The Citizen (KZN)

Advisor ‘must repay farmer’


- Roy Cokayne Failed scheme These included that Venter:

About 18 700 people invested an estimated R5 billion in various property syndicatio­n schemes.

The ombud for financial services providers (Fais Ombud) has ordered a financial advisor to repay an 87-year-old farmer the R200 000 he invested in two property syndicatio­n schemes promoted and marketed by Sharemax Investment­s.

Fais Ombud Nonku Tshombe said financial advisor Ernest Venter, trading as Ernest Venter Makelaars, was unlicensed to sell Sharemax products and there is no evidence on record that he acted as a representa­tive and was supervised to sell these products to Hendrik Everhardus Grundling Du Preez.

Du Preez invested R100 000 in Sharemax Zambezi Retail Park Holdings in November 2008, and a further R100 000 in Sharemax The Villa Retail Park Holdings during November 2009.

Tshombe said Du Preez lost his capital and there is no prospect that he will recover any part of it.

This appears to be the first determinat­ion issued this year by the Fais Ombud related to a complaint about an investment in Sharemax.

Tshombe told Moneyweb in April there were 1 114 property syndicatio­n matters still open at her office.

Sharemax collapsed in 2010 after the findings of a Registrar of Banks investigat­ion that its funding model contravene­d the Bank Act became public knowledge.

This led to new investment­s drying up and Sharemax being unable to make monthly payments to investors.

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

About 18 700 investors invested an estimated R5 billion in Sharemax’s various property syndicatio­n schemes.

At the time it imploded in 2010, it was the biggest-ever collapse of a property syndicatio­n scheme in South Africa.

Tshombe said the investment by Du Preez into Sharemax had been recommende­d by Venter.

She said over time interest payments from Zambezi began decreasing and during July 2010 payments from both the Zambezi and Villa investment­s stopped, with no further payments received since July 2010 for either of the investment­s.

Du Preez instructed Venter in August 2010 to cancel the investment­s and get back his capital.

Venter gave an assurance that

“everything was alright and we should be receiving our interest soon” but there were no further interest payments and Du Preez did not receive any response from Venter regarding the capital.

After numerous attempts by Du Preez to liaise with Venter, he approached the Office of the Fais Ombud.

In his response to the complaint, Venter disputed Du Preez’s version regarding the circumstan­ces around the investment and claimed he had visited Du Preez at the farm because Du Preez needed assistance with a Sanlam policy.

Venter said it was on this occasion that he told Du Preez about Sharemax but Du Preez was well informed about investment­s, had already done his homework and concluded that Sharemax was the answer to his problem. In addition, Venter claimed Du Preez no longer wanted to invest in Absa because these investment­s only yielded an interest rate of 4-6%.

Venter, therefore, believed Du Preez was making an informed decision, saying that he had acted in the best interests of his client and carried out his work “absolutely correctly”.

He further claimed that no one could predict that Sharemax would go wrong.

The Fais Ombud listed a number of undisputed facts which were relied on for the resolution of the matter.

Requested a Sharemax consultant to explain the investment to Du Preez.

Did not provide Du Preez with a prospectus for either of the investment­s.

Did not explain the risks in the investment to Du Preez and didn’t deny that he informed Du Preez that Sharemax was a safe investment and that he had invested his own funds into it.

Informed Du Preez that Sharemax purchased property, rented it out and eventually sold it at a profit for the benefit of investors but failed to point out that the Zambezi and The Villa schemes were different from all the previous syndicatio­ns marketed by Sharemax.

Did not carry out a risk analysis or needs analysis, with his record of advice confirming this.

Did not offer Du Preez any other or alternativ­e financial products.

Failed to point out to Du Preez that Sharemax, in respect of Zambezi and The Villa, had no trading history and no independen­t means to pay commission­s, and that investor returns and commission­s and monthly interest payments in effect were to be made out of investor funds.

Failed to point out that Sharemax did not own any property.

Tshombe found that Venter failed to act honestly, fairly, with due skill, care and diligence; contravene­d the general code of conduct for financial services providers; and failed to act in the interests of his client.

In addition, Tshombe said Venter failed to provide full and frank disclosure of all the material informatio­n about the Sharemax product to enable Du Preez to make an informed decision; failed to provide appropriat­e advice; and failed to identify a product that was appropriat­e to Du Preez’s risk profile and financial needs.

Tshombe said even if it is accepted that Venter could not reasonably have foreseen that the scheme would be found to have contravene­d the Banks Act or foreseen any delinquent conduct by the directors of Sharemax, Venter was expected to make an evaluation of the product from the prospectus and give advice based on the client’s requiremen­ts and tolerance for risk.

Venter failed to do this and was therefore negligent, in this case possibly even dishonest, and is accordingl­y liable for damages, she said.

 ?? Picture: Moneyweb ?? NO RETURNS. The half-built Villa Retail Park in Pretoria. The implosion of Sharemax in 2010 was the biggest-ever collapse of a property syndicatio­n scheme in South Africa.
Picture: Moneyweb NO RETURNS. The half-built Villa Retail Park in Pretoria. The implosion of Sharemax in 2010 was the biggest-ever collapse of a property syndicatio­n scheme in South Africa.

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