Ombud rejects adviser’s Sarb story about Sharemax

THE OMBUD for Financial Services Providers, Noluntu Bam, has rejected a claim by a financial adviser that the loss suffered by his clients, who invested in a property syndication promoted and marketed by Sharemax, was caused by the intervention of the SA Reserve Bank.

Bam said the loss suffered by Barend and Hermina Viljoen was caused by the inappropriate advice they received from financial adviser Martin Holtzhausen, based in George in the Western Cape.

Holtzhausen said it was unfair to be blamed for the loss the couple suffered, “when it was the Financial Services Board (FSB) and Sarb that had failed in their duties”.

Bam ordered Holtzhausen to repay the couple the R520 000 they had invested in Sharemax on his advice. Holtzhausen also referred to a ruling by the high court that the Nova and Frontier companies should pay back investors in accordance with a schedule.

However, Bam said despite Holtzhausen’s contention that a payment plan was in place, the complainants had not seen a single cent of their monthly repayments nor a return on their capital.

Nova is the rescue vehicle born out of a scheme of arrangement following the collapse of Sharemax Investments in 2010.

Bam referred to a communiqué circulated to share and debenture holders by Nova in May last year confirming that the Nova board had made a decision in 2013 to reduce and/or cease the projected monthly return payments to use these funds for repairs and maintenance.

“There can be no other conclusion that the complainants lost their investments,” Bam said.

Nova is now proposing listing the property syndications and converting the debentures to shares in the proposed JSE-listed company.

Sharemax collapsed in 2010 after it became public knowledge that the registrar of banks had found that Sharemax’s funding model contravened the Banks Act. New investments dried up and Sharemax was unable to make monthly payments to investors.

The registrar of banks laid criminal charges against Sharemax for alleged contraventions of the Banks Act in March 2012.

The Hawks confirmed they were investigating Sharemax, but to date no charges have been brought against anyone associated with the failed investment schemes in which about 33 000 investors invested about R4.5 billion.

In a separate determination, Bam ordered Port Elizabeth-based financial adviser Fanie du Preez to repay Bernardus Vorster and his wife, Magdalena, the R160 000 they invested on his advice.

Bam rejected an application by Du Preez that it was more appropriate for a court to deal with the matter and she declined to address the complaint.

Bam said Swanepoel’s suggestion that Capicol, the developer of The Villa and Zambezi Mall, paid interest through the attorneys’ trust account was false.

She said Swanepoel admitted that investors’ funds were lent to Capicol to fund the building, and it was no longer in dispute that investors’ funds were not held in trust but were used to fund the building of the mall.

“They made the payments from the investors’ own funds. This easily explains why the whole scheme collapsed once the Reserve Bank intervened. The base of new investors shrank, and there was no cash to continue,” she said.