Johannesburg - A financial adviser has been ordered by the ombud for financial advisory and intermediary services (Fais) to repay a 75-year-old female pensioner the R125 000 she invested on his advice in Realcor.
In a separate determination, Durban-based Bahti Yeti Brokers and/or Alida Maria du Preez-Maritz were ordered to repay a male farm manager in KwaZulu-Natal the R40 000 he had invested on her advice in The Villa, a property syndication scheme promoted and marketed by Sharemax.
Read: Two more advisers must repay Sharemax clients
Noluntu Bam, the Fais ombud, said there were no prospects of ever recovering the money from Sharemax.
In regard to the Realcor complaint, Bam said the female pensioner was one of thousands of investors who invested in Purple Rain Properties, trading as Realcor Cape, which was now liquidated.
Huis van Oranje Financiele Dienste and two of the firm’s representatives, Barend Petrus Geldenhuys and Stephanus Johannes van der Walt, were ordered to jointly and severally to repay the pensioner the R125 000 that she invested in Realcor.
Bam said Realcor used various subsidiary companies to obtain funding from the public for its development projects.
Allegations by the public that Realcor was obtaining money from the public unlawfully led to the South African Reserve Bank conducting an inspection through PricewaterhouseCoopers.
Not authorised
This inspection found Realcor was conducting the business of a bank without being registered or authorised to operate as a bank. Realcor was placed under supervision and prohibited from obtaining further money from the public.
Attempts to put the Realcor companies under business rescue as an alternative to liquidation failed.
Bam said Geldenhuys and Van der Walt had failed to comply with the Fais Act and code of conduct at the time of giving advice to the pensioner.
She said they were also negligent in failing to comply with the duties of a financial adviser as contemplated by the code and failed to act in the interests of the complainant by recommending a highly risky investment in an unlisted property syndication scheme when the personal circumstances of the pensioner demonstrated the product was not suitable.
Bam said they also failed to act honestly, fairly, with due care, skill and diligence by recommending an inappropriate financial product to the pensioner and failed to provide an explanation of why the Realcor investment was likely to satisfy the complainant’s identified needs and objectives as envisaged by the code.
Better returns
In regard to the complaint related to The Villa, Bam said that Bahti Yeti Brokers had advised the farm manager to disinvest his R40 000 investment from Old Mutual Investment Horizons and invest it in Sharemax because he would receive better returns from The Villa investment.
Bam said the farm manager did not see anything untoward about this advice at the time because he was receiving regular interest from a R100 000 investment he had made into the Liberty Mall Welkom, another property syndication promoted by Sharemax that was also made on the advice of Bahti Yeti Brokers. She added that if Bahti Yeti Brokers had followed the code, it would not have recommended an investment in The Villa.
Bam said the brokerage could not have been acting in the farm manager’s interest when recommending the investment in Sharemax, because there was no evidence suggesting it knew what paid investors’ interest because the property was under construction.
She said there was no evidence Bahti Yeti Brokers was aware of the risk involved in Sharemax, including the lack of apparent safeguards to protect investors against misconduct by the directors, the lack of visible governance arrangements and the complicated structure of the investment, which left investors with no protection.
BUSINESS REPORT