The Difference Between What's Right and What's Legal

Someone once asked me why lawyers are always controversial and don't seem to think the same way as everyone else. Below is my favorite part of Robert Bolt's play "A Man for all Seasons". It basically shows that there is a difference between what is "morally" right (a moving target) and what is legal. Morality is subjective and emotional and people often condemn you before hearing you out. The law, on the other hand, is objective and based on empirical evidence. The objectivity and predictability of the law provides stability and ensures that we do not only follow the law when it suits our convenience-which is a shortcut to anarchy.

  

Even though it is generally agreed that the law is not infallible and at times we don't agree with certain parts of the law, we should follow every law strictly. The law is not only a spear, but also a shield-if we are selective in what laws we follow, we shouldn't be surprised if other people bend the law to our detriment.

Alice: Arrest him!

More: Why, what has he done?

Margaret:: He's bad!

More: There is no law against that.

Roper: There is! God's law!

More: Then God can arrest him.

Roper: Sophistication upon sophistication.

More: No, sheer simplicity. The law, Roper, the law. I know what's legal, not what's right. And I'll stick to what's legal.

Roper: Then you set man's law above God's!

More: No, far below; but let me draw your attention to a fact -- I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of the law, oh, there I'm a forester.I doubt if there's a man alive who could follow me there, thank God.

Alice: While you talk, he's gone!

More: And go he should, if he was the Devil himself, until he broke the law!

Roper: So now you'd give the Devil benefit of law!

More: Yes. What would you do? Cut a great road through the law to get after the Devil?

Roper: I'd cut down every law in England to do that!

More: Oh? And when the last law was down, and the Devil turned round on you, where would you hide, Roper, the laws all being flat? This country's planted thick with laws from coast to coast -- man's laws, not God's -- and if you cut them down -- and you're just the man to do it -- do you really think you could stand upright in the winds that would blow then? Yes, I'd give the Devil benefit of law, for my own safety's sake.

Louis Majwara: Unlucky Forex Trader or Fraudster?

On 18 August 2010, in the Weekly Observer Newspaper, Patience Akumu wrote, in an article titled "Online forex trade: a gamble or goldmine?" "Louis Majwala, who admits to leading a relatively comfortable life thanks to forex trade, is a good example of how you can turn your life around just by buying and selling forex." 

Fast forward to 3 February 2011-  the same paper carried a story titled "Ugandans lose Shs 11bn in forex scam" showing that over 300 Ugandans are trying to recover $4.5m from Mint Consult, which is owned by Louis Majwala's. The article states "A task force representing the interests of the duped clients has already attached assets belonging to Louis Majwala, the boss at Mint Consults Limited. However, the value of the attached assets – two car log books and a land title to roughly 20 acres of land outside Kampala – does not come close to what the clients are seeking."

The position of trader, created an implied trust between Louis and each client and imposed the following fiduciary duties on him

1. To act prudently/diligently and with reasonable care

2. To act impartially and avoid conflicts of interest

3. The duty to put the investors first and not to unfairly benefit from the trustee position

4. The duty to segregate his personal funds from the funds under management and provide accountability to the clients

5. The duty to provide information in a timely basis

6. The duty to preserve the confidence of beneficiaries

In the end, Louis breached each and every one of his fiduciary duties and it is said he created a ponzi scheme. I expect that he'll be bankrupt and probably in prison for fraud and obtaining money by false pretences soon (as a disclaimer-Louis is innocent unless/until proven guilty).

In an ironic twist, Louis says he can recover the money if investors give him $2m dollars more. I would be very surprised if the "duped clients" who were eager to give him their money last year give him one shilling.

Hearts of Lambs, Feet of Cheetahs and Memories of Elephants

Yesterday, I got a call from a gentleman I had not heard from in a while. He started off pleasantly enough, asking when I left CMA and how business was. I almost laughed when he proceeded to tell me about how his boss a Tullow Oil wanted to send him to Germany to buy some expensive spare parts, but he knew someone in Industrial Area who had them (but he couldn't approach him because they had been competing for the same job). He was therefore giving me the opportunity to make $20,000 per part by investing some of my money (USD 5,000). I was telling a friend about how ridiculous and unimaginative these people were, when he told me that he had fallen for the same confidence scam.


Emerging markets are the destination of choice for investment because their growth potential and investment return expectations are much better than most of the returns in Europe. Also, because our issuers are not highly leveraged by securitization, most of the companies are recession-proof. Uganda is one such country, as evidenced by the over-subscription of IPOs and additional issues in our market. Unfortunately, while this market is a great destination for investors, it has also attracted a number of fraudsters. The investor is the first line of defence against such fraud


There is an old saying "Investors have the hearts of lambs, the feet of cheetas and the memories of elephants". This could be interpreted to mean many investors do not take time to study the market or get equipped to take calculated risks. Instead, they are driven by the emotions of greed and fear, fall prey to unscrupulous characters who steal their money and destroy their confidence even in legitimate investment vehicles.


Before you invest, seek professional advice. Make sure you read everything that is given to you and don't be rushed into a get-rich-quick scheme that requires you to put money up without any guarantees. remember, if it seems too good to be true, it most probably is.

Is your Forex Trader Legit?

Forex trading is the new craze to hit Kampala. For many speculators, this could be a profitable if they land on the right side of a transaction. However, there is no doubt that this is a very risky investment vehicle, which, of late, has been used to perpetrate fraud all over the world. The risks herein are two-fold:

i) The first risk is the ordinary market risk that every investor bears-if you are on the wrong side of a transaction, you could lose your entire investment. 

ii) The second risk, which is the focus of this note, is the risk of market abuse or fraud by the broker or trader. Since the Traders in Uganda are mostly unlicensed, the investor is the first and last line of defence.

A potential, or actual investor must conduct a due diligence and know his or her Trader. 

I recently received a proposal and a contract from a forex trader, who promised a potential investor a return of 20% per month for an investment of USD 2,500. Apart from the fact that this return seemed to be too good to be true, and the trader had not bothered to clearly declare the risks to the potential client, I noticed a number of things that made me suspect that the trader was not looking out for the interests of the client or worse- was probably operating a ponzi scheme and would defraud the potential investor. 

I would like to share afew tips on what you should look for and how  to identify red flags to avoid being ripped off.

1. Is the trader licenced? For one to be authorized to take deposits from the public, he should be licenced by Bank of Uganda. Alternatively, for one to act as an investment advisor, with discretion to invest funds on behalf of clients, he must have an investment advisor class (a),(b) and (c) licence from the Capital Markets Authority. If one is not licenced, he is unregulated and any clients that lose their money as a result of the malfeasance of the trader have no recourse to the CMA or BOU for compensation. However, CMA and BOU can take action against such traders to prevent loss.

2. Does the Company have Sound Corporate Governance Practices? Have you seen its incorporation documents, particulars of directors, company filings, audited accounts, procedures manual, investment policy. The trader's failure to meet its legal and regulatory obligations is a red flag. 

3. Do the contract documents reflect the intent of the transaction? I noted that the documents relied on were investor or preference share agreements which transferred the risk from the trader to the client. I also saw some clauses that were to the effect that "the trader has no obligation to give the investor information relating to the investment." This lack of transparency is very suspicious since it does not give the investors an opportunity to assess the suitability of the investment, and in effect, renders them blind. This could also allow the Trader to carry out fictitious trades and do a "Bernie Madoff" without being checked by the client.

I also noted that the contract did not expressly state that the "Investor" was entitled to the 20% return promised, but rather to dividends. In my experience, dividends are tagged to profits and paid on an annual basis and not monthly as promised by the trader. The investor would therefore not be able to prove his/her entitlement to the monthly returns. 

4. Are you satisfied with the resources and financial capability of the Trader: Traders are trustees of their clients' funds and "a necessitous man cannot be a trustee". Check your trader's assets because you might need to liquidate them to recover your money in case of a loss and his bankruptcy. Please note that the money you give the trader is a liability and therefore does not fall within his assets. If the Trader mixes the funds (e.g. by using one account for his operations and client funds) this is already a breach of trust.

5. Are you satisfied with the skill levels or experience of the Trader: Traders should provide you with proof of capability. Why would you trust an amateur with your hard earned money?

If you have been cheated out of your hard earned money by any unregulated Forex Traders, please contact BOU or CMA or the Police. You could stop the loss of money and prevent large scale fraud