day you left the country, assuring him everything was fine. What is your version of events?
LEIGH: I told him that the Friday before I had met with RMB and that they had agreed to allow us time to try and collect on our debtors and Vox needed to come through on the commitments to recapitalise their positions with DS. He asked me what I needed and I explained that to start, he needed to pay for a parcel of 12m Vox shares, which he agreed to do at 190c the next morning. By the way, the curator told me this transaction was not booked to Vox and it has been therefore been apportioned to the loss that DS clients have had to absorb. He understood that the money he had sent us to recapitalize his positions with us was spent money and sitting at RMB. He knew that his shareholder Regiments Capital had defaulted to us causing us extreme pressure and he knew we were working through the weekend with Regiments’ Eric Wood and Litha Nyhonyha so that they could make a payment to us. He knew we both faced a very fluid situation based on his share price and that the share price was hanging at a precipice – if he intimated to you that we had a meeting where everything was solid and fine then he is delusional because it’s a matter of record that above 200 he was solvent and below that everyone known to anyone at Vox was insolvent.
HOGG: RMB’s report states that on September 2, 2008, Dealstream was unable to meet its margin call. Yet the bank only put Dealstream into default on September 22nd . What happened in these three weeks?
LEIGH: During the period you mention we were given time to collect from our debtors, there had been some big positions on SAFEX which were going to be refinanced by the owners. We were also given time to unwind our positions on SAFEX thereby reducing risk. As I mention above, DS’s solvency status was extremely fluid depending on live market prices, we were given time by RMB to bring risk into acceptable levels and to collect on debtors.
HOGG: What was Saul Cohen’s relationship with Ernst & Young at the time that he was sitting next to you every day (as you explained yesterday). Ernst & Young claims that it sold out its minority stake in Dealstream before the collapse. If so when? And if that was the case why was Saul still so closely involved with Dealstream?
LEIGH: I am not sure about Ernst & Young’s sale of its stake in the fund or the fund manager. IDC and Ernst & Young where shareholders in the Argil-IDC fund that owned 50% of Dealstream. As I understood, Saul Cohen was an owner of the fund manager that managed the fund. In any event he was a non-executive director of Dealstream.
HOGG: After the collapse Saul claimed “We (presumably E&Y’s Argil VC fund) were always under the impression that clients’ positions were protected and their funds segregated. You rely on what you are told. ” Why would he have believed this? Were Dealstream clients’ trust funds were lumped together in a pool or segregated?
LEIGH: He could only mean that he believed that client money that RMB was holding in the SAFEX margin account as a result of their daily margin call against DS would be protected and segregated by RMB at close out.
HOGG: Please could you explain how the Dealstream clients’ trust accounts functioned? They were opened in the client’s name but did Dealstream have carte blanche over the funds?
LEIGH: Opened in a client name, we had a mandate to pass the funds over to SAFEX margin account at our clearing bank RMB or other such accounts that we had at Peregrine Securities at earlier some stage.
HOGG: Reports after the collapse state Dealstream had 2 700 clients. Roughly what percentage had exposures to Vox and Simmers? Were they all long?
LEIGH: I don’t know this number. By close of business we had been given time to unwind positions and reduce risk as I said above, so at close our book was left with that which was taking longer to unwind. Vox was held by directors and we were having a lot of trouble executing a close out on the FD, MD, CEO and every other key person at Vox.
HOGG: Why was Dealstream and its clients so heavily exposed to Vox and Simmers? What was it about the fundamentals of these companies that made them so appealing?
LEIGH: Simmers: we had numerous investor presentations about how it was under valued based on the value of it’s reserves and the value of their listed uranium subsidiary in Toronto. Every quarterly result came with a promise of hitting better production on the next and the potential there was significant. However, it’s not as much as what we thought of Simmers as to what our clients thought. Many of them came from people who knew the Watsons. When our clients are wrong, DS is liable for their margin call by 12pm and we’re left chasing them for it. As far as I can remember, Barry Sergeant wrote a report about some mining asset where the reserves and reserve model was very wrong but he liked Simmers. Whatever the case, Simmers was theoretically supposed to be able to produce a lot more than they were doing.
I don’t think Dealstream had anything to do with the internal situation at Simmers. I believe it really had to do with the fact that the pile of rock or the hole they owned didn’t amount to any real value in the time frame investors needed to support the share price. Management were also frustrating shareholders by executing zero cost collars which resulted in a flow of equity into the market on delta, that provided excess liquidity to a planet that was under a liquidity crisis.
Vox: I never really understood the business at all and initially I was always short or trying to be short of it. If I bought it ever, it was based a short term trading buy. There is an old saying in banking, when you owe the bank R1m they own you and when you owe them R1bn, you own them. When Vox universe of people suddenly owed DS hundreds of millions of rand I decided to engage management as to what was going on with it. Thereafter, I had a very close relationship with Tony Van Marken and Douglas Reed for two years. I had a single track mind with them irrespective of the business I didn’t really understand: I wanted to see them improve the quality of their shareholders. Regiments Capital approached me to try and get a significant (-+10%) stake of Vox in the 212c placement and Mvelephanda also bought in. At the same time Regiment brought along the PIC and the IDC. TVM spoke to me a lot about how other Stellenbosch based investors were wooing him and how Vodacom Business was always eyeing them and there were opportunities with Didata who could have been convinced of a strategic alliance of a voice business to compliment their 100% data business. TVM convinced another wealthy individual to buy a stake. We understood the PE was high but new earnings were going to bring it down and its client base and infrastructure were becoming more and more valuable and impossible to replicate. When the PIC bought Vox we decided to put some client money into it where we had a mandate to do so – it was a leap of faith. However, as I said what DS did with Vox is immaterial in respect to what our clients own holdings in Vox and how they spent their equity with us which was supposed to be used to protect their holdings in Vox.
HOGG: At the time of the default on September 22, how many of Dealstream’s clients had positive balances in their trading accounts? Did any get back funds from their trust accounts?
LEIGH: I have tried to find out but I don’t know the status of this at all, the liquidators are not communicating with me at all since meeting with me in 2009. I really wanted to work with them and the curator from day one as there were debtors who could have under moral suasion alone agreed to pay what they should have. There are debtors who know their debts and who are some of the wealthiest people in South Africa today and some of the biggest sports heroes and they are in default today. Part of the irrationality of the FSB and JSE I alluded to yesterday is based in the fact that once they became aware of DS’s solvency issue and our unpaid margin, there was no crisis meeting to try and avoid the melt down that occurred. They went straight for our throat. The JSE even divulged to a private client of ours what our liquidity position was while RMB was working with us to help improve our liquidity. This caused the panic that resulted in the client bringing a mob to the office, assaulting staff and causing us to close down at a time RMB apparently wanted us to try improve our risk profile through normal operations. From them on, they never asked me for anything more, they wanted their bad guy and did not want to talk to me.
HOGG: There are a number of reports stating that Dealstream traded in CFDs. Was this the case or did you only trade in Single Stock Futures?
LEIGH: All of DS’s business was in listed JSE single stock futures. DS business was a trading system that allowed clients to execute via DMA into the JSE and book all transactions as Futures!
Let me explain: the single stock future price of Anglo American looks very different to the Anglo American share price because of financing and dividend assumptions in the future’s price. Also, there is almost zero trade in SSF’s on Safex. All trade is in underlying shares on the JSE which are then changed into a future by essentially changing the delivery date to a future date on the JSE transaction. Trade occurs on JSE and then a transaction is booked as a future in SAFEX. SAFEX rarely actually transacts futures with buyers and sellers. This mechanism works very well except for the fact that a future price takes into account a dividend assumption. If a company changes its dividend, the broker (DS) or the future underwriting bank can be very exposed to each other for that change in dividend. DS had to sign a supplementary dividend swap agreement with its broker which gave mutual protections to each other. This is not efficient so SAFEX starting allowing us to book the two components of the future separately: the underlying share price future and the dividend future. This is effectively a CFD. This is how our website marketed our CFD’s. Gist was that we advertised that trades were DMA into the JSE and booked as SSF’s and which the client could have the option of viewing in our systems as a CFD with the underlying share price, dividend and interest components of the SSF viewed as separate items – which is essentially a CFD.
HOGG: On last night’s radio show David Shapiro said Dealstream’s administration was in a mess. Your comment?
LEIGH: That’s a cheap shot because it doesn’t matter how good administration is if its 2008 when market volatilities where at unprecedented levels and we have 1000 margin calls before lunch, worth a multiple of our capital base. DS was a spectacular failure only because it was first a great success because DS offered a good service. David had no insight into DS operations but I do understand where he is coming from. When I was trying to put DS together a mutual friend tried to ask David to join DS as a founding partner. In all our meetings, David had said that one thing that was important was to get administration right and it was a central theme to him. I think he is and was saying back in 2004 that with all the best of intentions you are going to fail if administration is bad. DS was set-up with the best of intentions and I think dealing with 3000 clients with a staff of under 20 we did very well in terms of administration. We knew our exposure every second of the day. We executed hundreds of transactions every day and which were booked, matched and margined. It was a fireable offense for our staff to leave the day without a completely matched trading day. We were dealing in complex instruments which required a formula to calculate their value and rounding off something to five decimal points rather then 2 had the difference of millions of rands. From mid 2007 until late 2008, financial markets faced a continuous tsunami of unprecedented volatility that broke every model for risk management. The issue was that we would close the day as a highly solvent concern and open the next day with 500 clients being under margin call and by lunchtime 1000 and we would close any day at various states of liquidity. As long as the margin call came in we were liquid and the week after the weekend Merrill Lynch collapsed the volatility became too much. It wasn’t as much as an administration issue as it was an issue of risk management with a book geared up too much on illiquid stocks in a liquidity crisis that took out most global brokerage houses.

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If anyone knows the whereabouts of Russell Owen Leigh in Israel - kindly let us know. There is a reward available for his capture.

hopefully after Osama Bin Laden and Gaddafi, this one wont be too difficult to hunt down.

www.twitter.com/dealstreamfraud

2 new links

2008-10-31T00:14:00.000-07:00

Two new links

http://bit.ly/sjlRZg

http://bit.ly/tOv0Er

A picture of him (for bounty hunters)

http://bit.ly/rXurJt

http://bit.ly/sTe1Lr

Oct week 3 articles here 2008...

DEALSTREAM DEBTS COULD BE HIGHER - Renee Bonorchis

Wed, 29 Oct 2008

DEALSTREAM may have flinched 27.3m shares worth R17m from its client VOX TELECOM. VOX chairman Tony van Marken has said this could mean that the debts that DEALSTREAM CE Russell Leigh left behind when he fled to Israel could be higher than originally estimated. DEALSTREAM JSE-regulated trades was owed R214.4m.

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JOHN FRASER: Dealstream is very bad news – the collapse of that institution has left all sorts of ripples, and one of which is, of course, the impact on Vox Telecom. They appear to have had 27 million shares invested in Dealstream, I believe on behalf of some of their employees, a pension fund or something, and in essence they’re saying that those shares appear to have gone missing and as a result of the exposure to the Dealstream disaster their headline earnings a share are going to halve, down by 45% - 55% for the year to August. Presumably if you were a shareholder in Vox, you’d be asking some quite serious questions about why they were so careless.

JONATHAN FISHER: Sure - the exposure was way beyond what shareholders would have expected. I believe that financial impact is to the tune of R30 million which is big for a company like Dealstream – that is a once off item, so it won’t happen again. It’s not nice for shareholders to get a surprise like that. I think the news was a red in the market. It’s been out there for probably six weeks or so. The price didn’t do much on the back of this announcement, and I guess we’re going to have to look at Vox going forward. Their results are going to be released shortly, within the next two weeks, but to have that kind of exposure beyond your control is not a nice surprise.

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Vox Telecom's earnings a share for the year to August were expected to be 45 percent lower because of the collapse of Dealstream, the JSE-listed company said yesterday. Headline earnings a share would be 55 percent lower during the period.

The company said that if the effects of Dealstream were excluded, earnings a share and headline earnings a share would have grown by between 20 percent and 30 percent. Last month Vox said it had not entered into contracts in which it had liability to Dealstream, but the company held R30 million of its cash, which it warned could be difficult to recover.

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Dealstream's Leigh avoids investigation

October 29, 2008 Edition 1
Mzwandile Jacks Johannesburg
Russell Leigh, the former chief executive of Dealstream, had indicated he would not return to South Africa to help with the probe into the collapse of the derivatives brokerage firm because he had received threats to his life, Bernard Levenstein, the curator, said yesterday.
Levenstein told Business Report this could make his investigation difficult.
Dealstream had defaulted on R167 million in debts to Rand Merchant Bank (RMB).
Levenstein, who has been communicating via e-mail with Leigh, said the former Dealstream chief executive was concerned about his safety in South Africa.
He said Leigh told him he was in Israel, but he did not have evidence to prove this.
"He has called me from a secret phone number and I do not have his numbers," Levenstein said. "He said his safety had been compromised."
Leigh emerged about two weeks ago, after disappearing last month.
"At this point investigations are ongoing," said Levenstein. "Any evidence of criminal misconduct will be referred to the relevant authorities, who may decide to conduct an extradition."

Levenstein said he had received complaints from investors who claimed to have lost money when Dealstream collapsed. "The names will be in my report, which will come out on November 10."
Levenstein had earlier said that Investec, which held accounts on behalf of Dealstream and its clients, might come under investigation should it be implicated in the probe.

He said Investec could be investigated just like RMB, Dealstream management and staff, including Leigh.

Levenstein insisted that at the moment Investec was not being investigated, but all the other parties involved in business dealings with Dealstream would face an extensive probe.
A Johannesburg-based analyst, whose company does not allow him to be identified, said that if the curator wanted to get to the bottom of the matter he would have to probe Investec now and not wait for what came out of the investigation.
"When they investigate Investec, it is not to say the investment banker is guilty. It is just to try to get right to the core of the issues," the analyst said. "I think even though Investec was not named in the Financial Services Board [FSB] report as one of the parties to be investigated, they need to look at them."
A report released recently by the FSB recommends that RMB's role in the extension of credit be investigated. It also recommends that Dealstream's status as an authorised user of the JSE since its inception be investigated too.

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South Africa: Dealstream's Failure Leaves Tangled Web

Business Day (Johannesburg)

30 October 2008
Posted to the web 30 October 2008

Renée Bonorchis
Johannesburg

BERNARD Levenstein, curator of failed brokerage Dealstream, said yesterday he was still in touch with Dealstream's CE, Russell Leigh, and if there was enough evidence charges would be laid against Leigh along with an attempt to extradite him from Israel.

Dealstream has become one of the most scandalous financial collapses in SA in the past decade. It was a small company but had large clients, and big names from Investec to Rand Merchant Bank (RMB) and the JSE have been pulled into the debacle.

Levenstein, working in Leigh's offices in Johannesburg, said the office was being dismantled where possible, but selling Dealstream's assets would not fetch much.

Dealstream traded in regulated single stock futures and unregulated contracts for difference . Last month the company started to default on its payments to its clearing agent, RMB.

When Dealstream went under at the end last month and Leigh fled the country, the Financial Services Board (FSB) did a preliminary investigation and found R134m was missing from client accounts and that Dealstream's account had just R15,5m in it.

Levenstein said he had met with RMB and Investec. He had Investec's data and could track the cash movements of Dealstream and its clients.

Ciaran Whelan, Investec's head of risk, said there had been contact with Levenstein, but Investec had not handed over clients' funds because there were competing claims for the funds.

"The money probably went back to Dealstream to pay its margins," Whelan said when asked about where Dealstream's clients' money may have disappeared to.

Levenstein said yesterday many investors were registering their claims against Dealstream via its website and it was possible claims would amount to more than the missing R134m.

On Tuesday, Vox Telecom issued a statement showing that two of its directors had their entire holdings in Vox wiped out while another four had their holdings significantly depleted. This would be in addition to the disappearance of Vox's share scheme, worth R17m. There is also the fact that Vox's share price has fallen more than 60% since the news of Dealstream's disintegration. Vox has lost R1,47bn off its market capitalisation thanks to Dealstream's damage to its reputation.

Levenstein's first progress report, which is not public, went to the FSB last week. His final report goes to the courts on November 10.

At that point there may be a challenge against those appointed as the provisional curator and the provisional liquidator, since both parties are linked to the Gobodo group.

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Newer articles here

2008-10-27T11:44:00.000-07:00

http://www.hellopeter.com/the_comment.asp?recid=206862&comp=711512

Anyone else diddled?

Am I the only one in Gauteng who was diddled by Dealstream online trading? Why the silence on this matter?

Investec has taken the “it’s not our fault” stance. The JSE suddenly says Dealstream has no licence to trade although Dealstream have been trading for around four years on the JSE.

The Financial Services Board has turned a blind eye.

About R70 000 in my “Trust Account” has been frozen and I can’t get to the cash which is legally mine.

BRIAN

Roodedpoort

Ombudsman ready for a higher caseload
Renée Bonorchis

Print-Friendly

Financial Services Editor

CHARLES Pillai, the Financial Advisory and Intermediary Services (Fais) ombudsman, said last week that he was watching the global market crisis with concern, but remained confident SA had a robust system of financial regulation.

But Pillai, who was speaking at the launch of his organisation’s fifth annual report at Gallagher Estate on Friday, said SA would not come out unscathed.

Pillai’s chairman, Cyrus Rustomjee, said he had no doubt the ombudsman would experience an increased workload. In the year under review, the number of complaints sent to the ombudsman grew 27,5% to 5720. The ombudsman office was able to resolve 486 cases and dismissed 1218 cases. In total 18 determinations were issued and the settlements related to those cases amounted to just over R14m.

Pillai drew attention to a couple of the more meaningful cases. One was to do with what he described as “errant practices” within the retail furniture industry. The Barnetts store in Port Shepstone, which is one of JD Group’s brands, had sold “ poorly educated domestic worker” Thulisiwe Gumede a TV , a mini oven and a TV licence. The goods were worth R3004 but Gumede signed “lots of papers” and walked away owing R6468. Upon further examination it was found she had been conned into signing up for a credit life policy, a warranty, and a goods insurance policy in addition to contract fees. The retailer was ordered to refund Gumede with interest.

In the past year, for the first time, the ombudsman pronounced on a case to do with the principles of equity. A pensioner and a widow, Elizabeth September, used a broker from Sanlam Life who took her bundle of cash and put the funds into Fidentia, the pension fund that collapsed early last year. September was promised 20% a year from her investments and, up until February last year, that is what she got. And then there were no payments.

September spoke to Sanlam Life and the company said it had nothing to do with it, referring her to Fidentia. But when the ombudsman stepped in it found Sanlam Life was responsible for the actions of its employees and ordered the company to repay all of September’s money with interest.

Given the collapse of Fidentia and most recently Dealstream, the ombudsman may have set a precedent for investors to get their money back from their brokers.

As for his own office, expenses grew more than 27% to R14,3m. The deficit is funded by the industry regulator, the Financial Services Board, and in the fiscal period it managed to create a process map for complaints, install a data management system, recruit six new case managers and work on its public profile.

However, while the costs of producing annual reports almost doubled to R354988, it slashed its spending on advertising and consumer education from R437371 to just R75918. Entertainment expenses rose 142% to R52816 and the cost of unspecified gifts went from R915 to R8920. Strategy planning and workshops, which cost nothing in the 2007 fiscal period, suddenly cost R52906 in the most recent period, textbook and library costs quadrupled and travel and accommodation costs doubled to R244632.

Some costs had been cut, but expenses were on an upward trend and Pillai was certain the ombud’s journey had only just begun. “The Fais ombud is now set to take centre stage in the financial services industry,” he said.

South Africa: 'Silence' After FSB Call for Dealstream Probe

Business Day (Johannesburg)

15 October 2008
Posted to the web 15 October 2008

Renée Bonorchis
Johannesburg

AFTER rushing out an inspection report and recommending an investigation of Rand Merchant Bank's (RMB's) role in the collapse of brokerage Dealstream, the Financial Services Board (FSB) had yet to contact RMB or ask for further information.

Alan Pullinger, CEO of RMB, said yesterday silence had descended, leaving the focus on RMB, although other parties named in the FSB report could help shed light on what happened.

Dealstream traded in single stock futures and contracts for difference (CFDs). It had accounts with Investec and RMB, with the merchant bank acting as a clearing agent for Dealstream's single stock futures trades.

In September, Dealstream started to default on its margin calls with RMB. This meant Dealstream could not give RMB enough cash in reserve to insure its trades. After three weeks, RMB reported Dealstream, and the brokerage was closed down and put into curatorship last week.

No one has been able to contact Dealstream CE Russell Leigh. He is said to have fled, flying first to London. One source said disgruntled clients arrived at Dealstream's offices calling for Leigh's head.

RMB's timing has been questioned, but RMB and the JSE have said it is normal to let a client default on margins before acting.

However, the FSB found that apart from the JSE knowing about Dealstream's misleading statements about CFDs since the beginning of 2006, Investec was acting as a market maker and a corporate cash manager for Dealstream.

Dealstream's clients had to have trust accounts with Investec to trade, and the FSB said those accounts should have had a total of R134,1m in them. But it appears Leigh bundled all but R15,5m into a single account, and may have absconded with the rest. How he got money out of client accounts held with Investec is not clear.

Tim Till, chief of operations at Investec Private Bank, said yesterday Investec held accounts on behalf of Dealstream and Dealstream's clients.

"Investec has been requested to release funds standing to the credit of Dealstream's account and standing to the credit of Dealstream's client's accounts to the curator of Dealstream," Till said.

"Certain clients of Dealstream have requested Investec not to release these funds to Dealstream. Investec is ... faced with competing claims to the funds which it is holding, and is taking legal advice ... to protect all parties."

RMB is owed R214,4m in its own right, and was left with more than R1bn in open trades for Dealstream's account. By the end of last week RMB had sold that down to R742m without losses. Pullinger said yesterday the bank still had two large positions in Vox Telecom and Simmer & Jack, making up to 90% of the remaining portfolio. Pullinger said it would take RMB longer to realise any value.

"We're taking a longer term, private equity type of mindset," he said. "We're moving on, and we're not sure of the FSB's next move. Certainly there are other parties that could shed light on what's transpired, especially the shareholders. Dealstream never released audited financial statements. Shareholders should have been asking for them."

Relevant Links

Southern Africa
Banking and Insurance
Economy, Business and Finance
Legal and Judicial Affairs
South Africa

Dealstream curator Bernard Levenstein's first progress report for the registrar of the high court is due next week. A full report is to be filed by November10.

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

INVESTECs PART in this- CASH in TRUST at INVESTEC MISSING- what Investec says

2008-09-27T07:59:00.000-07:00

Post/Comment here, or email any new info and we will post it for you.

____________________________________________________

DEALSTREAM WEBSITE read...
Trust Account
JSE listed Securities - Equities, Single Stock Futures, Options, Index and Agricultural Futures offered by Dealstream Securities Pty Ltd.
A SAFEX trust account will be opened for you to hold cash and stock positions.

CFD's and over the counterproducts offered by Dealstream Online PTY Ltd
Once a live trading account is activated, Dealstream will open a Trust Account at Investec Bank in your own name. You will receive a confirmation from Investec and Email from Dealstream providing you with your account details.

Trust Interest Rates
Dealstream negotiates a wholesale interest rate for each its clients based on the cumulative balance of funds held by all clients at Dealstream. In this manner it is possible to receive highly competitive rates for minimal cash deposits.

_____________________________________________

I contacted Invested and gave them my ID number and they informed me of my cash balance held in TRUST a few months back and my latest balance being considerably less!!

CASH in TRUST at INVESTEC MISSING- what Investec says
Where is cash that was held IN TRUST by INVESTEC?

Dealstream had cash held in trust at Investec...

Our Cash is missing !!

HOW CAN IT JUST VANISH WITHOUT A TRACE?
WE ARE NOT STUPID PEOPLE.
WHO IS TAKING RESPONSIBILITY HERE?

INVESTEC money held in TRUST in our personal names-where is it?

Yes Investec we know the accounts are frozen and that they are empty. Now explain how you are going to get our money that was in your trusting hands back to us?

ask Investec Corporate Cash Management where it is and that we want it back
Steven Group
Kris Mietz kris.meitz@investec.co.za
dgriffiths@investec.co.za

0112869607

IS INVESTEC TAKING RESPONSIBILITY FOR OUR CASH HELD IN TRUST WITH THEM?

_____________________________________
RESPONSE FROM INVESTEC

We are aware of the current problems related to Dealstream Securities (Pty) Ltd (Dealstream). Dealstream utilises an online product provided by Investec to intermediaries who manage client accounts. In terms of the legal relationships:

* Investec has limited capacity to deal with the clients of any intermediary that use this online product
* Dealstream requires each client to sign a mandate with Dealstream authorising them to open accounts and transact on behalf of the client
* Based on the legal agreement, and the client mandate referred to above, Investec can only transact based on instruction (electronic or otherwise) from designated officials at Dealstream .

Due to the legal structures that are in place, until we obtain some clarity on the future of Dealstream and the legal process that will be put in place, Investec will be unable to divulge information and/or process transactions based on instructions directly from the clients of Dealstream.

As an interim step, we have frozen access to the client accounts managed by Dealstream and we will actively work with the parties involved (the JSE, the FSB, RMB and Dealstream) in order to bring this matter to resolution as quickly as possible.

Furthermore, Investec has no trading exposures to Dealstream.

All press related queries should be referred to the Investor Relations division on 011-286 7070.

_________________________________________________

So INVESTEC, what exactly are you saying to the people who had their money held IN TRUST at investec on call?
Are you backing slowly out of this and not assuming any responsibility?

If I have to give you Investec my ID number to find out my cash balance in trust with you, and I found out that I have been defrauded, are you telling me that I must now ask someone else about the whereabouts of my cash in investec?

HELP info here- for those defrauded

2008-09-27T07:31:00.000-07:00

HELP info here- for those defrauded

Post/Comment here, or email any new info and we will post it for you.

DEALSTREAM's DEAFRAUDED CLIENTS
If you have been defrauded by Dealstream in Melrose Arch, South Africa,
kindly share your input here, so we can, as a larger informed number, head in the right direction to get our money back.

________________________________________________________

FSB LETTER

It is indeed unfortunate that you and many other investors under
Dealstream Securities find yourselves in an unforeseen circumstance with
regards to your investments.

However we must reiterate that the FSB is working tirelessly to get to
the core root of this problem. We further advice that every investment
has an element of risk and that people should advance with caution when
getting into any investment contract.

The FSB will communicate through the media if and when there any
developments with regards to their investigations on the operations and
demise of Dealstream.

For further assistance, please feel free to call the FSB Contact Centre
0800 20 20 87 / 0800 110 443 (Monday to Thursday 07h30 to 17h00, Friday
07h30 to 16h00)

I trust that this information is to your satisfaction

_________________________________________________________

INVESTEC
ask Investec Corporate Cash Management
where our cash is and that we want it back

Steven Group

Kris Mietz
kris.meitz@investec.co.za

Mr Griffiths.
dgriffiths@investec.co.za

0112869607

____________________________________

SAPS Commercial Branch

You need to open up a case of FRAUD againts Russell Leigh of Dealstream at your local SAPS First... and have a case number in order for them and the Scorpions to get to work.
WHO HAS DONE SO?

Focuses on fraud and commercial crime.
Hotline:
08600 10111

JHB
SAPS Commercial Branch 0118075320
Superintendant Heyman 0829007878

JHB-Commercialcrime@saps.co.za

hq.commercial@saps.org.za (no response from this)

________________________________

Below are two differing parties wanting to take action-

______________

Kevin Yeh on 2008/09/27 08:56:10 AM - Dealstream Action Group Affected clients are also welcome to email to me,
kyeh@worldonline.co.za
for further information. Currently we have 10 people in our group.

Dear fellow affected investors

Following my previous correspondence, I would like to inform you of a possible scam targeting affected Dealstream clients. An entity by the name of GFIA and certain individuals working with it are targeting affected Dealstream clients, asking them to sign a requisition form.

I am extremely suspicious of signing any form with GFIA or with any third party at this stage. The GFIA website seems to have been put up in a hurry, it lacks credibility.

I have been in contact with RMB, Investec and FSB. I was advised by FSB they are investigating the matter, and they have been to Dealstream’s offices to gather documents and information. I suggest we all wait until FSB makes a clear announcement on the matter. We should all speak to the regulator directly instead of attempting to use any third party to speak on our behalf at this stage. The toll-free number of FSB is 0800 110 443

Do not fall prey to any schemes that could want to make money off us, just because we are desperate to get our money back. Never sign anything if you don’t know who the counter party is.

_____________________________________________

This morning I was phoning around, to make some enquiries and to obtain assistance.

My first stop was Doug Reed, CEO of Voxtelecom, who is also affected by Dealstream. However, he was not available.

I then contacted RMB, who is the clearing member for Dealstream. Braam was sympathetic, but he could not really help me. All the futures contracts are now with them, but not CFD’s. He referred me to FSB for more info.

I then contacted FSB. A consultant said FSB has gone into Dealstream’s offices a few days ago to collect information and documents. They are currently investigating the matter. They will make a media announcement in due course.

Right now, what we can do is hope and wait.

______________.”

______________________________________________________________

Also those interested in taking some recourse, email this guy

www.troubleatdealstream.co.za

sales@investyourself.co.za
he says...
lets get a legal opinion. surely one of the institutions would have . .more been aware on what dealstreams actions were or . .more lack there of. also dealstream have . .more misrepresented themselves by claiming that ernst and young were shareholders, which is clearly not the case, as per ernst and young comments on this website. if dealstream misrepresented themselves and there creditors then i think they should be taken to task, if not for any moneytree value, then certainly on principle. why is that some persons if rumours are true can have there funds transfered to rmb from dealstream yet the rest of us have no say. spread the word to all creditors that we will seek legal advice and email me if you are interested in going forward once legal advice has been sought. .

Hi there everyone had a chat to GFIA and this is a little e-mail to let everyone know where we are to date. Please start watching the blog because we will update it as we know. Please note that the requisition form is not your actual claim and is therefore not legal and binding and you will require to fill in other documentation in this regard if GFIA get appointed and if in the future you incur any cost Mac form GFIA said that you would be notified and you can withdraw your claim at that point and then there would be no cost. Lets just do it step by step.

Regards

Bruce de Bruyn

082 8853 644

We are currently still anticipating a possible application for the liquidation of Dealstream Securities and will continue to file all the requisitions received from investors with the Master of the High Court. Although we have not received any formal communication in this regard, it seems that the Financial Services Board may still contemplate going the curatorship route with Dealstream Securities.

At this stage it is impossible to predict what the exact financial status of the company is. If Dealstream Securities is placed under liquidation or curatorship, the liquidator/ curator must take control of all the assets which would include the books and records. Only once that process has commenced, can the liquidator/ curator start to ascertain the financial position of the company and initiate appropriate investigations into the failure of the company.

Unfortunately this is the only update I have for you and your investors at this stage, but will keep you updated as further progress is noted. Thanks again for all the requisition forms received to date, it is appreciated. For those investors who would still like to submit their requisition forms, please scan and email to our Administration Manager: Madel Visser (madelv@gfia.co.za) or fax to us, at either (012) 361 0394 or (011) 482 4737.

Kind Regards

McComb Taylor

Divisional Director

GFIA Administrators (Pty) Ltd

and

Gobodo Forensic and Investigative Accounting (Pty) Ltd

I spoke yesterday to a representative at Investec and these are the questions regarding this whole mess and answers given - 011 286 9607

1) If an account was opened by Dealstream in the clients name at Investec, with a mandate to Dealstream, then surely the FSB or anyone else can not freeze this account as this account is not in the name of Dealstream. This account do not form part of Dealstream assets or liabilities and therefore not part of Dealstream at all. According to me I am suppose to be able to cancel Dealstream's mandate and take control of what cash is left in this account.

Answer - The accounts were frozen by the FSB, in order to finalise any open positions after the curator was appointed and then the accounts should be made available to the account holder.

Remark - This made sense except why can I not become a normal creditor in Dealstream's estate as RMB also took whatever the could.

2) Surely you can supply me the balance on my accounts as 2 of the 3 accounts was not in a trades. What do you want to hide.

Answer - If the FSB say we may not then we must listen. Wait until the curator was appointed and send your request to him.

Remark - maybe we must make a fraud case against Investec as they froze my account under the instruction of the FSB that has no jurisdiction over my account. Why not give me a transaction printout, so that I can at least determine the money missing, and then decide what route I want to go? Again not important enough like VOX?

3) Why can VOX and other major investors negotiate with RMB to cover their positions and us normal people are not allowed. Surely if Dealstream is liquidated then the short on RMB's side is also a normal creditor. Please then explain why RMB is allowed to finalise, maybe to the disadvantage of us, the open positions without talking to investors in Dealstream.

Answer - I do not know.

Remark - I did feel sorry for this person, as he was put in a situation where he did not know the any the answers and sound sincere. He did promise to bring my concerns to the attention of their public relations department. I do no think this will help at all as it was clearly shown by Investec and RMB the do only care for themselves.

Regards.

COMMENTS RE ABOVE
29 th Sep 2008
Dear X Dealstream Clients, ...Liquidation company for Dealstream ??

On 29 th Sept, a X Dealstream client was called by a "so called" liquidation company for Dealstream and needed to fax them a document in order to facilitate them getting their money back.

Anynone know details of this ...or is this a further SCAM?

is it this guy?
...from Moneyweb site.
Louis Fitz-gibbon
Louis you are vermin *&^%. stop praying on people who have already lost their savings. There will be 1c in the R in a liquidation and here you are trying to get these poor people to cough up for your benefit. back off.

Any help would be great for the victims.

louis fitz-gibbon
stop being an ambulance chaser you low life. the cash is gone. P*** off. these people have lost enough already

by angry on September 26 2008, 14:08
Find this comment inappropriate? Report it

Louis the Fly
LEave poor Louis alone - he is still looking for his MoneyTree (expand his purile comment to uncover the money tree pearl).

Good luck Louis. And be careful, don't chase a parked ambulance, you might hurt yourself

by 78 on September 26 2008, 16:06
Find this comment inappropriate? Report it

no flies on Louis
check out his website - Louis also sells CFDs!! FANTASTIC - i bet they will have a 50% off sale next week. You go my boy

by Louis Buffet on September 26 2008, 16:15

Dear Louis, trust you don't have some (all) of your clients' funds InvestYourself
there ....

by Louis Fitz-Gibbon on September 27 2008, 17:00

___________________________________________________________________

RUSSELL LEIGH's (CEO of DEALSTREAM) personal details needed urgently for Police

INTERPOL- you can see him and hear his lies here.

http://multimedia.johncom.co.za/view_video.php?viewkey=4094fe9e0bc1de3f94ed

http://multimedia.johncom.co.za/view_video.php?viewkey=8714c029b37a6ad3006f

What is his ID number :

I.D No: 710115 5174 088 -possibly

Address
Res Add: 67 Dorothy Road Norwood Johannessburg 2192 - possibly

CELL NUMBERS

Russell cell - 083-627-4445
and also 082-782- 4328 (had as old no)

Jeanne Leigh - 082-351-7122

PS
Jeanne Leigh was fired from Global Trader more than 5 years ago for attempting to steal Global Traders client base for her husbands business dealstream. The court records are public for those who are interested.

Where was he living before returning to South Africa?

_______________
Dealstream employees
Bernard Willer

Dealstream Securities and , Snap Systems software Owner
Johannesburg Area, South Africa

* at Dealstream Securities
* Owner at Snap Systems
Education
* North-West University/Noordwes-Universiteit
*
Owner
Snap Systems

Bernard Willer’s Education

*
North-West University/Noordwes-Universiteit

1999 — 2001

ADDRESS?
TEL?
___________________

off SAFEX website...
Notices and Circulars
23 September 2008 - F1847 - Default of Member - Dealstream Securities (Pty) Ltd

ie they were a member

Dealstream's FSP number is listed as 29 541 on the FSB's site, but its record has been marked as cancelled.

The Financial Advisory and Intermediary Services Act (FAIS) department of the FSB is responsible for issuing licenses, assessing financial services firms and taking action against firms who fail to comply with FSB legislation.

___________________________________

[IMG]http://i33.tinypic.com/2s0cork.jpg[/IMG]

http://tinypic.com/view.php?pic=2s0cork&s=4

[IMG]http://i37.tinypic.com/2lvoen7.jpg[/IMG]

[IMG]http://i35.tinypic.com/984vh1.jpg[/IMG]

[IMG]http://i36.tinypic.com/drb9ld.jpg[/IMG]

http://tinypic.com/view.php?pic=2ik9pj4&s=4

[IMG]http://i34.tinypic.com/1z35w5i.jpg[/IMG]

http://tinypic.com/view.php?pic=x5a5u8&s=4

http://tinypic.com/view.php?pic=2psg8t2&s=4

[IMG]http://i33.tinypic.com/68c7za.jpg[/IMG]

______________________________
Elmarie Kruger, manager of capital markets at the FSB,

said yesterday the FSB's investigation into Dealstream would not take long.

Listed securities: stick with JSE-backed investments
This week Dealstream, a brokerage that dealt in derivatives, had to close doors and clients are likely to lose all money held by the firm. This highlights the importance of the instruments you are investing in and how that relates to the credit risk of the company. Dealstream traded in contracts for difference (CFDs). These are not managed by the JSE and effectively are contracts between two parties, with the brokerage carrying the risk. When trading CFDs, effectively the brokerage firm's credit risk is taken on. Shares or securities, such as single-stock futures, which are traded through the JSE, offer far more protection as there is the backing of the combined balance sheet of all the members of the JSE. Moreover, reputable JSE-registered stockbrokers would keep all clients' assets in a trust account so that they are protected from any claims against the stockbroker. The brokerage would be a member of the JSE Guarantee Fund, which holds assets in excess of R80-million and protects against a member (a stockbroker) defaulting. A client can institute a claim against such a broker through the JSE Guarantee Fund.

LATEST ARTICLES HERE

2008-09-26T05:09:00.000-07:00

Dealstream placed under curatorship

But remains under provisional liquidation until both matters come to court.

Moneyweb
07 October 2008 15:12

Failed derivatives broker Dealstream has been placed under curatorship. This is despite it being provisionally liquidated.

The Pretoria High Court ordered the curatorship on Tuesday at the request of the Financial Services Board (FSB). It appointed accountant Bernard Levenstein as curator.

On Monday, JSE-listed Control Instruments (JSE:CNL), announced that its subsidiary company had been granted a provisional liquidation order against Dealstream. Control Instruments was a client of Dealstream.

Liquidation orders are granted when there is evidence that a particular company is insolvent. Companies are placed under curatorship when there is evidence of mismanagement, as in the case of Fidentia.

FSB spokesperson Russel Michaels says that the return date of the provisional liquidation is the same as that of the curatorship order, namely November 18.

He explains that this means the two orders will run concurrently until they return to court.

The FSB says it will collaborate with legal representatives of Dealstream clients to decide what will be best for investors.

In the South African context, curatorships have a history of being more creditor-friendly than liquidations.

"Investors may rest assured that everything will be done in their interests by both the liquidator and the curator," says Michaels.

"As these officers will be occupied with an immense task of unravelling the affairs of Dealstream, they should be allowed to do so without interference. Investors are requested not to contact either the liquidator or curator.

"Further public communication with investors will be issued by the FSB following reports received from the curator."

RMB report on Dealstream

The full text of RMB's report on its involvement with failed broker Dealstream

SENS
09 October 2008 08:29

Dealstream Securities was a non-clearing member of the JSE and an authorised user as defined in section 1 of the Securities Services Act. A non-clearing member trading SAFEX instruments has to place margin at theJSE through a clearing member. RMB acted as the clearing member for Dealstream in respect of its JSE Single Stock Futures dealings.

It did not know and did not have a relationship of any nature with Dealstream`s clients. RMB`s only
dealings with Dealstream was as clearer of Dealstreams futures contracts. RMB placed Dealstream in default on 22 September 2008 because Dealstream was unable to meet its margin obligations which RMB as its clearing member had an obligation to guarantee.

The FSB have issued an inspection report on Dealstream. This investigation was conducted by the FSB at the request of the Registrar of Securities Services and Financial Services Providers and the report formed part of the documents presented in a hearing in the Pretoria High Court on Tuesday 7th October 2008 for the appointment of a curator for Dealstream.

As a claimant against Dealstream, RMB fully supports the FSB`s investigation of Dealstream and has, to date, provided the FSB with details of transactions between itself and Dealstream but has not yet had the opportunity to engage with the FSB over its findings. Should the FSB choose to conduct any further investigation, RMB will cooperate fully.

The FSB report indicated that Dealstream started failing to meet its margin calls from the 2nd September 2008 and that RMB had allowed the situation to continue despite Dealstream not being able to meet its obligations. In terms of our normal credit procedure, it is not common to immediately place a customer in default following a breach.

The common practice for a clearing member is to first try to understand the cause of the breach and establish with the customer what can be done to remedy such a breach which may often be as innocent as an administrative error. Under such circumstances, the clearing member would
provide the margin to the JSE on behalf of the non clearing member. This effective provision of credit is secured by the non clearing member`s initial margin placed with the JSE in terms of JSE regulations and which is intended to cover normal market movements. In general, a customer is only placed in default as a last resort.

During the period of 2nd September to 22nd September, meetings were held with Dealstreams management to discuss payment of their margin obligations. Some additional margin was placed with RMB.

Furthermore, the required level of variation margin decreased and increased with market movements and position close-outs and at a time in this period Dealstream was up to date with its margins. When it finally became clear that Dealstream could not continue to meet its commitments and that the market prices had moved dramatically to effectively eliminate the security provided by the initial margin, RMB took the decision on 22nd September 2008 to place Dealstream in default in terms of its
future clearing agreement and JSE rules governing the default of a member.

The report also indicated that RMB had, as a result of Dealstream`s default, incurred losses of R401,7m which is not correct. The financial consequences for RMB of Dealstream`s default are as follows:

RMB`s gross claim against Dealstream was R401,7m million assumingDealstream`s positions after default
Dealstream had an initial margin with the JSE of R187,2m which, whenoffset against the gross claim, resulted in RMB having a net claim against Dealstream to the value of R214,4m, the recoverability of which will only be determined once the financial position of Dealstream has been established.
In accordance with its future clearing agreement and in conjunction with the JSE, RMB took over the futures positions of Dealstream. These positions amounted to an equivalent physical value of R1,14bn.
RMB has subsequently sold the portfolio down to R742m and did not occur any losses in the sell down.
Included in the remaining portfolio are significant holdings in Vox Telecom and Simmer and Jack Mines. These investments will be managed by RMB as strategic holdings with a longer term investment horizon in order to fully realise fundamental value.

RMB report on Dealstream

The full text of RMB's report on its involvement with failed broker Dealstream

SENS
09 October 2008 08:29

During the period of 2nd September to 22nd September, meetings were held with Dealstreams management to discuss payment of their margin obligations. Some additional margin was placed with RMB.

RMB`s gross claim against Dealstream was R401,7m million assumingDealstream`s positions after default
Dealstream had an initial margin with the JSE of R187,2m which, whenoffset against the gross claim, resulted in RMB having a net claim against Dealstream to the value of R214,4m, the recoverability of which will only be determined once the financial position of Dealstream has been established.
In accordance with its future clearing agreement and in conjunction with the JSE, RMB took over the futures positions of Dealstream. These positions amounted to an equivalent physical value of R1,14bn.
RMB has subsequently sold the portfolio down to R742m and did not occur any losses in the sell down.
Included in the remaining portfolio are significant holdings in Vox Telecom and Simmer and Jack Mines. These investments will be managed by RMB as strategic holdings with a longer term investment horizon in order to fully realise fundamental value.

Dealstream: As the FSB saw it

Oct 8 2008 12:51PM

Marc Ashton

Johannesburg - On Tuesday the Financial Services Board (FSB) released a report into the events leading up to the collapse of the failed derivatives trader Dealstream Securities which may leave more questions than answers.

The report shows a two-year sequence of events, which appears to have culminated in private and institutional clients being left sorely out of pocket.

January 2006: The JSE meets Dealstream MD Russell Leigh and complains that he is misrepresenting contract for difference (CFD) instruments, and that Dealstream was incorrectly representing its instruments as regulated by the JSE. The JSE requests Leigh to change the wording on the Dealstream website.
January 23 2006: Another letter is sent from the JSE legal representatives regarding the above.
February 28 2006: A further letter is sent from the JSE legal team.
March 17 2006: Another letter from the JSE is sent to Leigh.
July 11 2008: The FSB receives a complaint from a Dealstream client about an unusual request from Dealstream for a "lump sum" transfer into their trading account.
August 6 2008: The FSB contacts Leigh by letter regarding the above complaint, and the registrar instructs Dealstream to stop selling CFDs until the firm is properly administered.
August 12 2008: Leigh responds to the FSB, saying that Dealstream is a registered member of the JSE broking exchange and every transaction it makes is through the regulated single stock futures market.
September 2 2008: Dealstream fails to meet a margin call from Rand Merchant Bank (RMB). This trend continues for three weeks before RMB calls in the margin on the Dealstream account, after news that Leigh has fled and the company has collapsed.
September 18 2008: The JSE receives a complaint regarding Dealstream from client G Alpino, who says that funds that were supposed to be in the Investec trust account have been removed. Leigh responds, telling the JSE that it was a normal course of business and the funds were held in a pooled client account.
September 19 2008: According to interviewed Dealstream employees, Leigh instructed them to make excuses for reasons why trades could not be executed and there were insufficient funds in their accounts.
September 19 2008: The registrar of Securities Services and Financial Services Providers instructs Dawood Seedat to conduct an investigation into the affairs of Dealstream.
September 22 2008: The JSE sends a member of its surveillance department to the Dealstream premises, who finds them locked up.
September 23 2008: Seedat and his team arrive at Dealstream's Melrose Arch offices. They seize documents and meet Dealstream staff. Non-executive director Saul Cohen (who works for investor Argil, and is also an employee of auditing firm Ernst and Young) arrives at the Dealstream offices, and informs Seedat that Leigh has fled the country and has no intention of returning.
October 6 2008: The FSB releases its report into Dealstream, and confirms that in its two-year trading history the business has never produced a set of audited financials.

Has nobody blamed the JSE who firstly didnt follow through. It was too late for the FSB to react once defaults and cracks started. Anyway a question I would like to ask is how can an investor (individually, or through intermediaries) not be actively involved by asking for quarterly reports? Or is it typical of the new age brokers/advisors who take their cut to just disappear and move on to the next investor to rip off. Its also sad how these businessmen can just leave and not get punished. I see this as worse than murder because you have changes the socio-economic wellbeing of thousands. Anyway Im just here to be informed by these forums (and Mark's and fin24 journalists)

(Report this comment)

Love Africa on 2008/10/08 03:33:57 PM - Disgusting

Its typical no accountablity.

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Gregg on 2008/10/08 01:08:38 PM - FSB

It is high time that some competent people were put in place in the FSB - there have been far too many scandals on their watch and there is nothing that we as the public can do because they are apparently immune from prosecution...enough already!

Control takes Dealstream initiative

Granted provisional liquidation Sunday evening.

Moneyweb
06 October 2008 09:31

A subsidiary company of Control Instruments (JSE:CNL) has been granted a provisional liquidation order against Dealstream Securities, the failed derivatives broker.

Control Instruments is one of two JSE-listed companies that lost money in an apparent case of fraud and theft which saw millions disappear from Dealstream clients' accounts.

Control applied for the urgent liquidation of Dealstream on advice from its legal advisers.

It has invited parties interested in being part of the investigations to contact it at dsenquiry@ci.co.za.

Control Instruments used Dealstream to acquire about 23m shares with a total exposure of approximately R10,4m.

Dealstream held about R3,4m of Control's cash, which the company believes to have been stolen.

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Dealstream to be liquidated

BY CANDICE JONES , ITWEB JOURNALIST

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[ Johannesburg, 7 October 2008 ] - The High Court of SA has granted an application to have derivatives and futures trader Dealstream Securities liquidated.Dealstream, which dealt primarily in contracts for difference (CFDs), stopped dealing after failing to meet obligations for transactions done on its behalf on the JSE in late September.

Around 2 700 investors, including the High Court applicant, Control Instruments Automotive, as well as Rand Merchant Bank and Vox Telecom, have been affected by Dealstream's demise. Hundreds of individuals have also been affected through the online trading platform the company provided.A CFD is an agreement to exchange – at the closing of the contract – the difference between the opening and closing price of a share, multiplied by the number of shares detailed in the contract. The method allows investors to profit from share movements, without owning shares outright.Local and international financial reports show trading of CFDs has become a popular mechanism to deal in futures and derivatives.Gone AWOLDealstream was placed under curatorship last week, after it became apparent the company's founder, Russell Leigh, had fled the country. The company is also accused of misappropriating funds that had been deposited into a trust account, which were meant to cover the risk of CDF trading.Vox Telecom executive chairman Tony van Marken says the company supports Control Instruments' decision to pursue liquidation. However, he adds the outcome was inevitable. “The curatorship would have led to the same outcome, namely liquidation”He says Vox hopes the process will lead to some clarity on what happened at Dealstream and hopefully it will recover any funds it had lost. While Vox shares have been dramatically affected by the incident, CEO Doug Reed has issued a statement to reassure shareholders.He says the company has emerged stronger from the collapse of Dealstream Securities. "The open derivatives position that has been hanging over us like a sword of Damocles for the past six months is effectively gone."Reed adds that 90% of the derivatives have been taken out of the market and will be converted to shares. “With those cut out of the equation, we're actually better off because the exposure has been reduced drastically."The company says no changes have been made to operations and it continues to thrive in its local market position.Online tradersRand Merchant Bank (RMB) is the clearing member for Dealstream's South African Futures Exchange activities.The bank has followed JSE rules and taken over Dealstream's portfolio at a market value of around R1 billion, as well as the remaining initial margin. It has essentially become an RMB portfolio.The bank has also closed down Dealstream's online trading platform and made it clear that Dealstream's clients will not be able to retrieve lost funds from RMB.++

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South Africa: Failed Dealstream Raided By FSB


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Business Day (Johannesburg)

8 October 2008
Posted to the web 8 October 2008

Renée Bonorchis
Johannesburg

DEALSTREAM, the derivatives trading firm that collapsed last month with its CE Russel Leigh allegedly fleeing to the UK, has had its offices raided by the Financial Services Board (FSB).

Russel Michaels, head of communications at the FSB, said action would follow the raid at Dealstream's Melrose Arch offices in Johannesburg.

The FSB late yesterday recommended that Rand Merchant Bank (RMB) be investigated further for its role in the collapse of Dealstream.

In its preliminary report on the company, the FSB said RMB had failed to call up Dealstream on daily margin calls for three weeks before its collapse. The FSB said more than R134m in clients' money had been lost.

Authorised users of exchanges like the JSE are exempted from obtaining authorisation from the FSB in terms of the Financial Advisory and Intermediary Services Act. But Dealstream -- which was placed under provisional liquidation at the weekend after an application by a client, Control Instruments -- was trading in contracts for difference (CFDs), which are not covered by the JSE's regulations. It was also dealing in up to R1bn of single stock futures, which are monitored by the JSE .

The JSE was aware that Dealstream was trading in the risky CFDs and had entered into correspondence on the matter with it. But one insider said Dealstream lied to the JSE and the FSB about its activities.

Dealstream also appears to have lied to its clients. On its website it said all of its CFDs were "essentially" single stock futures held at the JSE, "thereby providing the client a secure instrument regulated by the JSE".

But Allan Thomson, head of derivatives trading at the JSE, was clear when he said CFDs were strictly between two parties -- the client and the CFD provider or writer.

"The CFD provider is always the counterparty and if the client wants to sell the instrument, he has to trade with the provider who originally sold it to him and cannot look to any other parties for trade.

Rudi Schmidt, MD of SEI Investments, said if a financial instrument was not regulated, it was a case of "buyer beware". But Schmidt, like other investors, wondered why the FSB had not played more of a role earlier+
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FSB reassures Dealstream investors
October 7, 2008

Johannesburg - The Pretoria High Court on Tuesday, at the instance of the Financial Services Board (FSB), placed the business of Dealstream Securities (Pty) Ltd into curatorship.

Dealstream, a brokerage that dealt in derivatives, closed its doors in September. Bernard Levenstein was appointed as the curator with certain powers and responsibilities, among others to report back to the High Court on November 18, the FSB said in a statement.

FSB spokesperson Russel Michaels said the order of curatorship was issued notwithstanding a provisional winding up order granted against the company by the Witwatersrand High Court late on Sunday evening.

"The return date of the provisional order of winding up is the same as that of the curatorship order, namely November 18 2008.

"The two orders will therefore run concurrently with one another until the matters come before court again.

"The FSB will in collaboration with the legal representatives of investors in Dealstream decide what will be best for investors when the matter will be heard by the court on November 18.

"Investors may rest assured that everything will be done in their interests by both the liquidator and the curator. As these officers will be occupied with an immense task of unravelling the affairs of Dealstream, they should be allowed to do so without interference. Investors are requested not to contact either the liquidator or curator.

"Further public communication with investors will be issued by the FSB following reports received from the curator," the FSB said.

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RMB in Dealstream firing line

Oct 7 2008 5:05PM

Marc Ashton

Johannesburg - The Financial Services Board (FSB) has recommended that Rand Merchant Bank (RMB) be investigated further for its role in the collapse of derivatives trader Dealstream Securities.

On Tuesday afternoon, the FSB released its preliminary report into the collapse of the firm; it said RMB had failed to call up Dealstream on daily margin calls for three weeks before its collapse.

The FSB said a total of R134 088 690 in clients' money had been lost by Dealstream.

Dawood Seedat of the FSB inspectorate wrote: "It is also evident that RMB allowed Dealstream to continue missing its margin settlements, and allowed the situation to continue for at least the last three weeks despite Dealstream being unable to meet its margin commitments."

The FSB also said that RMB should be investigated for contravention of the National Credit Act in terms of allowing Dealstream to extend credit to account holders, rather than calling in the margins daily.

Traders in contracts for difference (CFD) and single-stock futures have their instruments 'marked to market' on a daily basis to allow for fair valuation. At the end of each trading day, traders are expected to settle any margin calls due to them.

On September 22 2008, Dealstream abruptly closed up shop with clients and staff not sure where proprietor Russell Leigh had gone. On September 29, it emerged that he had left South Africa.

Dealstream was one of the largest CFD market operators in SA.

Shortly after Dealstream closed, RMB issued a statement saying that it was not responsible for the collapse of Dealstream, but that it would exercise the margin call on the Dealstream account.

RMB then took delivery of nearly R1bn in equities listed on the JSE; these securities were the underlying equities that the Dealstream CFDs were based on.

Ethanamok on 2008/10/09 07:08:41 AM - Accountability

And RMB are trustee and custodians for so much money/instruments in the Collective Investment Schemes industry in SA. Hope these cracks open into gaping holes so we can see for real how marketing can can put blinkers over our eyes and hide the nature and behaviour of these big institutions.

(Report this comment)

Yakub on 2008/10/07 10:57:27 PM - in house

RMB is laughting (all the way to the bank ) in house as they are also a creditor of dealstream. U coul dchallenge them for the amount they took over as any distribution must be done in cents to the rand

(Report this comment)

Norman Muller on 2008/10/07 06:20:00 PM - BAHAHA

I am sure RMB is quaking in its boots.

__________________________________________

Rand Merchant Bank Faces Probe for Dealstream Failure (Update2)

By Vernon Wessels

Oct. 8 (Bloomberg) -- Rand Merchant Bank, the investment banking unit of FirstRand Ltd., may be investigated by South African securities regulators for its role in the collapse of derivatives stockbroker Dealstream Securities Ltd.

Dealstream, which traded in derivatives called contracts for difference, was yesterday placed under administration by the Financial Services Board after an investigation by the regulator found it may have broken securities and credit laws, the Pretoria-based board said in an e-mail to Bloomberg today.

Rand Merchant Bank, which is responsible for clearing Dealstream's trades, allowed the broker ``to continue missing its margin settlements and allowed the situation to continue'' even though the company was unable to meet its obligations, the regulator said. RMB may release a statement tomorrow on Dealstream, it said in an e-mail.

The investment bank told inspectors it is owed 214.4 million rand ($23 million) by Dealstream after settling margin calls of 187.3 million rand, the regulator said. RMB also told the regulator's inspection team that it suffered mark-to-market losses of 234.6 million rand on Sept. 25 because of its obligation to unwind positions held by Dealstream, the regulator's report said.

Russell Leigh, the chief executive of Dealstream, fled the country and didn't respond to text messages sent to his mobile phone by inspectors from the Financial Services Board who raided the company's offices on Sept. 23 to seize documents, the regulator said. Dealstream's Johannesburg offices have been vacant since at least Sept. 19, the report said. Leigh didn't immediately return text messages sent to his mobile phone by Bloomberg.

No License to Lend

Dealstream hasn't met a margin call since Sept. 2 and on Sept. 23 defaulted on a margin call of 167.1 million rand, the regulator's report said. Brokerages provide margin loans to customers who want to borrow money to buy stocks. If the value of a company's shares decline below a certain level, the broker will issue a margin call. The customer must then pay down the margin loan or provide additional collateral.

The company may have traded in securities not listed on the Johannesburg stock exchange, which is against its mandate, and gave financial advice to clients without a license, the Financial Services Board, also known as the FSB, said. Dealstream also gave loans to clients without being a registered credit provider, it said.

Impression

``We were always under the impression that clients' positions were protected and their funds segregated,'' Saul Cohen of Argil Venture Capital Fund, which owns half of Dealstream, said by phone from Johannesburg. ``You rely on what you're told.''

Cohen said he last spoke to Leigh on Sept. 22, when Leigh told him he had left the country the previous night. He may be in Israel, Cohen said. Argil, which has 62 million rand invested across six companies, is ``standing in line with other creditors'' for repayment of a 3 million rand loan it gave to Dealstream, Cohen said.

The regulator's inspectors also found that the company pooled funds of its 2,500 clients into a single account instead of keeping separate individual trust accounts for each customer, as it had promised, the FSB report said. Clients are owed 134.1 million rand and there is only 15.6 million rand left in the account, it added.

Instructions Ignored

``Dealstream hasn't compiled financial statements since its inception'' in 2004, the FSB said. The company also ignored instructions from the Johannesburg stock exchange as far back as January 2006 to stop misleading clients by saying its products are regulated by the bourse, the regulator said.

Rand Merchant Bank on Sept. 23 said it took over Dealstream's portfolio of South African traded shares worth about 1 billion rand, which will be managed with its own investments.

So-called CFDs allow investors to profit from share-price movements by buying a portion of a stock's value, allowing them to leverage the amount traded. Inspectors for the FSB also recommended the regulator consider implementing new rules to regulate CFDs.

South Africa's High Court yesterday ordered the provisional liquidation of Dealstream after a request by Control Instruments Group Ltd. The administrator Bernard Levenstein will work with Dealstream's liquidator, Russel Michaels, a spokesman for the FSB, said by phone.

To contact the reporter on this story: Vernon Wessels in Johannesburg at vwessels@bloomberg.net

Last Updated: October 8, 2008 13:03 EDT
___________________________________________

Failed Dealstream Raided By FSB
Date	Wed Oct 08 12:50:37 GMT
Source	Allafrica / South Africa
Summary	DEALSTREAM, the derivatives trading firm that collapsed last month with its CE Russel Leigh allegedly fleeing to the UK, has had its offices raided by the Financial Services Board (FSB). Russel Michaels, head of communications at the FSB, said action would follow the raid at Dealstream's Melrose Arch offices in Johannesburg.

Faith wrongly given

By Rob Rose and Larry Claasen

"It's difficult to underestimate the ingenuity of complete fools." The words are from Douglas Adams, author of The Hitchhiker's Guide to the Galaxy.

He might well have been speaking about the collapse of Dealstream, a broking firm that dealt in fancy derivative instruments like contracts for difference (CFD) and single stock futures (SSF).

Dealstream's demise has left 2 700 investors up the creek, including companies like Vox and Control Instruments that should have known better than to sink shareholder funds into unregulated CFDs.

With a CFD, one party agrees to pay another the difference between the opening and closing price of a stock without owning it. But, unlike investments on the JSE, CFDs aren't regulated - so when a broker fails, investors lose their shirts.

It's anyone's guess how much Dealstream's investors have lost, though some estimates run to R300m. But the man best placed to answer this, founder Russell Leigh, has fled the country.

Says JSE director Allan Thomson: "A CFD is like you and a mate making a bet in a pub - it's that unsafe. These things have never been regulated, and if one client defaults, it puts the broker and all other clients at risk."

So why did JSE-listed firms like Vox and Control Instruments plough shareholder cash into Leigh's Wild West show?

Vox said last week that, thanks to Dealstream, it will take a hit of "less than 5c/share". That works out to R58m, more than Vox's R43m profit at its half-year stage. Control Instruments' maximum exposure is R10,4m - four times its R2,6m half-year operating profit.

Anger and disappointment fall short of describing the emotions of Vox executive chairman Tony van Marken. His company's stock has lost 50% of its value (now at R1,05) and R30m of its cash has vanished from a trust account. Several Vox managers, who were also Dealstream clients personally, are out of pocket.

"I'm not happy with what happened here," says Van Marken. He is particularly angry, he says, that Leigh lied about the state of his company to Vox CEO Douglas Reed, hours before Dealstream imploded. And he is furious at how quickly Leigh scarpered after news broke that Dealstream was flailing, and disappointed that (he claims) neither the JSE nor the Financial Services Board (FSB) exercised any oversight of Dealstream. "If they suspected irregularities, what did they do about it?" he asks.

Van Marken says Vox plans to lay criminal charges against Leigh, and will try to liquidate Dealstream.

But is Vox not simply looking for a scapegoat, after putting shareholders' money into a risky, unregulated instrument? Shouldn't heads roll at Vox?

Van Marken admits Vox was at fault for dealing with Dealstream in the first place, which it used as a broker to buy treasury shares in the market. H e points to Leigh's reputation, his appearance as a pundit on business shows, and the fact that he did business with Investec and Rand Merchant Bank (RMB). But t his last excuse is like saying someone has credibility merely because he has an account with one of the big retail banks.

It seems Dealstream had a patchy record from the start. In 2003, Leigh and his wife Jeanne were drawn into a messy legal scrap with Global Trader, a larger CFD trading company where Jeanne had worked before. Believing its client records had gone missing, Global Trader got an Anton Pillar "search and seizure" court order against Leigh.

Dealstream's only other director is Saul Cohen, who represents venture capital fund Argil. Argil invested R3m in Dealstream in exchange for 50% of the company, with Leigh owning the other 50%.

Cohen told the FM he too feels betrayed. "For Leigh to absolutely drop us, I can't even tell you the sense of anger and betrayal we feel."

As the only other director, Cohen is likely to feel a lot of heat. "My role was non executive, and I was lied to. Russell told me client accounts were segregated and [hedged] against single stock futures," he says.

So what actually happened? Though the FSB is investigating (and a curator will be appointed soon), it's difficult to say whether Leigh got trapped on the wrong side of some wrong calls, or if there was genuine fraud.

Some investors are convinced fraud was involved. Says Control Instruments MD Richard Friedman: "It was a highly sophisticated, fraudulent scam, I've got no doubt about it. It's clear that to cover Dealstream's losses, these guys were stealing money from trust accounts of individual clients."

Worse, Friedman says, the online trading system showed "we had money in our trust account, when actually it had been pulled out weeks before".

Cohen is less convinced there is fraud. "That would surprise me. It's more likely that under extreme pressure, a series of very bad decisions were made quickly. But I don't know if the client accounts were segregated, as they should have been." He says Leigh may have panicked, and "taken from Peter to pay Paul".

As with every collapse (think Deel-Smith in 2003 or Fidentia), investors are rounding on everyone short of Leigh's grocer. But who is really to blame?

Charles Savage, CEO of Global Trader SA, says the focus shouldn't shift from Dealstream. "It's unfortunate that we're having to defend the industry, when it looks like Dealstream was a failure of management, not of CFDs. The accountability for this sits with Dealstream and its risk controls."

But the FSB, as the ultimate investment guardian, has also taken a lot of flak. As a trader of CFDs, Dealstream should have been registered as a financial services provider - but it wasn't.

One investor says: "The FSB got complaints that Dealstream was pretending to be licensed, but they did nothing. They could have closed it down long before." Only after Dealstream collapsed did the FSB warn people to "proceed with caution".

FSB deputy CEO Gerry Anderson says the organisation became aware of the problems only after the failure. Anderson says the FSB had contacted Dealstream, which said it didn't need to be registered as it only provided services that fall under the regulation of the JSE.

Says Anderson: "Now that the facts have emerged as to what Dealstream's activities were, it is the FSB's view that Dealstream did require authorisation by the FSB." He says Dealstream's assurances "were incorrect".

Others blame the banks: RMB, which cleared Dealstream's futures trades; and Investec, which held the client trust accounts. But, says RMB CEO Alan Pullinger: "Unfortunately we don't have the ability to look through' into the brokers' books to see the position of individual clients. The clearing member has no insight into the arrangements with clients."

Investec investor relations head Ursula Nobrega says: "Dealstream deposited client money with us and we didn't see what the individual clients were trading. It's normal for money to run down in trading accounts anyway, and nothing happened to arouse our suspicions."

Some client funds remain frozen in Investec trust accounts, which will obviously mitigate any losses.

But as one investor says: "There must be a lot of people feeling quite stupid right now."

POLICE- see russell leigh here

http://multimedia.johncom.co.za/view_video.php?viewkey=4094fe9e0bc1de3f94ed

Dealstream to be liquidated

BY CANDICE JONES , ITWEB JOURNALIST

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Gone AWOL

Online traders

Around 2 700 investors, including the High Court applicant, Control Instruments Automotive, as well as Rand Merchant Bank and Vox Telecom, have been affected by Dealstream's demise. Hundreds of individuals have also been affected through the online trading platform the company provided.A CFD is an agreement to exchange – at the closing of the contract – the difference between the opening and closing price of a share, multiplied by the number of shares detailed in the contract. The method allows investors to profit from share movements, without owning shares outright.Local and international financial reports show trading of CFDs has become a popular mechanism to deal in futures and derivatives.

Gone AWOL

Dealstream was placed under curatorship last week, after it became apparent the company's founder, Russell Leigh, had fled the country. The company is also accused of misappropriating funds that had been deposited into a trust account, which were meant to cover the risk of CDF trading.Vox Telecom executive chairman Tony van Marken says the company supports Control Instruments' decision to pursue liquidation. However, he adds the outcome was inevitable. “The curatorship would have led to the same outcome, namely liquidation”He says Vox hopes the process will lead to some clarity on what happened at Dealstream and hopefully it will recover any funds it had lost. While Vox shares have been dramatically affected by the incident, CEO Doug Reed has issued a statement to reassure shareholders.He says the company has emerged stronger from the collapse of Dealstream Securities. "The open derivatives position that has been hanging over us like a sword of Damocles for the past six months is effectively gone."Reed adds that 90% of the derivatives have been taken out of the market and will be converted to shares. “With those cut out of the equation, we're actually better off because the exposure has been reduced drastically."The company says no changes have been made to operations and it continues to thrive in its local market position.Online tradersRand Merchant Bank (RMB) is the clearing member for Dealstream's South African Futures Exchange activities.The bank has followed JSE rules and taken over Dealstream's portfolio at a market value of around R1 billion, as well as the remaining initial margin. It has essentially become an RMB portfolio.The bank has also closed down Dealstream's online trading platform and made it clear that Dealstream's clients will not be able to retrieve lost funds from RMB.

Regulation alone no answer

David Shapiro: Making Cents of High Finance

Published:Sep 30, 2008

Application of common sense by investors also essential

MY AMEX card expired recently. A month before that , though, Amex promised that a courier service would contact me to arrange delivery of the new card.

The expiry date came and went with no word.

After a number of frustrating calls to the Amex call centre, I discovered that the courier company had called me but had refused to leave a message on my phone — in case, by some far-fetched chance, villains intercepted the call and diverted the delivery of my card to a fraudulent address.

After using some of the choice language that I have acquired over many years of trading on the JSE floor, I gently persuaded the call centre to arrange a meeting, at which I was ordered to have my ID and proof of residence available for inspection.

Though the courier service duly arrived, the messenger stubbornly withheld my card, saying the telephone account that I gave as proof of residence was registered in the name of D Shapiro, not D H Shapiro, my full name.

I was absolutely floored. It was only the threat of bodily harm that allowed me to pry my card from the obstinate courier.

Bureaucratic box-tickers have commandeered the Financial Intelligence Centre Act 2001 (Fica), favouring form over common sense.

Amex has been sending monthly statements to my present home address for more than 25 years.

The size and frequency of the transactions could hardly have suggested that I was part of the dubious activity the act was designed to thwart.

Nowadays, attracting new clients to a bank or financial services company is a nightmare, especially for wealthy individuals who conduct their business affairs through an elaborate warren of companies and trusts.

Assembling all the documents necessary to activate a new account and comply with the minutiae of Fica is a mind-twisting exercise that can take weeks.

The strict application of the act has forced financial companies into the heavy cost of building armies of compliance officers to ensure unqualified observance. But fraud and racketeering of enormous proportions continues to unfold under their noses.

Last week, Dealstream, an operation that offered contracts for difference collapsed, purportedly with liabilities well in excess of R100-million.

Russell Leigh, the chief executive and force behind the company, has reportedly fled the country.

A contract for difference is an over-the-counter contract in terms of which the seller agrees to pay the buyer the difference between the value of an agreed security at an agreed date and the value on the purchase date.

If the value is lower, naturally the buyer will pay the seller.

The attraction is that the buyer has to lay out only a relatively small amount of margin money to cover the interest charges on the full cost of the underlying transaction.

The downside, as Dealstream’s customers have found to their sorrow, is that the market in which they transacted was unregulated and so had no protection from supervisory bodies such as the JSE or the Financial Services Board. Their only claim is against Dealstream, which is hopelessly bankrupt. Talk is that Leigh plundered trust monies to finance his own sour trading positions.

In the clients’ defence, Dealstream conducted its operation in full view of the authorities, hedging its exposure in regulated markets through dealings with reputable financial institutions that did little to limit the profitable trade placed their way. Individual losses are said to be huge and include JSE-listed companies that should have exercised more vigilance with shareholders’ funds.

Compliance and fraud prevention sometimes require common sense. Customers, too, should be accountable for their own gullibility, particularly if they are risking large chunks of their personal wealth. Rather than succumb to the temptation of instant riches, they should carefully consider the trustworthiness of their counterparties.

Why endorse Dealstream?

Alec Hogg responds to a reader who asks why Moneyweb used the disgraced Russell Leigh as a market commentator.

28 September 2008 13:33

Dear Alec

I remember you had Mr Russell Leigh of Dealstream as a market commentator on Moneyweb.

Now this man is being pursued by the police.

Did Moneyweb not also carry ads for Dealstream?

On Moneyweb (radio SAFM) a day or two ago, your commentators say WITH HINDSIGHT how could anyone have even considered dealing with this SA company Dealstream because it was not connected to (governed by) the Financial Services Board.

Therefore why did Moneyweb deal with this company? Simply having Mr Leigh on your programme lended credibility to Dealstream in the minds of listeners.

At least ensure that all your SA market commentators are from companies governed by the Financial Services Board.

Otherwise have them in their individual capacity with their personal opinion (make this clear) and do not mention their company or business interests at all (like your local gold expert). Ie, do not allow the promotion of any investment company in SA which is not connected to the Financial Services Board on Moneyweb by having someone as an expert commentator on your programme.

I am completely unaffected by companies like Dealstream, because in 1995 I decided to invest in shares directly. There was still the trading floor then and sometimes it took one or two weeks to get my tiny order dealt with. Now I can see my tiny order on the screen at home on the computer along with all the big orders or if I buy at the market price I have my shares in a split second. All the information I would ever want about a company is at my fingertips. In 1995 I would never have imagined it could be like this. I am not a trader, I buy for long term and the dividends. I sell just for cleaning up /or shares I paid too much for like the Investec I bought at R70 when it was a "screaming buy", well I got more down to R45, so the "R70" ones may have to go one day hopefully for just a tiny profit and some dividends paid.

Thanks for the programme.

Christopher Iveson

Dear Christopher,

Thanks for the mail which I picked up this morning on my return from a short break.

The Dealstream debacle happened while I was away so still need to familiarise myself about what actually went on. But you correctly point out that we did have Russell Leigh as a commentator from time to time, and that Dealstream was also an advertiser on Moneyweb.

My due diligence process was to check out Mr Leigh's partners and his background in the financial services field. On the first point, the shareholders in Dealstream were himself, Ernst & Young and the Industrial Development Corporation. One might easily presume, as I did, that these high profile organisations wouldn't associate themselves much less invest in a business without absolutely checking the credentials of its principal.

On the second point, Mr Leigh was a returning South African who had worked at and traded for some big international investment banks.

Given developments of the past couple of weeks this is no longer an automatic tick, but things were very different a couple of years back when Dealstream launched.

In my dealings with Mr Leigh he struck me as highly intelligent and innovative - a smart young man who had learnt his trade abroad and was bringing it back to South Africa to serve the local sector. There is no doubt that his software offering was also world class. His appreciation of the complex world of using single-stock futures to structure ways in which directors of companies could unlock the value in their shareholdings was also impressive.

What went wrong between his credible start and the disaster which unfolded in the past coupe of weeks is a reminder of the fallibility of human beings - and that when it comes to managing money, you can never be too careful.

Like you, we at Moneyweb look forward to discovering exactly what happened at Dealstream that caused the change in Mr Leigh, a man with a young family who has suddenly become unemployable. Be assured we'll be doing our best to provide all the information as it emerges.

Regards,

Alec

COMMENTS

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30 responses to this article

Fin24.com
At one stage you couldn't browse on Fin24 without running into a Dealstream pop-up.

Maybe Koos can refund your cash deposits.

by klip on September 28 2008, 15:09
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Dealstream, Fidentia,,etc
The problem is that small things are overlooked/forgiven without prosecution and before anyone opens their eyes the monster has grown beyond a mere oversight. The gap has been found and taken.......

New Yorks broken windows my boet.

by Piet Pompies on September 28 2008, 17:39
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New York windows reference. Fyi
SSRN-Broken Windows: New Evidence from New York City and a Five ...14 Jun 2005 ... Keywords: broken windows theory, broken windows policing, New York City, policing, zero-tolerance, MTO, Moving To Oppportunity, disorder and ...
papers.ssrn.com/sol3/papers.cfm?abstract_id=743284 - Similar pages
by BE HARCOURT - 2006 - Cited by 24 - Related articles - All 4 versions . .less

by Piet Pompies on September 28 2008, 17:43
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Alec bought the hype!
Alec I hope you also learned a lesson: just because someone is making the most noise in town, are seen at all the right places, or because he is so slippery that he can slide uphill, does not make him credible.

For what it's worth I think your assessment of the current situation is also wrong. You ask what happen to cause the change in Leigh. Perhaps he was always a crook. Perhaps you just didn't want to know that. So leave his "young family" out of this!

Just like a lot of "smart" investors who invested pension money in CDS's, not because it was the right thing to do but because everyone was doing it, I think you bought Leigh's story because it sounded so nice. And then you sold it so your audience ....

Any way, I don't think you're a bad guy. But you are inexperienced and your desire to market the next best thing contributed to your undoing.

I suggest you consider the possibility introducing quality to your shows. And with that I don't mean running into the jaws of Investec or Old Mutual!!

. .less

by Chris on September 28 2008, 19:12
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not only should he be unemployable, he should be incarcerated.......
a thief is a thief is a thief.
at least the guy with the balaclava and gun makes his intentions clear and you can act accordingly.

by GungetsTuft on September 28 2008, 19:23
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Developments of the Dealstream investigation
Does anyone know where we can get more information of what is happening with getting the funds back to Dealstream clients? Or is RMB going to steal the monies that were on margin as well?

There is a deafening silence on this front from the regulators and large institutions involved, are they all culpable?

H . .less

by Hannes Joubert on September 29 2008, 06:35
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Alec, you need to stand up and take accountability!
You punted DealStream and now you need to admit your mistake.

Thanks in advance

by Milkshakes Mshabalala on September 29 2008, 08:42
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It saddens me that people lose money through their own greed and stupidity and then look to blame ot...
Alec has brought some wonderful success stories to us, if it wasnâ€™t for Alec few would know of Allan Grey, Piet Viljoen, John Biccard and many more who have brought brilliant and valuable insight to those who want to invest and not speculate. Take responsibility for your own actions if you cant then pay some one to invest for you. . .less

by agnieman on September 29 2008, 09:09
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Dont apologise for anything Alec
You cant take responsinility for every commentator in town.

They ar just that - COMMENTATORS.

If these retards want to follow their advice, that is their problem.

by Donkie on September 29 2008, 09:23
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Unemployable...
I guess he doesn't necessarily need employment since he appears to have helped himself to the funds of his investors. I was a Dealstream investor that divested some months ago when it became obvious that things were not all ok in the State of Dealstream. Dunno why or how anyone could have missed the obvious signs personally. . .less

by Jarred on September 29 2008, 10:12
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Would Russell have been a commentator if he had not bought advertising?
Huh?

by Watcher on September 29 2008, 10:21
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dealstream
i totally agree with some listerners , how can Alec be responsible for this ....how could he predict something like this would happen . It is up to the indiviual to do their own homework on who they invest with . Easy to blame someone else isnt it ??? . .less

by robyn on September 29 2008, 10:33
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does it matter? One has a brain in order to decide for oneself or are you a robot
if you cant think for yourself then investing is not for you and rather leave it to someone else today and get on with standard five!!

by beepbeep on September 29 2008, 10:34
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advertising, what about fin24.com gambling advertising?
Somebody has to opay the bills, you cannot vet every advertiser. I am sure most users of this site, also use 24.com.
They run gambling advertising, I do not see to many people complaining about that.

by subby on September 29 2008, 10:36
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@ Greed And Stupidity
Ummm Im not sure what you mean by "It saddens me that people lose money through their own greed and stupidity"... IF you are in the market which I suspect you are, then you are also by your own definition "Greedy and Stupid"
You need to differentiate between bad trading and stealing... What you are saying is that people lost their money because they were trading in Ssfs and Cfds when this is most certainly Not the case, conversely what you are suggesting is that people who buy underlying shares Never lose their money, which is quite laughable.

What happened to Dealstream Clients is that their Trust accounts with Investec were emptied by Russel Leigh and existing Margins on Shares in Companies You probably also have shares in, dissapeared. This doesnt make Dealstream clients stupid and greedy, it makes Russel Leigh a thief.

I hope when you lose money, and believe me you will, you are not surrounded by people like yourself... . .less

by J on September 29 2008, 10:57
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Not Alecs Issue
Many people start with the best of intentions and then things fall apart.This can happen to all of us,how you react is often unknown.Only when under pressure do you know how you will react.A good man/woman can become a gambler with other peoples money when things turn against them and finally when they lose it all they are thieves.
How is Alec supposed to know things about people that they themselves don`t know.
Of course you have thieves who premeditate their actions but even here it is difficult to pick up.
The financial world is a jungle,trust seldom if at all and do your due diligence. . .less

by aj on September 29 2008, 10:57
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@It saddens me...
Ummm Im not sure what you mean by "It saddens me that people lose money through their own greed and stupidity"... IF you are in the market which I suspect you are, then you are also by your own definition "Greedy and Stupid"
You need to differentiate between bad trading and stealing... What you are saying is that people lost their money because they were trading in Ssfs and Cfds when this is most certainly Not the case, conversely what you are suggesting is that people who buy underlying shares Never lose their money, which is quite laughable.

What happened to Dealstream Clients is that their Trust accounts with Investec were emptied by Russel Leigh and existing Margins on Shares in Companies You probably also have shares in, dissapeared. This doesnt make Dealstream clients stupid and greedy, it makes Russel Leigh a thief.
What you are also suggesting is that all companies who deal with these instruments are going to clear out your bank account and run away... which is also ridiculous.

I hope when you lose money, and believe me you will, you are not surrounded by people like yourself...
. .less

by J on September 29 2008, 11:06
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gambling advertising
But... If they had a commentator on how to play BlackJack????

by J on September 29 2008, 11:07
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get a life
how was moneyweb supposed to know if he is credable or not... you dont stink if you have bad intentions... on that point you dont even know if russell is even guilty of any crime.

Lets assume he is innocent, and see what the outcome is.. in the mean time... get a life! . .less

by rob on September 29 2008, 11:19
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Commentry Vs Sanction
Its not Alecs issue but it certainly is Moneywebs issue, moneyweb is an organisation, not just one man. Correct me if I'm wrong but moneywebs target ordience is the man in the street investor who wants to do it for himself. It is not a platform for advertising large funds and their fund managers. The advice given by moneyweb and its commentators is taken to heart... Moneyweb has on many an occasion told us "Stay away from company X" and guess what, we have.

Once again you Have to diffirentiate between advice given by Commentators on the Show and Organisations they sanction... If David Shapiro says Investec is a steal at R70 (which he did) does by no means mean the company he works for is going to clear out your bank account., or that the 2010 fund is going to go bust. . .less

by J on September 29 2008, 11:38
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from the gul on 88
You asked about the differences between Dealstream and a normal Safex broker, like DWT Securities.

I always ask people to just be aware of the extra risk when dealing with a CFD company like Dealstream or GT247.

With a CFD company, your money is deposited directly into that company`s bank account, and the derivative transaction`s obligations are between you and that company. Your money is pooled with all other client`s money. So there is always the risk of the CFD company not being able to pay you out any profits, or even paying back your margin amounts. This is not just a theoretical risk, but very real when we know that GT247`s British concern, and now Dealstream, going bankrupt, with clients losing their money.

In the case of a Safex broker, this is not possible to happen. Because:

The counterparty to all transactions is the JSE - Safex. and not DWT.
Your margin deposits are held by our Clearing bank, Absa, in your own name - never are the money part of DWT`s accounts.
I the unlikely event that something happens that places DWT as broker in default with Safex, your Safex account will just be transferred by Safex to another broker, and you will carry on as normal . .less

by surething on September 29 2008, 11:44
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Who is all too blame
Reps Haras you till you buy their Trade analising software, They open the acount for you at Dealstream. You trust them as they asure you that your money's safe as it is in an investec acount. So who is really to blame for many of the clients losing their money. Its companies like Capital Equities. If they do not follow it up and fight for their clients we will and must take them on as individuals. You can not invest about seven hundred peoples money without checking if the company your investing it with is creditable. Most of the customers do not have a clue about trading when they open these acounts. Yes you are told that you could lose money if your trades go against you but not that you could lose it due to a fly by nite company. . .less

by "P'd" of Trader - Durban on September 29 2008, 14:15
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Alec - can you help us out in understanding all of this?
I still like the idea of investing in CFD's, since they give divident exposure that an SSF doesn't. It seems though that they are inherently more risky for the companies offering them. Why is this? Is it because someone has to take a contrary position or hedge themselves when I go long on a share?

If there is a risk for the companies, should we be concerned about some of hte bigger name players like Nedbank, STB or PSG?

Regards . .less

by Jack on September 29 2008, 14:52
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Barings Bank vs Dealstream
This appear to be another Barings Bank and Nick Leeson escapade. Only difference is that Russel had far more power over controls in Dealstream than Nick ever had. Whilst Nick went to jail, his initial actions wasnt so much theft but more of a cover up in the hope that the markets will turn and he can restore the whole position. We all know what happened to Barings subsequently. Russel most likely did exactly that! With the past few weeks volatility he most likely used the customers cash resources to fund the companies counterparty obligations in the interim with the intention of making it right when it turns (By no means defendable!). As with Nick, Russel most likely did not set out to defraud his customers but ended up still committing fraud. For his actions Nick went to jail, wrote a book and became a celebrity. Has anyone checked with the Saxon to see if Russel's there busy writing his book? Hope Russel gets prosecuted, and no, I wont be buying his book..... . .less

by JohnnyCash on September 29 2008, 14:54
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Lodge your details of Loss on WWW.TROUBLEATDEALSTREAM.CO.ZA
HI ALL, PLEASE VISIT THE FOLLOWING WEBSITE WE HAVE REGISTERED WE FOR PERSONS WHO HAVE SUFFERED A LOSS:

WWW.TROUBLEATDEALSTREAM.CO.ZA

ONCE WE HAVE SEEKED LEGAL ADVICE IF THERE IS A WAY FORWARD LEGALLY, WE WILL REPRESENT THOSE . .more WHO HAVE PROVIDED THE WEBSITE WITH THERE DETAILS.

THNX . .less

. .less

by Louis Fitz-gibbon on September 29 2008, 14:55
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Louis Fitz-gibbon
Louis you are vermin scum. stop praying on people who have already lost their savings. There will be 1c in the R in a liquidation and here you are trying to get these poor people to cough up for your benefit. back off.

Have you even considered that there may be so little left that the parties to the liquidation have to pay in? Duh...

. .less

by liquidation lawyer on September 29 2008, 16:15
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CFD's how does it really work?
I think that if we knew how CFD's really worked we wouls have maby thought twice about how much money we would like to trade. I enjoy trading CFD's and know that you kan make money or lose money if your not disiplined enough. The problem is that we were not told that it worked like a big Casino. Everything looked real , but there were no real trades done. The trades were just between us and Dealstream. They just promises to pay the difference if your shares went up. They never really bought the shares. They could buy whatever shares they want as long as they made money to pay us. The problem is we were never told this. Do you think they really wanted us to make money , no they would have had to pay us not from out shares but from their trades. If I knew that I would have traded smaller and moved my profits out into my personal acount so if anything happened I proberbly wouldnt have lost any of my own money. I feel that investec should have had us sighn a form informing us that our money has been put int 'another' companys gambelling account. They can not tell me that they did'nt know how Dealstream worked. . .less

by P'd off Trader - Durban on September 29 2008, 16:32
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@ Piet Pompies
My boet, you should READ your own reference re "Broken Windows":

"[The] experiment provides NO SUPPORT for a simple first-order disorder-crime relationship as hypothesized by Wilson and Kelling, NOR that broken windows policing is the optimal use of scarce law enforcement resources. "

Dumb, dumber, pompies... . .less

by Zee on September 29 2008, 16:57
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Response to liquidation lawyer
Hi, 1stly i myself have lost lots of money in this ordeal.

2ndly no funds are being requested from any party in order to assess the way forward.

3rdly there may be no way forward but if there is, we wont be swayed by persons with your type of thinking.

We want persons who will collectively want to see and ensure that the relevent parties answer for what has happend and the truth be revealed. Whoever that relevent party is

i do understand that you may not fall into this category of person. . .less

by Louis Fitz-Gibbon on September 29 2008, 19:06
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_______________________________________

Sigh - FSB / Dealstream...
12:58PM, Wednesday, 24 Sep, 2008
Get a cup of coffee or a Spice Gold and Coke because this is going to be a LONG rant...
When I originally wrote the piece about the FSB's role in the Dealstream saga, I wrote it from the perspective of an insulted financial journalist.
I felt it was very inappropriate for a head of department at the FSB not to have all the details of the Dealstream collapse to hand - especially if it was his department that was supposed to be investigating the company's licence and it subsequent collapse.
What it says to me is that there are executives within the Financial Services Board that don't read the financial press and don't actually know what is happening in the financial sector...
If that is the case, then they can't complain when the industry they are supposed to regulate turns around and keeps calling it 'toothless'.
Since Monday, traders and financial services professionals have begun pointing fingers at various parties including the JSE (read CFDs not to blame), the CFDs market-makers, Rand Merchant Bank (as the counterparty to Dealstream's trades), Investec as the bank holding the funds of Dealstream clients and the FSB for its lack of regulatory oversight.
A large part of the FSB's mandate is to assist participants in various financial markets - including investments - to make informed decisions about identifying reliable and trustworthy custodians of their money.
Earlier this year, the FSB acted very quickly following an investigation from Fin24.com to shut down a "one-man band" trader who was offering unbelievable returns using a combination of sports betting and futures trading instruments and asking for investments of a few thousand rands from 'clients'.
Yet in Dealstream's instance, the company was a highly publicised operation sponsoring a number of high-profile financial portals and regularly being asked to provide market commentary on radio shows. They advertised freely and had nice offices in larny Melrose Arch, so they certainly weren't ducking and diving. The company was also holding far larger sums of money, including R30m of Vox Telecom shareholder and staff funds.
According to Fin24.com's discussions with various players - including the JSE's director of trading Allan Thomson, Global Trader CEO Charles Savage and the local stockbroking community - there are two core areas where the FSB was responsible for reviewing an operation such as Dealstream.
Firstly, to operate a trading and investing platform, you need to be a registered financial services provider (FSP) with the FSB. There is no question that Dealstream has an FSP number (29 541 according the FSB website).
The record has, however, been marked as "cancelled".
The FSB knew about Dealstream - unquestionably.
Thomson of the JSE also confirmed that the bourse had been in regular correspondence with Dealstream for nearly two years regarding Dealstream’s misrepresentation that the 'unregulated' CFD products were backed by the JSE's 'regulated' single-stock futures instruments.
As the body supposedly regulating the operation of both Dealstream and the JSE, the FSB could have intervened in such a dispute. At this point, questions could have been asked about Dealstream's operation.
Personally, I don't buy this line. If Fin24.com was to run a big banner across the top of the site saying "endorsed by the JSE" based on the fact that Russell Loubser happened to have invited us for some sarmies at one of his presentations, David and Hayley would be fielding lawyers letters demanding we change it.
Surely the JSE and/or FSB would have been alerted to the fact that Dealstream was not registered over that period of time?
Then again, maybe not... If the regulator's members don't read the financial press, perhaps their knowledge IS limited to the place they bank at and the insurance company they use.
The inability to identify that Dealstream was not in fact a regulated FSP led to a second issue which was potentially more damaging - the segregation of client funds from proprietary trading accounts and operational cash flow.
Both Thomson and Savage confirmed that it was industry practice to segregate client funds from other activities to prevent them losing should the trading company go under.
With Vox CEO Doug Reed telling his staff they can assume that any funds they held at Dealstream are "gone", Investec telling Dealstream customers that they cannot withdraw funds from the account it held on behalf of Dealstream and counterparty Rand Merchant Bank placing the entire Dealstream book in default on Tuesday, this would not appear to be the case.
Now that I'm on a roll, I'd like to conclude with three other questions:
1. Is anybody going to take Vox management to task on the fact that at least R30m of shareholder and staff money was sitting with an unlicensed financial services firm? Vox is a telecommunications company - NOT a derivatives trading business - and shareholders should ask why they should carry the can for this decision and why they should see 35% of their equity price get wiped out.
2. I THINK I understand Investec's role in this and we need to be very clear that the commercial relationship is between Dealstream and Investec, not Investec and Dealstream clients. HOWEVER, the client money in these accounts didn't just dry up in a day - it was purposefully removed; surely a flag was raised if this account was serving as a "trust" account.
3. Ernst and Young (a highly reputable auditing firm) - through Argil - was a primary investor in this business. If you are telling me that an auditor approved the structures discussed above then I'm worried. As the venture capitalist, E&Y may argue that it was its money to lose. Unfortunately, as Vox and many other clients will tell you, it wasn't. UPDATED - 2008/09/27: My criticism of the FSB drew a few grumbles which will probably be covered somewhere else. However, to the FSB's credit they have acted to address the 'flaw' that I mentioned. They have now changed the FSB system for cancelled licenses to now read = "This FSP number has been cancelled and therefore the entity is not allowed to render financial services in terms of the Financial Advisory and Intermediary Services Act".... Chalk one up for the good guys??UPDATED re point 3:I believe that Ernst & Young have distanced themselves from Dealstream and Argil saying they sold out of their minority interest in this business. I don't' totally buy this response either because Saul Cohen who was being quoted in the press regarding Argil's investment in Ernst and Young. Saul Cohen and Paul Dixon both continue to have e-mail addresses linked to Ernst and Young. I notice that the Argil site has been taken down in the interim.

Traders to sue Dealstream
Sep 26 2008 5:27PM
Marc Ashton
Johannesburg - Traders who have been hit in the pocket by the demise of derivatives trading company Dealstream are banding together to take legal action against those involved in the company's collapse.
This was confirmed to Fin24.com by Louis Fitz-Gibbon, a former client of the failed derivatives trader.
He and other traders have opened a website, troubleatdealstream.co.za, inviting former clients to record their details and to help them "get the answers we as investors deserve".
Fitz-Gibbon said he had received correspondence from other former clients adding that some of the e-mails received in which the monies lost had been outlined "are really cause for concern".
Following "technical difficulties" experienced by clients last week, the Melrose Arch-based derivatives trader closed its doors.
In the process, clients found their accounts had been pilfered, and listed companies such as Vox Telecom and Control Instruments confirmed that they had suffered financial losses in both professional and private trading capacities.
Rand Merchant Bank (RMB) - the counterparty to the transactions - found itself in possession of R1bn worth of listed equities.
It is believed that the decline in Vox Telecom's share price is a result of RMB unloading Vox shares onto the open market to clear its position.
Vox Telecom's share price has more than halved since last Friday; since hitting a high of R2.25 it has declined to R1.05.
- Fin24.com

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Comments
warren on 2008/09/27 04:23:44 PM - dealstream stole my dream Great, lets get all the thiefs at Dealstream and Investec see www.dealstreamfraud.blogspot.com too for all your info. Its very informative too
(Report this comment)
Giacomo on 2008/09/27 12:21:31 PM - Investec in cahoots with Dealstream I HAve trust money banked at INVESTEC and this was a account opened with them also through dealstream in my own name with a segrigated account nunber given to me by investec THEY HAVE NO MANDATE ON THIS ACCOUNT to transfer any kind of money out of it.as this was purely a savings account and only deposited money here to get the interest earned. I CHALLANGE investec to get passed this one , SHOW ME A MADATE that gives dealstream or Investec permision to move money on my behalve from this account. I signed no mandate for this account INVESTEC GIVE BACK MY initial deposit of 1 million plus interest and savings
(Report this comment)
Kevin Yeh on 2008/09/27 08:56:10 AM - Dealstream Action Group Affected clients are also welcome to email to me, kyeh@worldonline.co.za, for further information. Currently we have 10 people in our group.

SAFEX website...
Notices and Circulars
23 September 2008 - F1847 - Default of Member - Dealstream Securities (Pty) Ltd
ie they were a member

________________________________

Wheelin and Dealstreamin

Article By: Rene Bonorchis

Fri, 26 Sep 2008 08:55

Market volatility claimed its first South African victim when Dealstream, a brokerage that dealt in derivatives, closed its doors.

The collapse of Dealstream will not pose a risk to the South African banking system, but investors with accounts at the brokerage may lose their cash.

The problems started late last Friday when Dealstream's clearing member for single stock futures, Rand Merchant Bank (RMB), realised Dealstream had outstanding margin calls.

Not enough in account

This means Dealstream did not have enough money in its account with RMB to honour the trades it was putting through the market. Because RMB is a JSE member and trades in single stock futures are guaranteed, RMB's exposure is not material.

"We're covered in terms of the initial margins. We'll use that to close positions," Braam van Heerden, head of equity trading at RMB said yesterday. "We will limit the blow as much as possible for Dealstream's clients."

RMB had ensured no new trading contracts could be opened with Dealstream and the JSE and the Financial Services Board (FSB) moved yesterday to investigate the matter and protect investors.

Allan Thomson, a director at the JSE said part of the problem was that Dealstream had been trading contracts for difference (CFDs). A CFD is an over the counter trading instrument that allows people to trade on a stock without delivery of that stock.

"Bet between two guys at the pub"

Trading CFDs is "like a bet between two guys at the pub", according to Thomson, and those bets are neither regulated nor guaranteed.

"Dealstream must make good its losses to RMB and transfer what it can if there's any surplus cash from winding down RMB's exposure. I don't know if there will be sufficient money for Dealstream to give any back to clients," Thomson said. "But we keep telling the market to please be aware that when you take on a CFD you are taking on that company's credit risk."

The JSE had tried to communicate with Dealstream about onselling CFDs. On Dealstream's website the company says all of its CFDs were essentially single stock futures held at the JSE, "providing the client a secure instrument regulated by the JSE", but this statement appears to have been untrue.

Thomson was clear yesterday that neither the JSE nor RMB would bear any of the liability.

Thomson said if Dealstream's clients had just registered their respective positions as single stock futures contracts with the JSE, the contracts would have been transferred to a another member and their positions and funds would have been secured.

"Not many people are aware that Lehman Brothers held very large single stock futures positions on the South African Futures Exchange. Because these contracts were registered on the JSE, the clients were simply transferred to another member and did not lose their positions or their investment when Lehman Brothers went under," Thomson said.

Elmarie Kruger, manager of capital markets at the FSB, said yesterday the FSB's investigation into Dealstream would not take long. She said that the brokerage's failure was not directly related to the subprime debacle.

Business Day

South Africa: Trouble at Dealstream

23 September, 2008, Extracts from MoneyWeb and Miningmx

Dealstream is one of South Africa’s largest Contracts For Differences ("CFD") traders and, in this capacity, it has concluded many over-the-counter ("OTC") CFD’s with its clients.

Clients of Dealstream are concerned after the company's trading system went down last week. Calls placed to the derivatives broker and its CEO Russell Leigh went unanswered Monday morning. A visit to Dealstream's offices in Melrose Arch confirmed there was no one there.

The company is run by Russell Leigh, a regular market commentator for many of the financial publications. The company includes Argil Venture Capital (Argil) as an investor. Argil is a fund manager owned by auditing firm Ernst & Young Southern Africa and Worldwide African Investment Holdings. Argil's first fund is an innovation and technology fund, which was launched with R100m in investment capital.

"As the contracts signed were over-the-counter contracts between Dealstream and its clients that are neither concluded on the JSE nor regulated by the JSE in terms of its rules, neither Rand Merchant Bank nor the JSE will be liable for Dealstream's failure to meet its commitments to its clients," Allan Thomson, the JSE's head of derivatives trading, said in a statement.

"What is disconcerting is the lack of information from the company," said one investor who contacted Miningmx.

According to one investor, warning flags were raised last week: "Last Wednesday afternoon the system was online but trades were not going through. Dealstream said it would enter them for us but one could not see if trades went through or not. Thursday was the same. By Friday afternoon, the system went offline 'due to technical difficulties' and this morning the site remained offline."

Rand Merchant Bank (RMB), a division of FirstRand Bank Ltd, is the clearing member for the SAFEX activities of Dealstream Securities (Pty) Ltd. In terms of this relationship, Dealstream is required to post margins with RMB in respect of their open trades.

In terms of the JSE Derivative Rules, RMB has placed Dealstream in default as they are unable to fully reinstate their minimum margin requirements. Dealstream's transactions on the JSE were for their own account. Dealstream does not have any clients registered on the JSE and did not conclude transactions on the JSE on behalf of clients. As a result of this, Dealstream's clients do not have any recourse to RMB in respect of their transactions with Dealstream.

Clients familiar to the situations are claiming that money that was deposited into Investec trust accounts was used by Dealstream improperly. Dealstream had power of attorney over trust money. This money was meant to be used to fund clients' losses when trades moved against them. However, clients say that money was removed from the trust accounts by Dealstream even when there was no need to access it. This means that clients stand to lose millions. Reed estimates that he and fellow employees have together lost about R112m in their personal capacities.

What the money was used for remains uncertain. However, it has been speculated that it was being used to fund positions held by Dealstream in Vox Telecom and Simmers & Jack Mines (JSE:SIM). Investec head of investor relations Ursula Nobrega said she could not confirm the balances were zero. She cited client confidentiality. Since 8 September 2008, Simmers & Jack Mines has lost 33% of its market value, falling from a high of 399c to 260c. The share price has subsequently rebounded 5.6% or 15c during trade on Monday on the back of stronger equity markets. Over the same period, the Vox Telecom share price has moved significantly. Since the 8th, the share price has moved from a low of 198c to hit a high of 225c. On Thursday last week the share traded down around 5% (10c) and lost another 9% (20c) on Monday to trade at 200c.

Nobrega said at all times Investec was acting on behalf of Dealstream. She says Dealstream clients were not clients of Investec. Reed recounts how he met with Dealstream CEO Russell Leigh on Sunday after he heard rumours of troubles at the derivatives broker.

"We actually believed him," said Reed. "He convinced us that everything was absolutely safe." Leigh apparently showed Reed printouts of trust accounts, reflecting that his money was safe. However, when news of Dealstream's problems broke on Monday morning, Reed realised he had been fed false information.

He says he managed to confirm that most of the trust accounts held by Dealstream with Investec had zero balances. Leigh appears to have gone to ground. He is not answering his cellphone. Saul Cohen, a spokesperson for Argil, a shareholder in Dealstream, says its offices were vacated after a client threatened employees with violence.

Alpino says he contacted Investec last week, who confirmed that certain trust account balances were zero. Dealstream's clearing house RMB has assumed responsibility for its open trades on the JSE. This happened after Dealstream failed to meet its obligations to RMB.

Fiasco at Dealstream strikes one more firm

2008-09-26T03:23:00.000-07:00

Fiasco at Dealstream strikes one more firm
September 26, 2008

By Roy Cokayne

Pretoria - The fallout from the collapse of stockbroker Dealstream Securities widened yesterday.

Listed automotive electronics group Control Instruments reported that the stockbroking firm held about R3.4 million of its cash and it believed the recoverability of this money had been "materially prejudiced".

Control Instruments' announcement follows the 31.3 percent slump in the shares of Vox Telecom on Tuesday, after it said it had lost R30 million following the collapse of Dealstream.

Dealstream - which ceased trading earlier this week - was one of South Africa's largest contract-for-difference traders. The company was run by Russell Leigh, a regular market commentator for many financial publications, and investors included Argil Venture Capital.

The share price for Control Instruments remained unchanged in Johannesburg yesterday at R1.50.

However, the announcement about the Dealstream losses was made after JSE trading had closed for the day.

Control Instruments said yesterday that it appeared that Dealstream, or its management and staff, had misappropriated funds of the group and its directors.

It said the group had used Dealstream to acquire approximately 23 million shares in the open market.

Its total expenditure in respect of these shares was about R10.4 million.

A spokesperson for Control Instruments said neither the group nor the directors' accounts with Dealstream were in default of their margin requirements at the time that Dealstream ceased trading.

"On the contrary, the directors' accounts had substantial cash balances, as the directors had introduced their own equity to ensure that more than sufficient cover existed at all times."

The group said it was taking legal advice in regard to claims that it might have against Dealstream and its staff, but "none of the above should have any impact on the day-to-day operations of the group's subsidiaries".

It added that Dealstream's positions in Control Instruments securities had been assumed by one of Dealstream's counterparties.

The group had contacted the counterparty to facilitate the orderly uptake of these securities.

Rand Merchant Bank, which was responsible for clearing Dealstream's trades, had restricted it from trading.

The bank also assumed all Dealstream's open trades after the firm failed to meet obligations for deals done on the bank's behalf on the JSE derivatives divisions.

Latest Articles

On Monday 22 September 2008 the trading activities of Dealstream Securities (Pty) Limited (a local online broking firm) were restricted by Rand Merchant Bank, its clearing member. The action was taken due to Dealstream’s “failure to meet its obligations in respect of transactions concluded on its proprietary account on the Financial Derivatives Division of the JSE.” What this means is the company is barred from opening new Single Stock Futures (SSF) positions through the exchange on behalf of its clients.
And that’s just the beginning of the bad news for account holders. Dealstream wasn’t only trading in regulated SSFs; but also unregulated Contracts for Differences (CFDs). When new clients opened CFD trading accounts Dealstream placed their money in trust with Investec Bank. The Dealstream website declares: “Once a live trading account is activated, Dealstream will open a Trust Account at Investec Bank in your own name.” Balances in these trust accounts are supposed to be applied to clients’ trading positions as and when required. But it appears Dealstream was forced to ‘raid’ many of these accounts to try and salvage massive loss positions in various open trades. The result: many account holders may have lost money.
The Financial Services Board (FSB) received complaints on Friday last week. On the following Tuesday they issued this useful statement: “The FSB issues a warning to the investing public to proceed with caution when trading with Dealstream Securities (Pty) Ltd.” But it came too late!
Trading on the edge
It seems Dealstream had been misleading potential clients with false claims on its website since day one. They incorrectly stated that their CFD trading was somehow underpinned by the JSE’s single stock futures programme – thus making it a regulated product and protecting clients should Dealstream go under. This was never the case and the JSE Limited claims to have correspondence dating back to 2006 in which they advised Dealstream to make changes to these claims. Why the JSE never escalated this correspondence to concrete action is anybody’s guess!
Since the collapse, account holders have been forced to read press release after press release in which companies linked to this mess deny any accountability. Rand Merchant Bank has washed their hands of the CFD trades and will fulfil its obligations in terms of JSE requirements where SSF trades are concerned. Investec has made it quite clear that its relationship is with Dealstream and not the individual account holders. It won’t have to answer to individual account holders – who will be left knocking at Dealstream’s door for money. And the JSE has clearly stated that it has no obligations to guarantee Dealstream account holders’ funds either. How is it that the corporate players always find a way to duck and dive when problems emerge?
And what can be said for the watchdog for the financial services industry – the Financial Services Board? Dealstream’s website proudly announced that it is a licensed Financial Services Provider (xxx). And until recently anyone checking this fact on the FSB website would have found details of the licence with the status: “Applied.” When FAnews Online checked the FSB website yesterday the status had been changed to “FSP number cancelled.” A comment by a Fin24 reader (possibly with FSB links) reads: A new application will always have the status of APPLIED until the license is issued. Business and the public should not deal with an entity until the status change to ISSUED. Else you jump the gun and then this kind of problem bites you. The public can view the status on the FSB website!” That’s crazy talk; but if true the FSB would have to police the financial services environment to make sure no licence applicant advertises its licence until it is granted. To shift the blame to the consumer would be crazy!
Time for the FSB to get with the programme
Despite rumours of serious financial problems at Dealstream the FSB website carries no official warning for visitors. We haven’t seen any communication that Dealstream’s licence has been cancelled either. In fact, the latest media release carried on the website is more than a month old, dated 6 August 2008. There’s no surprise that a broker is the subject of the FSB’s censure. The release reads: “In order to protect the interests of consumers, the FSB today, issued a warning to consumers not to conduct financial services business with Theresa Fourie Financial Brokerage, which is rendering financial services without having the requisite licence to do so…” If so much care is taken to warn people about a small operation without an FSP licence, why is it so difficult to sound the alarm when a big operation with thousands of account holders goes bust?
Although small ‘fly-by-nights’ pose a great deal of danger to unsuspecting clients it’s always the larger companies with licences in place that cause the damage. Just you’re your mind back to LeaderGuard and Fidentia. Granted, Dealstream was a high risk operation and people knew that they could lose money trading in the financial instruments offered by the company. But that should never have included the deposits and account balances that weren’t physically tied to an open market position.
There are plenty of other questions we can ask around this issue. We’re sure some will be answered in due course. We believe there are too many financial collapses that could have been avoided if licensing processes were better applied – and approved licences actively monitored. If one good thing can come from this saga, let it be this: That the FSB takes the necessary steps to improves the quality of its communication to all stakeholders in the financial services industry. And for heaven’s sake – could someone please get the Dealstream website taken down?
Editor’s thoughts: We’re tired of the financial services industry regulator always popping up at the wrong side of a financial crisis. Given recent large-scale collapses should we still have any faith in the Financial Services Board? Or should we just accept the excuses that the failed firm wasn’t entirely theirs to regulate? Add your comments below, or send them to gareth@fanews.co.za
Comments received on the article above
Lourens wrote: The FSB! On various occassions I have voiced my opinion about the incompetency and blatant "don't care" attitude of the FSB. I have reported a number of cases to the FSB as far back as 2 years ago and they still have not attempted an investigation - maybe they are in cahoots with the perpetrators? A sorry lot they are.
DJT wrote: The Dealstream fiasco once again highlights the weakness of the FSB to protect the consumer & their pathetic 'head in the sand' attitiude. They only go for soft targets. It's very easy for them to debar a small broker on 'suspicion' & unproved allegations, but where big money is involved (eg Kebble saga) they are useless. There are too many investment companies who find ways around regulation. What about the hedge fund industry?
Colin Gillot wrote: My concern is with Investec. How many 'bad' deals has this company got into? I know they got out of the American sub prime crises by selling their 'book' to Goldman sacks, but there have been others: Trinity Holdings and the Kebble saga. There was one other 'shady deal' where they were implicated, and now this. Perhaps you know of the others. One cvan understand the American issue, but are they a crowd that looks for 'high risk' with border line regulatory procedures? I know they have some gery good funds on their balanced portfolio where I hav e placed clients money, but now I am becoming skeptical.

crisis claims its SA victims

2008-09-26T02:59:00.000-07:00

Renée Bonorchis

Editor at Large

MARKET volatility claimed its first South African victim yesterday when Dealstream, a brokerage that dealt in derivatives, closed its doors.

The collapse of Dealstream will not pose a risk to the South African banking system, but investors with accounts at the brokerage may lose their cash.

The problems started late last Friday when Dealstream’s clearing member for single stock futures, Rand Merchant Bank (RMB), realised Dealstream had outstanding margin calls.

“We’re covered in terms of the initial margins. We’ll use that to close positions,” Braam van Heerden, head of equity trading at RMB said yesterday. “We will limit the blow as much as possible for Dealstream’s clients.”

RMB had ensured no new trading contracts could be opened with Dealstream and the JSE and the Financial Services Board (FSB) moved yesterday to investigate the matter and protect investors.

Trading CFDs is “like a bet between two guys at the pub”, according to Thomson, and those bets are neither regulated nor guaranteed.

“Dealstream must make good its losses to RMB and transfer what it can if there’s any surplus cash from winding down RMB’s exposure. I don’t know if there will be sufficient money for Dealstream to give any back to clients,” Thomson said. “But we keep telling the market to please be aware that when you take on a CFD you are taking on that company’s credit risk.”

The JSE had tried to communicate with Dealstream about onselling CFDs. On Dealstream’s website the company says all of its CFDs were essentially single stock futures held at the JSE, “providing the client a secure instrument regulated by the JSE”, but this statement appears to have been untrue.

Thomson was clear yesterday that neither the JSE nor RMB would bear any of the liability.

Thomson said if Dealstream’s clients had just registered their respective positions as single stock futures contracts with the JSE, the contracts would have been transferred to a another member and their positions and funds would have been secured.

“Not many people are aware that Lehman Brothers held very large single stock futures positions on the South African Futures Exchange. Because these contracts were registered on the JSE, the clients were simply transferred to another member and did not lose their positions or their investment when Lehman Brothers went under,” Thomson said.

Elmarie Kruger, manager of capital markets at the FSB, said yesterday the FSB’s investigation into Dealstream would not take long. She said that the brokerage’ s failure was not directly related to the subprime debacle .

as Dealstream Stumbles

2008-09-26T02:19:00.000-07:00

Vox Falls Most in Four Years as Dealstream Stumbles (Update1)

By Vernon Wessels

Sept. 23 (Bloomberg) -- Vox Telecom Ltd. fell the most in four years in Johannesburg trading after the collapse of Dealstream Securities Ltd., a stockbroker holding cash on behalf of the South African Internet service and software company.

Vox fell 61 cents, or 31 percent, to 1.34 rand, the biggest drop since June 2004. The stock has declined 40 percent this year, giving the Johannesburg-based company a market value of 1.56 billion rand ($191 million).

Dealstream, which traded in derivatives called contracts for difference, or CFDs, was stopped from dealing after failing to meet obligations for transactions done on its own behalf on the JSE Ltd.'s derivatives division, the Johannesburg stock exchange said in a statement. Rand Merchant Bank, which is responsible for clearing Dealstream's trades, restricted trading by the company and assumed all its open positions, JSE said.

Dealstream holds 30 million rand of Vox's cash, ``the recoverability of which the company believes has now been materially prejudiced,'' Vox said in a statement to the stock exchange today. The company is in talks with unidentified counterparties to ensure that positions held by Dealstream are taken up in an ``orderly'' way, it added.

Calls to Dealstream's Johannesburg office and trading room weren't answered. Paul Dixon, the managing director of Argil Venture Capital (Pty) Ltd., which owns a stake in Dealstream, didn't return messages on his office phone seeking comment.

Portfolio

Rand Merchant Bank ``has taken over Dealstream's portfolio of diversified local listed shares at a market value of approximately 1 billion rand together with the remaining initial margin,'' the investment bank, a unit of FirstRand Ltd., said in an e-mailed statement. ``This portfolio will be managed as part of RMB's portfolio.'' Dealstream clients do not have ``any recourse to RMB,'' the bank added.

Thats what I call the best of both worlds RMB

So-called CFDs allow investors to profit from share-price movements by buying a portion of a stock's value, allowing them to leverage the amount traded.

To contact the reporter on this story: Vernon Wessels in Johannesburg at vwessels@bloomberg.net.

Dealstream shows FSB flaw

2008-09-25T15:44:00.000-07:00

Dealstream shows FSB flaw

Sep 24 2008 11:11AM

Marc Ashton

Johannesburg - An investigation into the Financial Services Board's role in online trader Dealstream's collapse reveals an exploitable flaw.

Anyone who approaches the Financial Services Board (FSB) can pick up a financial services provider (FSP) number for three months and remain on the FSB online database indefinitely.

This became clear when Fin24.com did a search on the FSB's website to determine the trading status of failed derivatives trader Dealstream Securities.

On Monday it emerged that Dealstream, one of South Africa's largest contracts for difference (CFD) market-makers, had closed up shop and client accounts had been emptied.

The firm's failure has seen private traders and at least one AltX-listed company, Vox Telecom, lose a great deal of money.

"From the moment a company contacts the FSB call centre (with the intention of becoming a registered financial institution) they are issued with an FSP number," said Manasse Malimabe, head of the FAIS division of the FSB.

"Firms then have three months in which to complete all relevant documentation to process their registrations," he said.

Dealstream's FSP number is listed as 29 541 on the FSB's site, but its record has been marked as cancelled.

The department is also responsible for 'risk-based supervision' of financial service providers and their compliance with legislation. This includes on-site visits to FSPs and liaison with compliance officers.

Malimabe confirmed that Russell Leigh, the MD of Dealstream, was the contact person for this licence. However neither the FSB contact centre, communications or FAIS departments were able to confirm when the licence application had been received or cancelled.

Malimabe was "not aware" of the circumstances surrounding Dealstream's collapse or that the business had gone under.

- Fin24.com

Dealstream shows FSB flaw

Comments

quidditas on 2008/09/25 09:04:14 AM - History repeats itself!!

History repeats itself. Remember (the quadriplegic) Keith Scott of SAM (Scott Asset MAnagers)? He too was a respected trader who built up quite a reputation managing a "Magnum" fund for the founder of Dions, a gentleman by the name of Friedland. He managed 100%+ annual performances when the mean was a mere 18% and became quite a guru. Scott went on to become a futures trader (registered with SAFEX) and to cut a very long story very short, swindled the opublic and PACT (Performing Arts Council of the Tvl) of some R300+ million. He, unlike Dealstream, showed up as a member in good standing of both the FSB and SAFEX. Fat lot of help!!! When the brown stuff hit the fan neither body did anything and investors lost all. The liquidation div was approximately 3%, probably more than will be the case with Dealstream. SAM, SCOTT ASSET MANAGERS, REFLECTED AS A MEMBER IN GOOD STANDING OF THE FSB WHILST LIQUIDATION PROCEEDS WERE BEING INSTITUTED AND CERTAIN GULLIBLE PEOPLE LOST MONEY IN THIS PERIOD!!!!!!!!!!!!!

gcr on 2008/09/25 08:35:35 AM - Dealstream

Surely if this is a FAIS issue and presumably FICA as well how could the FSB allow them to ply their trade without getting all the details and signing off the deal. Don't belive you can trade as a private individual with an online company until all the documentation is completed by these on line companies. FSB should manage their accountabilities a lot better than they are after all tehy were set up as the watch dog for all financial services

walt on 2008/09/24 08:03:59 PM - fsb is a joke

you won't get any financial players to allow themselves to be quoted on it, but I think the overall market concencus is that the fsb is pretty incompetent. Sadly there is little sign things will improve in the forseeable future.

Dealstream took money

2008-09-25T15:37:00.000-07:00

Control: Dealstream took money

Sep 25 2008 6:45PM

Johannesburg - Control Instruments (CNL) said on Thursday that Dealstream's positions in the company's securities have been assumed by one of Dealstream's counterparties.

It was announced earlier this week that Dealstream Securities had ceased trading.

"Control Instruments has contacted the counterparty with the aim of facilitating the orderly take-up of these Control Instruments securities," Control Instruments said.

"Control Instruments used Dealstream to acquire approximately 23m shares in the open market and its total expenditure in respect of these shares is approximately R10.4m. Dealstream held approximately R3.4 million of Control Instruments' cash, the recoverability of which the company believes has been materially prejudiced.

"Directors of Control Instruments also hold accounts with Dealstream. Neither the Group's nor the directors' accounts were in default of their margin requirements at the time Dealstream ceased trading. On the contrary, the directors' accounts had substantial cash balances as the directors had introduced their own equity to ensure that more than sufficient cover existed at all times.

"Based on the information available it appears that Dealstream and/or its management and staff misappropriated the funds in the Group's and the directors' margin and trust accounts. Control Instruments and its directors are currently taking legal advice in respect of claims that they may have against Dealstream and its staff," Control Instruments said.

"None of the above should have any impact on the day to day operations of the group's subsidiaries," the company added.

- I-Net Bridge

Comments

Gerry on 2008/09/25 08:27:40 PM - Dealstream and Control Instruments

So does this mean that Control Instruments Directors (or any other company for that matter) can trade shares in their own company via Dealstream without anyone being able to see that it is they who are trading? Does this avoid a lot of pesky legal stuff that requires all sorts of declarations when a director deals in their own securities?

)

Ghosts on 2008/09/25 08:23:28 PM - Dealstream

I wonder how many other Companies will be coming out of the woodwork with similar stories in the next couple of days.

Ghosts on 2008/09/25 08:23:05 PM - Dealstream

I wonder how many other Companies will be coming out of the woodwork with similar stories in the next couple of days.

T-Shirts etc -some humour in the madness

2008-09-25T15:27:00.000-07:00

T-Shirts "I was defrauded by Russell Leigh from Dealstream"

Price: R 18

Ad ID: 76597579

Location: Johannesburg
Date Listed: 25/09/2008

T-Shirt "I was defrauded by Russel leigh from Dealstream"
on the front and back.

or "has anyone seen Russell Leigh from Dealstream" contact me or the Police.

only R18

I only have to sell 20,000 to begin to recoup the money he stole from me.

this was off

http://johannesburg.gumtree.co.za/c-Stuff-for-Sale-clothes-accessories-T-Shirt-I-was-defrauded-by-Russel-leigh-from-Dealstream-W0QQAdIdZ76597579

_______________________________________

Gumtree Johannesburg > Community > lost and found

DEALSTREAM -cash LOST / DEFRAUDED?

Ad ID: 76530711

Location: Johannesburg Other
Date Listed: 25/09/2008

DEALSTREAM -cash LOST / DEFRAUDED?

I am trying to locate Russel Leigh from DEALSTREAM in Melrose Arch, who may have taken a large amount of my cash or know where it is.

This is an urgent and serious appeal to anyone to do the right thing and come forward and let me know where I can locate him or anyone who may know him.

__________________________________________________-

RUSSELL LEIGH's personal details needed

2008-09-24T01:06:00.000-07:00

RUSSELL LEIGH's (CEO of DEALSTREAM) personal details needed urgently

Please add any below for the SAPS Commercial crimes unit to follow up:

If anyone has opened a case of fraud with the SAPS Commercial Crimes Unit, please let us know

What is his ID number :

I.D No: 710115 5174 088 -possibly

Address

Res Add: 67 Dorothy Road Norwood Johannessburg 2192 - possibly

Assets details
People he knows details to track him
pictures of him
his current whereabouts
childrens names and schools
family names and addresses
cell numbers
Has he fled the country?

All these are needed urgently to assist arresting him an charge him accordingly.

If anyone else needs to be charged please add their details below.

SAPS Commercial Branch

Focuses on fraud and commercial crime.
Hotline:
08600 10111 Email:
hq.commercial@saps.org.za

CASH in TRUST at INVESTEC MISSING- what Investec says

2008-09-24T01:01:00.001-07:00

CASH in TRUST at INVESTEC MISSING- what Investec says
Where is cash that was held IN TRUST by INVESTEC?

Dealstream had cash held in trust at Investec...

Our Cash is missing !!

HOW CAN IT JUST VANISH WITHOUT A TRACE?
WE ARE NOT STUPID PEOPLE.
WHO IS TAKING RESPONSIBILITY HERE?

INVESTEC money held in TRUST in our personal names-where is it?

Yes Investec we know the accounts are frozen and that they are empty. Now explain how you are going to get our money that was in your trusting hands back to us?

http://dealstreamfraud.blogspot.com

ask Investec Corporate Cash Management where it is and that we want it back
Steven Group
Kris Mietz kris.meitz@investec.co.za
dgriffiths@investec.co.za

0112869607

IS INVESTEC TAKING RESPONSIBILITY FOR OUR CASH HELD IN TRUST WITH THEM?

_____________________________________
RESPONSE FROM INVESTEC

We are aware of the current problems related to Dealstream Securities (Pty) Ltd (Dealstream). Dealstream utilises an online product provided by Investec to intermediaries who manage client accounts. In terms of the legal relationships:

* Investec has limited capacity to deal with the clients of any intermediary that use this online product
* Dealstream requires each client to sign a mandate with Dealstream authorising them to open accounts and transact on behalf of the client
* Based on the legal agreement, and the client mandate referred to above, Investec can only transact based on instruction (electronic or otherwise) from designated officials at Dealstream .

Due to the legal structures that are in place, until we obtain some clarity on the future of Dealstream and the legal process that will be put in place, Investec will be unable to divulge information and/or process transactions based on instructions directly from the clients of Dealstream.

As an interim step, we have frozen access to the client accounts managed by Dealstream and we will actively work with the parties involved (the JSE, the FSB, RMB and Dealstream) in order to bring this matter to resolution as quickly as possible.

Furthermore, Investec has no trading exposures to Dealstream.

All press related queries should be referred to the Investor Relations division on 011-286 7070.

_________________________________________________

So INVESTEC, what exactly are you saying to the people who had their money held IN TRUST at investec on call?
Are you backing slowly out of this and not assuming any responsibility?
If I have to give you Investec my ID number to find out my cash balance in trust with you, and I found out that I have been defrauded, are you telling me that I must now ask someone else about the whereabouts of my cash in investec?

DEALSTREAM's DEAFRAUDED CLIENTS If you have been defrauded by Dealstream

2008-09-24T01:00:00.001-07:00

DEALSTREAM's DEAFRAUDED CLIENTS

If you have been defrauded by Dealstream in Melrose Arch, South Africa,
kindly share your input here, so we can, as a larger informed number, head in the right direction to get our money back.

To add your comments below -click "Post a Comment"

To add a new POST -click "NEW POST" at top of page

South Africa: World Market Crisis Claims Its First Local Victim Business Day (Johannesburg)

2008-09-24T00:54:00.000-07:00

South Africa: World Market Crisis Claims Its First Local Victim

Business Day (Johannesburg)

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Business Day (Johannesburg)

23 September 2008
Posted to the web 23 September 2008

Renée Bonorchis
Johannesburg

MARKET volatility claimed its first South African victim yesterday when Dealstream, a brokerage that dealt in derivatives, closed its doors.

The collapse of Dealstream will not pose a risk to the South African banking system, but investors with accounts at the brokerage may lose their cash.

The problems started late last Friday when Dealstream's clearing member for single stock futures, Rand Merchant Bank (RMB), realised Dealstream had outstanding margin calls.

This means Dealstream did not have enough money in its account with RMB to honour the trades it was putting through the market. Because RMB is a JSE member and trades in single stock futures are guaranteed, RMB's exposure is not material.

"We're covered in terms of the initial margins. We'll use that to close positions," Braam van Heerden, head of equity trading at RMB said yesterday. "We will limit the blow as much as possible for Dealstream's clients."

RMB had ensured no new trading contracts could be opened with Dealstream and the JSE and the Financial Services Board (FSB) moved yesterday to investigate the matter and protect investors.

Allan Thomson, a director at the JSE said part of the problem was that Dealstream had been trading contracts for difference (CFDs). A CFD is an over the counter trading instrument that allows people to trade on a stock without delivery of that stock.

Trading CFDs is "like a bet between two guys at the pub", according to Thomson, and those bets are neither regulated nor guaranteed.

"Dealstream must make good its losses to RMB and transfer what it can if there's any surplus cash from winding down RMB's exposure. I don't know if there will be sufficient money for Dealstream to give any back to clients," Thomson said. "But we keep telling the market to please be aware that when you take on a CFD you are taking on that company's credit risk."

The JSE had tried to communicate with Dealstream about onselling CFDs. On Dealstream's website the company says all of its CFDs were essentially single stock futures held at the JSE, "providing the client a secure instrument regulated by the JSE", but this statement appears to have been untrue.

Thomson was clear yesterday that neither the JSE nor RMB would bear any of the liability.
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Thomson said if Dealstream's clients had just registered their respective positions as single stock futures contracts with the JSE, the contracts would have been transferred to a another member and their positions and funds would have been secured.

"Not many people are aware that Lehman Brothers held very large single stock futures positions on the South African Futures Exchange. Because these contracts were registered on the JSE, the clients were simply transferred to another member and did not lose their positions or their investment when Lehman Brothers went under," Thomson said.

Elmarie Kruger, manager of capital markets at the FSB, said yesterday the FSB's investigation into Dealstream would not take long. She said that the brokerage' s failure was not directly related to the subprime debacle .

2008-09-24T00:41:00.001-07:00

World market crisis claims its first SA victim Renée Bonorchis E-Mail article Print-Friendly Editor at Large MARKET volatility claimed its firs

2008-09-24T00:38:00.001-07:00

World market crisis claims its first SA victim
Renée Bonorchis

Editor at Large

MARKET volatility claimed its first South African victim yesterday when Dealstream, a brokerage that dealt in derivatives, closed its doors.

The collapse of Dealstream will not pose a risk to the South African banking system, but investors with accounts at the brokerage may lose their cash.

The problems started late last Friday when Dealstream’s clearing member for single stock futures, Rand Merchant Bank (RMB), realised Dealstream had outstanding margin calls.

RMB had ensured no new trading contracts could be opened with Dealstream and the JSE and the Financial Services Board (FSB) moved yesterday to investigate the matter and protect investors.

Trading CFDs is “like a bet between two guys at the pub”, according to Thomson, and those bets are neither regulated nor guaranteed.

Thomson was clear yesterday that neither the JSE nor RMB would bear any of the liability.

The Dealstream debacle. Allan Thomson – head of derivatives and equity trading, JSE 23 September 2008 23:06 GEOFF CANDY: Let's bring in Allan Thomso

2008-09-24T00:05:00.001-07:00

The Dealstream debacle. Allan Thomson – head of derivatives and equity trading, JSE

23 September 2008 23:06

GEOFF CANDY: Let's bring in Allan Thomson now. He is with the JSE. Allan, surely something must have registered just in terms of what Dealstream projected itself to be, the FSB coming out with a statement saying that under the FAIS Act you have to be registered as a financial services provider? Dealstream wasn't registered - yet they were advertising blatantly in the open that they were seemingly a regulated entity. What went wrong?

ALLAN THOMSON: Geoff, ja, the situation with Dealstream is quite clear, and we've made it quite clear to Dealstream as well. We have a long history of literature between ourselves and Dealstream, requesting them to change their website, remove all reference to the JSE, and to the fact they are trading regulated and guaranteed products through their CFD mechanism. We had at one stage partial compliance, but essentially they had been ignoring us and we were continuing that discussion with Dealstream. The fact of the matter is the CFD market is an entirely OTC market that is not guaranteed by the JSE or its rules, and it is not regulated by ourselves or the FSB.

GEOFF CANDY: Should people not have done something more forceful, sooner?

ALLAN THOMSON: Geoff, I think - we've had a look at the website and the website is quite vague in their terms. They say that their positions were backed off with single-stock futures on the exchange, and that is quite true. But that is a very different thing from saying that the CFDs are then guaranteed because they are backed off to single-stock futures. Unfortunately it was with those single-stock futures that Dealstream were eventually not able to meet their commitments, and it was those single-stock futures that eventually put them into default.

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The day's interviews
Market watcher: David Shapiro: Sasfin »
Getting clarity on the political transition process. Pravin Gordhan: Commissioner, SARS »
Ministerial chaos. Razia Khan – head of research for Africa, Standard Chartered Bank »
Dealstream’s missing millions. Doug Reed – CEO, Vox Telecom »
The Dealstream debacle. Allan Thomson – head of derivatives and equity trading, JSE »
Gold slot: gold price. Peter Major – Cadiz Financial Services »
Comment on the story »
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1 responses to this article

dealstream
so what is the bottom line have we done our money ,and where is this r leigh,we have been told nothing by dealstream,is their anyone we can get in touch with//

Articles on the net

2008-09-24T00:04:00.001-07:00

Dealstream’s missing millions. Doug Reed – CEO, Vox Telecom

23 September 2008 23:07

GEOFF CANDY: Talking about big moves on the market, David, Vox Telecom down 31%-odd today on the fiasco at Dealstream. Doug Reed, the CEO at Vox telecom joins us now. Doug, could you just explain how exactly Vox has been involved in this whole thing?

DOUG REED: In effect, our staff obviously have been involved, because all the shareholders who had their positions by Dealstream have obviously lost their money, and that includes obviously the money they had on deposit to trust accounts, as well as single-stock futures.

GEOFF CANDY: Why were there so many open CFD positions in Vox? Was it just something that became a fashionable thing to do at Vox?

DOUG REED: How it developed was about 18 months, two years, ago we had quite a lot of problems with hedge funds, etc, shorting the stock, taking it out, etc. And I geared my position up and took those shares in my name as a single-stock future. But at the time I said I'm not doing this for personal gain, I'm doing it for the company, and I offered those shares to a variety of shareholders and the staff. Basically what happened is we went through a closed period and, when I came out, those positions were taken up at like R1.30 - or the share price now was R1.30 and I bought them at 65c. So all that took them up were immediately in the money - and obviously it was a bit easy and that started the trend. So that's why it's such a big proportion of single-stock futures.

GEOFF CANDY: Doug, what exactly happened with the trust accounts - reports coming in that Dealstream had been using the money that had been put into a trust account at Investec improperly?

DOUG REED: Look, I obviously have to speculate, but it looks like he was using Peter's money to pay Paul, and using and rolling the trust fund. And what happened is we obviously got wind of this on the weekend, and we actually met with Russell Leigh at Dealstream on Sunday. We were obviously very concerned and, to be honest with you, he reassured us that, according to the JSE rules, all the stock that we had was backed by single-stock futures. He gave us a printout of our trusts, and he reassured us the trust couldn't be taken. And, to be honest, we believed him. The next day the first thing we checked was the trust, and one trust had R4m in it which should have had R30m-odd, and all the other trusts were on zero. So that's our staff position. And then it appears that they were cleaned about 10 days prior. So I am not sure exactly what the situation is, but I suppose it will come out with the wash. It's obviously quite a serious situation.

GEOFF CANDY: What is now the risk forward for Vox shareholders?

DOUG REED: Well, funnily enough, there's a silver lining on the cloud. We couldn't be in a stronger position. The R219m derivatives have been taken off the market, and they'll be held by the counter-parties, and that will be taken out of derivatives. So we have replaced lots of weak shareholders' geared position with one strong shareholder, you know, non-geared position. So in reality, obviously now the price has come down, a lot of people have come out to want to buy, and we'll see how it goes going forward. So from the company's point of view it's strong. Obviously all the investors need the people, so we are going to have to come up with some sort of private-equity deal to get the staff back involved, so they can make good some of their losses. And the bottom line is we have to put our nose to the grindstone and treble the business again. I know we can do it. We've run a good business, we've grown from nothing, a R2m business to where we are now in eight, ten years, so I've no doubt that we will carry on.

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Geoff Candy
Email: geoff@moneyweb.co.za

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The day's interviews
Market watcher: David Shapiro: Sasfin »
Getting clarity on the political transition process. Pravin Gordhan: Commissioner, SARS »
Ministerial chaos. Razia Khan – head of research for Africa, Standard Chartered Bank »
Dealstream’s missing millions. Doug Reed – CEO, Vox Telecom »
The Dealstream debacle. Allan Thomson – head of derivatives and equity trading, JSE »
Gold slot: gold price. Peter Major – Cadiz Financial Services »
Comment on the story »
View disclaimer

2 responses to this article

Blind Trust
The sad thing is that a lot of people will continue to believe this guy. Come one people, if you haven't got a serious wake-up call now, you never will. "did it for the company" oh boy, that is a lame one !

by Observer on September 24 2008, 06:54
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Not Blind trust
I (not an employee!) happen to know how Doug has done tons for his staff (and the company)

http://www.classicfm.co.za/business/2008/09/
http://www.classicfm.co.za/business/2008/09/classic-business-transcripts-september_201.html

DONALD ROGAN: Yes. Funny enough that’s actually been the disappointing side, I believe, to Woolworths. Their food formula is phenomenal, their distribution centre is probably the best in the country, but the one thing that the jury is out on is the success on their retail side. We should get a better idea of that towards the end of the season.
JOHN FRASER: We saw a news release today from the JSE - warning about Dealstream derivatives. What on earth are Dealstream derivatives?
DONALD ROGAN: Dealstream derivatives - basically n agency - a brokerage agency dealing specifically in single stock futures and CFD’s - they basically have clients who I believe, just reading through the news article have not been able to reach their marginal requirements and therefore the brokerage can't pay out their clients. We expect this sort of thing to happen with these markets, particularly in these very volatile times and these instruments do tend to be at the edge of these volatile instruments. If you're on the wrong side of them, unfortunately this is what can happen.
JOHN FRASER: Just to unpick this slightly, a derivative is something that derives from an actual stock and you can get massive exposure both on the upside and as we seem to be seeing here, on the downside - if something goes wrong with the share then whoever has made this investment could be really badly exposed.
DONALD ROGAN: Yes that’s correct. Its effectively a leveraged position - so you're increasing your exposure, whether you're going long of the stock i.e. you're positive on the story or whether you're going short of the stock, i.e. whether you're negative. If the market moves against you, that position is calculated against your balance at the end of each day. If you're out of the money you need to chip in.
JOHN FRASER: What did Dealstream do wrong? Were they too exposed to this particular type of instrument?
DONALD ROGAN: I’m not quite sure if we have the exact details but I think it was one client of theirs who wasn’t able to meet his marginal requirements and it happened to be a very significant client. This isn’t the first time this has happened. In fact there was a smaller house in the UK earlier this year in fact who had a similar case, and that is the risk obviously of having one particularly big client on your books.
JOHN FRASER: Going back to a rather disappointing bit of news on Friday - we all heard that Altech had won this very important ruling against the communications ministry to say that people can basically build their own IT networks in South Africa - the monopolies or the duopolies or whatever you want to call them, were being crushed. The bad news on Friday was that government is going to appeal this. Why on earth do we sit in a situation where South Africa appears to be tying people’s hands behind their backs in the growth of what must be the most dynamic and important sector of the future economy - the IT economy.
DONALD ROGAN: John I don’t have an answer for you, but it is very frustrating - there were obviously going to be huge beneficiaries of the earlier ruling across the board, and clearly this has come as a bit of a shock. But I’m sure the private sector will probably be appealing it as well so I’m sure it will be one of those cases that go on and on.
JOHN FRASER: Finally from our misery to other people’s misery - just looking across the Atlantic - it’s about a week now since we heard about the demise of Lehman Brothers, the other dramatic cases in both the UK and the US - the continuing fallout from the sub-prime crisis. It doesn’t seem to have been that bad here in South Africa, so far. Are we out of the woods yet or could something still come crashing down?
DONALD ROGAN: You must bear in mind that we’re still very influenced by what happens in the US and the UK. I would say there are three reasons why we seem to have come out of this relatively unscathed. The one is that there is very little correlation between Africa and what’s happening in the rest of the world. The second point is exchange controls - I said it on the show not so long ago - I’m not a supporter of exchange controls but in some way the irony of it is that exchange controls have protected us from what’s happening in the US. The third issue is - I don’t know if you recall when Absa were talking to Barclays - the Governor and in fact the Minister of Finance came out and said categorically that we must not think that we are going to allow international banks to come in and own the banking landscape in South Africa. They’ll probably let one deal go through and the deal that they're going to let go through, they're going to monitor very closely and it happened to be the Absa-Barclays deal. Now if they’d opened up the doors to all these international banks, you could have had Lehman Brothers buying a stake in Standard Bank and Merrill Lynch buying - we would have been in the thick of it. And this isn’t - I’m a promoter of free trade and capitalism and free markets etcetera and this isn’t only unique to South Africa - the same applies to Australia. There are probably three or four banks, which are allowed to be owned by internationals otherwise the rest are out of bounds. So I think with those three elements all working we are fairly protected. But we’re not out of the woods; there are still some potholes in the road.
JOHN FRASER: So “local is lekker and a bit safer”…and you are clearly a dissaffected arm chair critic.

RMB.announcement on Dealstream Securities RMB has placed Dealstream in default as they are unable to fully reinstate their minimum margin r

2008-09-24T00:03:00.001-07:00

RMB announcement on Dealstream Securities (Pty) Ltd

RMB has placed Dealstream in default as they are unable to fully reinstate their minimum margin requirements.
RMB
23 September 2008 17:29

Rand Merchant Bank (RMB), a division of FirstRand Bank Ltd, is the clearing member for the SAFEX activities of Dealstream Securities (Pty) Ltd. In terms of this relationship, Dealstream is required to post margins with RMB in respect of their open trades.

In terms of the JSE Derivative Rules, RMB has placed Dealstream in default as they are unable to fully reinstate their minimum margin requirements. Dealstream's transactions on the JSE were for their own account. Dealstream does not have any clients registered on the JSE and did not conclude transactions on the JSE on behalf of clients. As a result of this, Dealstream's clients do not have any recourse to RMB in respect of their transactions with Dealstream.

In terms of JSE regulations as a result of the default RMB, has taken over Dealstream's portfolio of diversified local listed shares at a market value of approximately R1billion together with the remaining initial margin. This portfolio will be managed as part of RMB's portfolio.

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5 responses to this article

RMB, Investec
If RMB have taken over the Book (stock along with the margin) from Dealstream and were only dealing with Dealstream then how is the that Doug Reed from Vox has been in discussions with RMB as he is not a client of theirs.

Surely if there . .more is no recourse to RMB, their is recourse to Dealstream of sum sorts. How pray tell me if RMB only deal with RMB is it that they what certain clients have invested with Dealstream (VOX)..............................

RMB: as prime broker it would be polite of you to let all exposed to Dealstream know what the default was so we have some indication if we can at least get 0.10c to the rand back. . .less

by Conned on September 23 2008, 18:04
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P'eeed Off
Agreed Conned...That would be very kind indeed! And perhaps for RMB to elaborate on the necessary process all those who have been raped should follow to at least recoup some of their NAV... Further, what becomes of our open positions?

by Wescot on September 23 2008, 18:56
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Artibrage
Hey all....

If you have a big open position watch the stock closely as RMB will have clear instructions to close all open positions. Therefore take the other leg from them and recoup some of your money......

Russell and his . .more wife have some interest in GT247............. possibly a rounte for the curators to follow . .less

by Opposite Side on September 23 2008, 19:37
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Why can't RMB
close the open positions, since it's to the tune of 1bn and refund our losses which are supposed to be to the tune of 110m

by Confused on September 23 2008, 19:49
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Group lawsuit
does any one know if a group law suit will assist in anyway.

RMB in bad faith
If this statement is saying that RMB is taking over the margin that all depositors have placed with them it is definately in bad faith and I would question the legality.
RMB is aware that the Dealstream funds put in for each purchase belong to various investors.
They are also aware that CFD are unsecured so if the Dealstream directors cannot meet their margin calls on their investment they should not touch other investments.
Further they are meant to be marked to market every day so even if Dealstream was in default the CFD or underlying SSF should have been closed off that day and only the shortfall owing that day could RMB have any claim over.Any losses ocurring after the first day are surely not claimable by RMB as it is due to their negligence and should not be recoverred by taking security left with them for unrelated deals.

Vox reassures on Dealstream collapse Company has emerged stronger from the collapse of Dealstream Securities. Vox Telecom 23 September 2008 15:56 Vo

2008-09-24T00:02:00.001-07:00

Vox reassures on Dealstream collapse

Company has emerged stronger from the collapse of Dealstream Securities.
Vox Telecom
23 September 2008 15:56

Vox Telecom CEO Doug Reed says the company has emerged stronger from the collapse of Dealstream Securities.

"The open derivatives position that has been hanging over us like a sword of Damocles for the past six months is effectively gone," he says. "90% of the derivatives have been taken out of the market and will be converted to shares. With those cut out of the equation we're actually better off because the exposure has been reduced drastically"

Reed says Vox managers and employees remain upbeat: "So far as we know none of our employees were in default of their margin requirements when Dealstream stopped trading. Our fundamentals remain solid and unchanged and we're keeping focussed on the work.

"This will in no way affect our delivery of services to our customers."

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4 responses to this article

Bunny chicken
The issue you are reffering to, is not what actually happened.
Have a cold shower mate (........)

by Funny f on September 23 2008, 17:07
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So did Vox know
So did Vox know this for 6 months? Maybe trust funds where used to bale out Vox?

by g on September 23 2008, 17:13
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Sunday meeting
Doug,

You met with Russell on Sunday at JB Rivers in Melrose Arch........... bud, please advise what action your company is taking to recoup some of your loses. How come you have special streatment from RMB....

You say your . .more shares have been converted, was this RMB who advised you of this and have these been corvereted from your dealstream account into RMB's????? . .less

by Doud Reed on September 23 2008, 19:41
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FULL DISCLOSURE AND CO-OPERATION WITH THE SAP
iF YOU MET RUSSELL ON SUNDAY HE CAN,T BE FAR AWAY, FUNNY NO ONE CAN REACH HIM WHO KNOWS-OR MAYBE SOMEONE DOES AND MAYBE SOMEONE WILL TALK AND MAYBE SOMEONE WON'T, I HOPE THE LATTER WILL BRING OUT THE TRUE STORIES, OR MAYBE IT"S A LOT OF PEOPLE THAT . .more ARE GOING TO TELL THE TRUTH OR MAYBE NOT. WE ALL KNOW THAT THIS IS A SMOKESCREEN OR MAYBE NOT, I THINK THE LATTER . .less

Vox Reveals Dealstream Damage
Telecoms operator Vox Telecom has revealed it’s set to lose millions more on the Dealstream collapse.
It puts its losses at less than 5 cents a share – in other words, anything up to R58-million. That compares with net interim profits of R43-million.
Vox had R30-million deposited with the CFD broker. It doesn’t expect to get that back. And it’s facing more costs for potential legal action against Dealstream staff, and for impairments to staff loans related to Dealstream. Vox says it’s contemplating laying criminal charges.
Dealstream collapsed five days ago. The Financial Services Board is investigating. Among the other victims are Control Instruments, which could lose around R3-million, and the Industrial Development Corporation.
Dealstream’s managing director Russell Leigh is thought to have left the country.
Source: Heather D’Alton, Summit TV ReporterFor more on this story, watch Summit TV tonight

[Image] Ernst & Young distances itself from Dealstream Dealstream was eager to encourage the notion that it was linked to the auditor, and published

2008-09-23T23:59:00.001-07:00

[Image]
Ernst & Young distances itself from Dealstream

Dealstream was eager to encourage the notion that it was linked to the auditor, and published incorrect info on its website.
Moneyweb
23 September 2008 18:12

Auditing firm Ernst & Young (E&Y) says it asked Dealstream to remove certain information from its website.

Dealstream, a failed broker, was keen to associate itself with E&Y, even though the link is tenuous at best.

Despite E&Y's efforts, Dealstream's website contained (and still contains) the following statement:

"Dealstream is South African based derivatives broker that is owned by management and the IDC-Argil Investment Trust (Argil). Argil is a partnership between, Ernst & Young South Africa, the IDC and World Wide Africa Investment Holdings."

E&Y claims this is inaccurate.

"Argil Venture Capital was established as a joint venture between Ernst & Young and World Wide Africa Investment Holdings as a venture fund manager. It established an innovation and technology fund, the Argil IDC Venture Capital Trust and raised capital primarily from the IDC, with each partner introducing a small amount of capital," said E&Y in a statement.

"Both Ernst & Young and WAIH disposed of their interests in Argil Venture Capital, in the case of Ernst & Young this occurred in 2006.

"The trust is managed by Argil Venture Capital and amongst its investments the trust had made, is an investment in Dealstream.

"In addition, Ernst & Young had recently sold its beneficial (minority) interest in Argil Venture Capital (Pty) Ltd subject to certain conditions present which to date, had not been fulfilled.

"Ernst & Young are in no way involved in the management of any of the investments of the trust nor does Ernst & Young have access to any information from these investments.

"Ernst & Young regrets any losses that may be incurred as a result of Dealstream."

Dealstream trust money gone missing Money deposited in Investec trust accounts went walkabouts, clients say. Julius Cobbett 23 September 2008 12:28

2008-09-23T23:58:00.001-07:00

Dealstream trust money gone missing

Money deposited in Investec trust accounts went walkabouts, clients say.
Julius Cobbett
23 September 2008 12:28

Money that was deposited into Investec trust accounts was used by Dealstream improperly. This is according to clients who are familiar with the situation, including Vox (JSE:VOX) CEO Doug Reed.

Dealstream had power of attorney over trust money. This money was meant to be used to fund clients' losses when trades moved against them.

However, clients say that money was removed from the trust accounts by Dealstream even when there was no need to access it.

This means that clients stand to lose millions. Reed estimates that he and fellow employees have together lost about R112m in their personal capacities.

What the money was used for remains uncertain. However, it has been speculated that it was being used to fund positions held by Dealstream in Vox and Simmer and Jack (JSE:SIM).

Investec head of investor relations Ursula Nobrega said she could not confirm the balances were zero. She cited client confidentiality.

Nobrega said at all times Investec was acting on behalf of Dealstream. She says Dealstream clients were not clients of Investec.

Reed recounts how he met with Dealstream CEO Russell Leigh on Sunday after he heard rumours of troubles at the derivatives broker.

"We actually believed him," said Reed. "He convinced us that everything was absolutely safe."

Leigh apparently showed Reed printouts of trust accounts, reflecting that his money was safe.

However, when news of Dealstream's problems broke on Monday morning, Reed realised he had been fed false information.

He says he managed to confirm that most of the trust accounts held by Dealstream with Investec had zero balances.

Leigh appears to have gone to ground. He is not answering his cellphone. Saul Cohen, a spokesperson for Argil, a shareholder in Dealstream, says its offices were vacated after a client threatened employees with violence.

Client Giacomo Alpino says he suspects Cohen is referring to him. Alpino tells Moneyweb that he visited Dealstream's offices on Monday morning. He says he found the doors locked with some employees standing outside. He denies threatening anybody with violence.

Alpino says he contacted Investec last week, who confirmed that certain trust account balances were zero.

Dealstream's clearing house RMB has assumed responsibility for its open trades on the JSE. This happened after Dealstream failed to meet its obligations to RMB.

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Related Links
Articles: Ernst & Young distances itself from Dealstream
RMB announcement on Dealstream Securities (Pty) Ltd
Vox reassures on Dealstream collapse
Be cautious of Dealstream Securities - FSB

Transcripts: Dealstream’s missing millions. Doug Reed – CEO, Vox Telecom The Dealstream debacle. Allan Thomson – head of derivatives and equity trading, JSE

COMMENTS
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34 responses to this article

Mofo
Russel Leigh... the same guy that was giving investment advice on the power hour, and even sponsored segments on the show... moneyweb, you should do due diligence on the ppl you get to give advice on your show since we the common ppl take your . .more advice to heart... then again since he managed to con everyone else I guess he conned you too... . .less

by J on September 23 2008, 12:59
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Ditto Mofo...
Farking pay attention to your own hse moneyweb before you critise the hse of others !

by Masti on September 23 2008, 13:08
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Masati, rocket scientist
Ditto E

by hindsight2020 on September 23 2008, 13:15
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Ersnt and Young, RMB, VOX, Investec, SAFEX, FSB
Also idiots?

by 2020 on September 23 2008, 13:21
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No E
Also Frauds

by N Muller on September 23 2008, 13:31
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What now
Who does one trust - back to using the pillow or mattress for your spare cash. On the flip side - these were people dealing / speculating in hot air, same as the great yankie banks were doing. Guess we will revert to buying and selling apples and . .more oranges aka real tangible stuff. . .less

by Umfiki on September 23 2008, 13:54
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Ernst and Young; IDC ; WWAIH - Return their money
Time to step up to the plate for these companies. Stop worrying about "good corporate governance for other companies, BEE,and young entrepeneurs awards and start worrying about your responsibility to investors. You concern yourselves with everyone . .more else's business except your own. Put your money where your mouth is and return their money. . .less

by Dave on September 23 2008, 13:59
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I wish Moneyweb
would take over Dealstream ,as it was the best trading platform I had ever used. I believe Cortex Securities has the same one , I will give it a try and let you know.

by Dieter on September 23 2008, 14:03
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why did VOX have money there? what are the ceo and staff doing trading CFD
INVESTIGATE PLEASE

by TAKECAREOFTHEBUSINESSANDSHAREPRICEWILLTAKECAREOFITSELF on September 23 2008, 14:17
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Is "cortex" registerd with the fsb?
check first trade later

by jon on September 23 2008, 14:37
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Risk-hahaha
My money in fixed investment in bank for years. 11.5%,no fees

by Life in the slow lane on September 23 2008, 14:49
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banks
I say as a client of dealstream , investec should be held liable for the compliance in regard to the trust accounts, and should refund everyones money , www.dealstream.net and click the banking tab , here they explain how they opened in co-ordinance . .more with investec your account in your own name surely the copliance of this should be investigated as investec themselves agreed to move monies out of these accounts with out audits.
. .less

by Dealstream client on September 23 2008, 15:54
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Vox
I find it shocking that a listed company had money at Dealstream. Was this to facillitate the directors and employee CFD positions. We need an independent investigation here and not appointed by the exec and non exec directors. It loooks like . .more poor governance and conflicts of interests here. . .less

by Honest Thabo on September 23 2008, 16:15
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OPERATING WITH NO FAIS LICENCE???
You are required to register with the FSB under the FAIS ACT to trade in CFD's ...how did Investec miss that one...and e

by FAISER on September 23 2008, 16:31
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Vox Advisors
Who on earth were advising Vox to deposit money with the likes of Dealstream to the tune of R 112m. Outrageous credit risk - a non regulated institution being what it was. The directors are completey mala fides in this respect - they may not be . .more financiers, but should have taken advice on the potential consequences of depositing cash with an unregulated bucket shop. Seriously stupid and misguided. Whoever their advisors are deserve to sit in Pretoria Central!! . .less

by Huh? on September 23 2008, 16:42
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Vox CEO - We expect you to fall on your sword -
I cannot understand how a listed business the size of Vox could have money with Dealstream. Why was the company and directors involved so heavily with Dealstream. Lastly, where was the corporate gov. in Vox.
I do expect to see both Tony and . .more Doug resigning shortly.
. .less

by Investor on September 23 2008, 17:03
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Paying with stolen money
Can Dealstream pay its debts (fund its position) with stolen money? Surely the recipient would be receiving stolen 'goods'! My trust account with Dealstream/Investec was also cleared of its contents!

by Poor John on September 23 2008, 17:40
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VOX
Was Vox informing dealstream to take prop positions, or was Dealstream informing Vox to take position trades.

Insider trading some where here surely.... all staff at dealstream and Vox need to be investigated.

2ndly: can . .more someone start a group of investors exposed to dealstream and start finding out the exact ownership structure of dealstream. Think there needs to be comment by IDC and Ernest and Young how they are going to make good the money stolen by Russell as he surely would have been appointed by the board.

Pay up boys . .less

by Pissed off on September 23 2008, 18:10
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To regulators: FSB
To the regulators.....

Firstly thank you for saying I told you so.... blah, blah, blah. Me says a little too much a little too late.

Can you stop telling investors what we already know and advise what recourse we have. e.g. do . .more we need to open a charge of theft, fraud or both. Who are the owners of Dealstream and what recourse do we have to the oweners due their employee/s actions.

Some guidance and less trumphet puffing . .less

by Looking forward on September 23 2008, 18:15
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Moneyweb
To moneyweb.....

How much are you boys owed from your positions and secondly from advertising........ were dealstream late in paying for the advertising on this site and did you guys know before it was too late.

Did you boys . .more pull your money and run and then break the news . .less

by Moneyweb on September 23 2008, 18:17
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deal
i want my money from dealstream or im gona F*** them upso they better hope they gona pay us out

by hell on September 23 2008, 18:20
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Arrests
Moneyweb....

Can you perhaps establish if Russell has been arreasted, or did the police just look at the offices on Monday.

Where is Russell and the rest of the owners, if there is fraud involved his others assets and those of . .more the directors can be attached as they were bought with the proceeds of dirty money.

Lets all think of ways to get some money back.

Doug Reed.... you have a lot exposed, help out mate . .less

by Arrests on September 23 2008, 18:28
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To Investec
Investec: please post a note to all your private clients who had accounts opened by Dealstream what risk measures you had in place to protect the end user. Surely you should have noticed something was strange when client trust accounts were all . .more being reduced at the same time........ stand tall and answer the questions. Post the contract between yourselves and dealstream on the net

RMB: you have this book from Dealstream. If you were only the prime broker how do you know what is Dealstreams part of the book from prop trading and what each underlying client is owed???????????? Explain that one please.

Kindly post your contract between yourselves and dealstream on the net. . .less

by To Investec on September 23 2008, 18:35
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Russell Leigh
Can the regulators please advise who caused the collapse of dealstream. Was it dealstream management and employees taking prop positions or was it due to a client default.

How did Leigh "Leight fingers" manage to access Investec private . .more client trust accounts that were not being used for margin calls or margin. . .less

by Russell Leigh on September 23 2008, 19:45
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Russell Leigh = Leight Fingers
What a con.................

by Nick name on September 23 2008, 19:46
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SSF on VOX
How many shares did Leight Fingers and his team have of VOX and did VOX management not know that Leight fingers was trading his stock aggressively

by Doud Reed on September 23 2008, 19:49
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FIN24 Post
I find Global Trader's post on FIN24 interesting.......... what they forget to mention is that Russell's wife has/had an ownership stake in the business........... is this still the case and was this investment not made by Russell???????

by The Leigh Family on September 23 2008, 19:52
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Suggest all Dealstream clients to form a collective group
I suggest all Dealstream clients to pull together to form a collective group, to fight for the interests of all affected clients. If we were to act individually, I am afraid Investec, RMB etc will act to the detriment of affected . .more clients.

For those interested, please email me with your name and telephone number at kyeh@worldonline.co.za . .less

by Kevin on September 23 2008, 20:28
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Investec
Read the latest Noseweek.

For all the Dealstream clients that have funds with them, I wish you all the luck in getting your money returned from these thieves.

by Ad Hoc on September 23 2008, 22:24
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Note on Dealstream Website
CFD's and over the counterproducts offered by Dealstream Online PTY Ltd

Once a live trading account is activated, Dealstream will open a Trust Account at Investec Bank in your own name. You will receive a confirmation from Investec and . .more Email from Dealstream providing you with your account details.
. .less

by Jacob us on September 23 2008, 22:46
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Strange?
How can Investec allow money to be taken from an account that is in my name (check above comment) Money can only be taken for Trade purposes. Surely that is THEFT and Investec should know the difference...

by Freddie on September 23 2008, 22:49
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Buddies
Looks like J Arthur Brown and Russel will have to share a 4 x 2 space soon...

by Jacob us on September 23 2008, 22:50
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CFD's
I find it astonishing that people would invest in CFD's when they clearly dont know what they're doing!
Unlike futures, CFD's are UNREGULATED and are bought and sold over the counter. (OTC) If you really want to take risks, better to use the . .more futures market or the warrant market.
Incidentally, you'll find Investec is not liable for a cent! They have excellent lawyers and any agreements of theirs will be watertight. Dealstream will be liable, but better join the queue. Its going to take years, just like Fidentia.
Good luck fellas! . .less

by Jack on September 23 2008, 23:13
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Is Global trader likely to suffer the same fate?
And do the operate the same way?

DEALSTREAM's DEAFRAUDED CLIENTS

2008-09-23T23:56:00.002-07:00

Trouble at Dealstream Offices vacated as some clients can't meet obligations, others threaten violence. Julius Cobbett 22 September 2008 10:34 Clien

2008-09-23T23:56:00.001-07:00

Trouble at Dealstream

Offices vacated as some clients can't meet obligations, others threaten violence.
Julius Cobbett
22 September 2008 10:34

Clients of Dealstream are concerned after the company's trading system went down last week. Calls placed to the derivatives broker and its CEO Russell Leigh went unanswered Monday morning. A visit to Dealstream's offices in Melrose Arch confirmed there was no one there.

According to its website, Dealstream is owned by management and the IDC-Argil Investment Trust (Argil). Argil is a partnership between, Ernst & Young South Africa, the IDC and World Wide Africa Investment Holdings.

Saul Cohen, a spokesperson for Argil told Moneyweb that Dealstream's offices were vacated this morning after a client threatened employees with violence.

According to Cohen, certain of Dealstream's clients were unable to meet their margin requirements. This came in the wake of extremely volatile markets. He says Dealstream is working to collect money from these clients.

This is similar to what happened at Global Trader Europe, which collapsed earlier this year after a very large client failed to meet a margin call.

Dealstream employees are now working from a remote office. Cohen says they are co-operating with Dealstream's clearing house, Rand Merchant Bank (RMB).

According to a JSE press release, the trading activities of Dealstream have been restricted by RMB. The clearing house has also assumed responsibility for the management of Dealstream's open trades on the JSE.

"RMB has taken these steps in accordance with the JSE's rules and as a result of Dealstream's failure to meet its obligations in respect of transactions concluded on its propriety account on the financial derivatives division of the JSE," says the press release.

Some clients - those with sufficient funds - are apparently being moved to competitor brokers.

Cohen says a decision was taken last week to close the online trading platform and allow only manually entered trades. This prevented Dealstream's clients from increasing their exposure to the markets.

Dealstream deals mainly in contracts for difference (CFDs). These instruments allow clients to trade stocks with a deposit or margin, typically a little more than 10% of the value of the trade. If a stock moves against the client by more than 10% in a single day, and he or she is unable to come up with money to cover the loss, this creates a shortfall.

CFDs are unregulated. However, Dealstream clients were also given the option of dealing in single-stock futures (SSFs), which are regulated and guaranteed by the JSE.

Dealstream is a registered member of the JSE.

JSE head of derivatives Allan Thomson confirms that Dealstream's account with its clearing member is being managed in a manner that will minimise potential damage to its clients.

Thomson says an investigation is under way to determine whether Dealstream was representing CFDs as futures.

None of Dealstream's clients were registered with the JSE, which is very unusual for a futures broker, Thomson says.

He says there is a long history of correspondence where the JSE had requested Dealstream not to give the impression that CFDs were regulated by the exchange.

"The contracts signed were over the counter contracts between Dealstream and its clients and are neither concluded on the JSE nor regulated by the JSE in terms of its rules," said Thomson. "Neither RMB nor the JSE will be liable for Dealstream's failure to meet its commitments to its clients."

"CFD's are not regulated by the JSE, and the JSE has been warning the market for some time now about the very unnecessary risks that clients face with CFD contracts," says Thomson "Had Dealstream's clients registered their respective positions as single-stock futures contracts with the JSE, the contracts would have simply been transferred over to a another member and their positions and their funds would have been secured."

Elmarie Kruger, manager of capital markets at the Financial Services Board (FSB) says she is considering whether to conduct an "on site review" of Dealstream after receiving complaints from clients. Dealstream is not registered with the FSB.

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42 responses to this article

Afrikaaner Money=Theft
Extract from Dealstream website "Traditional stock broking values and an understanding of our clients needs, forms the basis of our business. Our value system is based on integrity, trust, honesty and professionalism". It seems there is no reason to . .more panic. They are honest!!!! . .less

by Lionel on September 22 2008, 11:04
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What now?
What happens to investors who had deposits...and more importantly open positions with dealstream????

by panic on September 22 2008, 11:04
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Panic, you're loot is gone!
Ouch

by Broker on September 22 2008, 11:15
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INTERESTING LINKAGE TO EY
I LIKE THE ERNST

by CONCERNED INVESTOR on September 22 2008, 11:50
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@Lionel
What do you mean "Afrikaaner Money=Theft"? Please ellaborate.

by Dear John on September 22 2008, 12:00
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what now?
So what do you do now if you had an account with them?

by J on September 22 2008, 13:48
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Accounts with dealstream
Sorry for you - your money is GONE!!!

by Vanished on September 22 2008, 15:10
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Poor Risk Management
They clearly dont have a clue about risk management. Last Thursday they were only allowed to execute closing trades - clearly their clearing agent had a credit event against them and was only allowing risk reduction trades in order to reduce . .more exposure.

Funny - they had a good laugh at GT 247's risk failure earlier on in the year which alomost crippled their (Purples) business. Now the shoe is on the other foot. . .less

by Pissed on September 22 2008, 15:15
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Your money is safe its just gonna take a while if they go under
Same thing happened to me a few years ago with a compnay called Dealstmith. The fact that the funds are cleared at RMB means that RMB has client funds so it should be secure. The only problem issue is if Dealstream go bankrupt it could take about . .more 18 months before clients funds will get repatriated from RMB after a due diligence is sorted . .less

by frosty on September 22 2008, 15:22
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what about open positions??
i can't close out open positions...would the stop-losses kick in?

else there's gonna be k*K in paradise

by panic on September 22 2008, 15:48
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doubtful
with cfd's your money is pooled with other clients on dealstreams balance sheet. therefore if they have lost money you have lost as well.

by frontline on September 22 2008, 15:52
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Still in the dark
I would like to know who these QUOTE Some clients - those with sufficient funds - are apparently being moved to competitor brokers. UNQUOTE are as I have sufficient funds in my account and yet have received no corrospondence from Dealstream or . .more anyone else. One would at lest think that at least each loyal client to dealstream would have been notified and at least a contact number be provided so that we can at least inquery about our accounts and positions held..

. .less

by New Trader on September 22 2008, 16:03
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by any other name
another bull market betting (bucket) shop hits the wall. so sad, too bad. These guys did a bit of prop trading - i wonder whose tom they used? i wonder if the accomodation adjacent to Mr Brown (eye) is available? a new girlfriend for J Arthur, . .more now that he has found the undying love of a man, mmm? . .less

by 1 on September 22 2008, 16:04
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im a client
and there is no one i can speak to that can help(because none responding to emails or answering phone)... Moneyweb could you advise us... maybe a contact number?

by roberto on September 22 2008, 16:08
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what about Open Positions without stop loss
dont understand , if say mtn price goes down and the sell order is high, when is it selling and how will i be affected by the loss. i have no stop loss only sell order at say 15300

by curios on September 22 2008, 16:09
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Personal account funds
What is the position to bank accounts that were opened in our personal capacities at Investec private bank and we stiill have funds available as per our "TRUST ACCOUNT". According to the bank i could not get any info on my account only that it does . .more exist, but will have to work through the dying "Dealstream" . .less

by D from P on September 22 2008, 16:15
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Bucket Shops â more to fall?
Sorry guys â but to trade an OTC with a counterparty who has no balance sheet is not very smart. If you want to make money on the short side open an account at the big boys.

by Prudent Bear on September 22 2008, 16:16
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"Steal Dream"
Trade regulated products only!

by Anon on September 22 2008, 16:20
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You sound smart ,but thats it
Prudent Bear
dont try to sound smart, be specific or back out

by Curios on September 22 2008, 16:24
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Re: curios
Well obviously if you have no stop loss you can lose your entire margin and then some more. And if the price never reaches the sell order, but stays below it, then you remain at risk. Also, the sell order is not guaranteed, and the price can "gap" . .more so you always have to be on top of the situation your self, and not rely on orders as a last resort.

BUT the problem is that Dealstream have taken themeselves out of communication which alsmost certainly means that they have gone bust. They most likely cannot meet their committments to honour trades. Whether or not you get any money back depends on a whole lot of criteria that have yet to be made clear. They are unregualted, so don't expect too much out of it.

. .less

by Ad Hoc on September 22 2008, 16:30
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prudent bear?
Yes open an account with the big guys, like Lehman brothers?

by skippy on September 22 2008, 16:39
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I had over R100,000 on call there a week ago...now R21.05
I had over R100,000 on call there a week ago...after I felt it was a turbulent time to be trading......

Apparently Investec Corporate were meant to manage funds on call from Dealstream. I called Investec and they said my D.S balance on . .more call was R21.05 !!!!!

What did they do with my cash????

Where do I go to now for help??

RMB?
Investec?
Dealsteam has no one home....

Who?

helpppp!!!! . .less

by Ted on September 22 2008, 16:57
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Att Ted
Your first call should be to the SAP as you suspect fraud or theft. Your second call should be to the FSB, third call to the person who advised you to use Dealstream, fourth call report this guy to the FSB. Good Luck, but it doesn't look good.

by Regulated on September 22 2008, 17:13
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What do RMB know that they aren't telling us?
The issue for many Dealstream Investors is that they told some clients (like me) that they were registered with SAFEX and that I could open a client account and trade futures as their client on SAFEX. This is different to CFD's as the funds are . .more segregated and ultimately settlement is guaranteed by their clearing member, who is RMB. However, Dealstream never opened client accounts at SAFEX, but pooled all funds in CFD's instead, effectively allowing them to-cross subsidize various client margin calls.

My issue is that RMB and the JSE must have known this was happening and did nothing about it. Surely they are accountable as well and must make good to the clients?

. .less

by Investor on September 22 2008, 17:13
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FSB where are you !!!
Why does the FSB allow these operations to go under first before they step in???
Are other operators at risk, especially if they are running so called risk books?

by john on September 22 2008, 17:16
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See this article
http://www.fin24.com/articles/default/display_article.aspx?ArticleId=1518-24_2397729

by Ad Hoc on September 22 2008, 17:32
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Vox
These guys wrote bucketloads of Vox CFDs. Wouldnt be surprised if Vox mgt and staff have accounts at Dogstream. Will these guys loose their margin accounts? What will happen to the share price?

by Ike on September 22 2008, 17:33
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FSB
Wake up investors

by Regulated on September 22 2008, 17:36
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I Had over R 100,000.000 ...R21.05
Mate - either your long positions gobbled up your margin till the position closed out - hence the R 100,000.00 loss OR the money was gobbled up by Dealstream to meet their own margin calls (hope not ). You should know if u were long before the . .more downward price correction and should be able to do the math. If not - What the F . .less

by Duhh on September 22 2008, 18:43
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Dealstream and the banks
Dealstream themselves have trades gone bad Russell Leigh has used our money over for their bad trades aswell as their positions in Vox and simmer

by Aparrent Violent trader on September 22 2008, 19:02
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In the Dark
I wish that someone from Dealstream would just take the responsibility and come out and explain what happened and take it from there. By not saying anything raises suspicion even more....Come on Russel. You owe us that !!!

by Jacob us on September 22 2008, 21:08
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When are people going to learn, if you want to gamble go to a casino.
YOu should buy shares for investment not some fancy instrument that offers you all kinds of gearing. Traders never make money over a long term the studies and statistics have been done. The few that are good at it or lucky make a few bucks on the . .more side just like people who play the horses or professional gamblers but in the end its only long term investors that make real money, just ask Warren Buffet. Trying to make a quick buck always ends in tears. You may look clever in a bull market but you going to give it all back and then some when things turn bad. Same thing happens to a gambler he wins today but gives it all back the next day. So what the F... where you thinking, buy real assets next time like good companies like remgro or whatever floats your boat. If you can't do that then buy houses instead... numb nuts . .less

by Brendan on September 22 2008, 21:10
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Kicking myself
I called dealstream on thursday last week and asked are there any problems etc and was told there was a little system problem, however did I want to place a telephonic order.

I then called up Nedbank to move my money across. Got all the . .more forms, my paper work ready over the weekend and bang..... what a great start to the week.

I ask moneyweb to please assist as follows:

1: Investec Bank Accounts: were these trust accounts opened at the bank? Call accounts: is the money on call or have Russell and his team tapped into this to cover margin calls?

2: The article mentions that certain clients are being moved across to competitors. Who is moving this money, or has say over the matter as I would like some communication.

3. Ownership structure of Dealstream: what is the ownership structure of dealstream.

4: does russell's wife not have some involvement with global trader? . .less

by Wanting Feedback on September 22 2008, 21:26
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TRADING WITH CFDs
TRADING WITH CFD'S IS A GAMBLE ANY WAY YOU LOOK AT IT IN MY VIEW, WHAT CONCERNS ME IS WHY DID'NT ANYBODY FROM INSTAQUOTE OR INVESTEC WHERE WE HAD MONEY INFORM US OF THE RISKS INVOLVED WITH DEALING IN THESE STOCKS WICH IS CONNECTED TO ONE OF THE . .more BIGGEST INVESTMENT INSTITUTIONS BEING IN THIS CASE INVESTEC . .less

by LTA on September 22 2008, 21:26
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Investec
Is it just me or does anyone smell the stink when this company arrives in the vicinity.

by Ad Hoc on September 22 2008, 22:46
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misinformed
I had a margin call on the 12 Sept, i did a transfer immedeatly...I emailed jennifer everyday for a week as to why the transfer was not reflecting in my trust account, I am still waiting for a reply!...This whole thing is absurd, there is far more . .more to this than what we are being told. . .less

by dustydeb on September 23 2008, 07:41
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response to kicking myself
Jeanne Leigh was fired from Global Trader more than 5 years ago for attempting to steal Global Traders client base for her husbands business dealstream. The court records are public for those who are interested....

by In the know on September 23 2008, 08:44
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Darth Vader
If this is the type of feedback we get i will never deal with Investec or Rmb in my lifetime and will make sure that i inform as many people as possible about this dark experience.GAURANTEED.

by No Faith on September 23 2008, 09:28
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Now is not the time for panic
Whilst I understand the mentality of the sensationalists out there I do believe now is the time for a cool head. As a Dealstream client myself it is indeed easy to jump on the bandwagon and cry "I told you so". The bottom line is that the most . .more likely occurrence should Dealstream indeed fold is that there will be a buyout of the company and clients can trade as per normal. One would hope that there are institutions who are savvy enough to realise the potential profits far outnumber the concerns. A few bad trades have caused this commotion, not gross negligence. It is a mistake that I'm sure can easily be rectified. . .less

by Trader on September 23 2008, 09:30
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Re now is not the time to panic
You are living with the fairies....this company was built on dishonesty. No savvy company would EVER go anywere near them. Your money is gone!!!

by Regulated on September 23 2008, 10:37
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Cohen
This man is as fraudulant as the rest of dealstream there was no reason to close the platform ..... the platform does not allow you to trade with insuficiant funds. They closed the platform because they had used up all the clients trust monies for . .more their own acount and were rejecting clients orders He knows this STOP TRYING TO COVER YOUR rear end idiot.....were not that stupid . .less

by Client on September 23 2008, 16:01
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money fails
ever heard of when your money fails - signs of the times. all i can say is this kind of thing is happening more and more - be awake.

by happeing on September 23 2008, 22:46
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JSE warns against CFD trading Dealstream Securities being placed under restrictions in accordance to the JSE’s rules. JSE Ltd 22 September 2008 17:57

2008-09-23T23:52:00.000-07:00

JSE warns against CFD trading

Dealstream Securities being placed under restrictions in accordance to the JSE’s rules.

JSE Ltd
22 September 2008 17:57

JOHANNESBURG, Monday 22nd September 2008 - The trading activities of local brokerage firm Dealstream Securities (Pty) Ltd) ("Dealstream") have been restricted by its clearing member, Rand Merchant Bank ("RMB"). RMB has also assumed responsibility for the management of Dealstream's open positions on the JSE. RMB has taken these steps in accordance with the JSE's rules and as a result of Dealstream's failure to meet its obligations in respect of transactions concluded on its proprietary account on the Financial Derivatives Division of the JSE.

Dealstream's transactions on the JSE are limited to transactions concluded on its proprietary account as Dealstream does not have any clients registered on the JSE nor did Dealstream conclude transactions on the JSE on behalf of any clients.

Dealstream is one of South Africa's largest Contracts For Differences ("CFD") traders and, in this capacity, it has concluded many over-the-counter ("OTC") CFD's with its clients. CFD's are not standardised agreements, and are, in essence, an over the counter contract between two parties (Dealstream and its client) stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at the expiry date stipulated in the CFD.

CFD's have elements in common with derivatives instruments (such as single stock futures "SSF") listed on the JSE but transactions in CFD's are not regulated by the JSE nor do parties enjoy the protection of the JSE's risk management and guarantee structures and procedures. Transactions in SSF's listed on the JSE are regulated by the JSE and performance of the parties to the SSF is guaranteed in terms of the risk management structure as set out in the JSE's rules. Investors who buy CFD contracts, on the other hand, take on the brokerage's credit risk and can stand to loose if the CFD brokerage defaults.

"As the contracts signed were over the counter contracts between Dealstream and its clients that are neither concluded on the JSE nor regulated by the JSE in terms of its rules, neither Rand Merchant Bank nor the JSE will be liable for Dealstream's failure to meet its commitments to its clients," comments Allan Thomson, Head of Derivatives Trading at the JSE.

"CFD's are not regulated by the JSE, and the JSE has been warning the market for some time now about the very unnecessary risks that clients face with CFD contracts," says Thomson "Had Dealstream's clients registered their respective positions as single stock futures contracts with the JSE, the contracts would have simply been transferred over to a another member and their positions and their funds would have been secured."

An investor buying a single stock futures contract through SAFEX, will have to go through a clearing member who acts as a risk-manger and guarantees that the counterparty will honour its commitment to the deal.

Thomson points to the recent example of Lehman Brothers. "Not many people are aware that Lehman Brothers held very large single stock futures positions on SAFEX, the JSE's futures exchange. As these contracts were registered on the JSE, the clients were simply transferred to another member and did not lose their positions or their investment when Lehman's Brothers went under."

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11 responses to this article

OK so if my money was on CALL at DS. where is it now ?????
Forget the CFD's my money was on CALL at DS. where is it now ?????

cos my R100000 was at Investec (thru Dealstream) and is no longer there.

can you answer this?

by ted on September 22 2008, 19:13
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Dealstream
Where is the FSB and RMB compliance to Dealstream trading manner and the rules concerning Investecs so called trust accounts opened in the name of us the clients Where we were led to believe that the money gets taken as it clearly shows on the platform , a trust acc with investec and a investec account no in wich we deposited the money and How is it that one day investec gives us a trust account balance and the next day when theres trouble they suddenly have no records of the accounts ....also what happened to the money at investek of accounts that were not at all traded and money banked for interest only thats gone too who gave investec the right to move thet money when it has no order of any sort against it ??????? what compliance rules are there with these isues
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by Giacomo on September 22 2008, 19:17
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Giacomo
Hell mate - you can barely speak English. What the hell were you doing trading CFD's on margin. Your account at Investec was, as u state, a Trust Account. i.e. in the Trust of Dealstream Securities, deposited with Investec. Once you transferred your money upon the opening of your account, the managemnt was ceded to Dealstream ito your Ac opening forms. The money was to be used to provide margin for trades that you wished to be executed, and to cover variation margin as it was due.

Investec have no liability here - their responsability is to transact in accordance with Dealstream instruction as mandated by your account opening form. if Dealstream masappropriated ur funds - your claim is against Dealstream.

Before you play the game, read the instructions - Credit Risk 101. . .less

by Cled in on September 22 2008, 20:30
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DEALSTREAM
Does anybody know what happens to the nav of the shares, AND IF I CAN GET MY MONEY BACK THAT WAS IN THE TRUST ACC?

by Lance Allison on September 22 2008, 21:03
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They all denying responsibility/cowards
All dealstream investors go seek legal advice. Rmb, Investec, Ernst and Young , JSE and Fsb need to be taken on. They have been aware or should have been aware of all the irregularities. They are all hiding behind legal disclaimers. You guys didn't do your jobs and you all need to pay up now cause we as investors relied upon you. . .less

by I hate cowards on September 23 2008, 08:14
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Dealstream
It seems as though there are a lot of us who have been cheated, what happens now ? How do we take action against Dealstream and can we take action.

by Steve on September 23 2008, 09:32
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Cry Wolf
I (and I am sure that many our CFD traders like me) are now well versed in all the JSE rules and relied on the media advertising that the only risk that we were taking is making bad trades. Just do a search for CFD - Pages from South Africa ( I got 16400 results in 0.12 seconds) advertising trading CFD. On the very first page one of the cpmpanies offering the public to trade CFD is NEDBANK and BoE (these are household names) Even on this website(right at the top when one first opens the page) there are adverts to trade CFD. Also with the names connected to Dealstream one would think that all was above boardi and that they complied to all of the rules being JSE and registered with the FSB. Now everyone is crying wolf . All that we want is to be advised what is happening and actions to take. Please help..... . .less

by New trader on September 23 2008, 09:53
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Who's Lying?
According to Dealstream's Website, and I Quote, "All Dealstream CFD's are essentially Single Stock Futures held at the JSE,thereby providing the client a secure instrument regulated by the JSE and which is fungible(meaning that any position can be transferred to any other JSE broker)" This is on their Website under CFD's, therefore RMB should have no problem transferring our positions, if they say can't, we need to know why? Who is lying to us? . .less

by Frustrated Trader on September 23 2008, 11:35
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The Real Problem
They have been banned from trading by the JSE and FSB who are not giving us good reasons why. This is like A SUPERMARKET COMMISSION not allowing a supermarket to receive goods from the dairy and the market and then telling us the supermakret is bad because it is not licensed. . .less

by The Real Problem on September 23 2008, 12:00
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The JSE should strive to give us a fair market
With all thats happening and the lost time weve had they should give us a trading sesion tommorrow afternoon.

by Johann on September 23 2008, 12:08
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Does global trader operate similarly?
???