Judgment clips ombud’s wings

Appeal board finds in favour of appellants

THE SUCCESSFUL appeal by Sharemax Investments and four of its former directors against two determinations by the ombud for financial advisory and intermediary services (Fais) will have significant implications for the operations of the Fais ombud’s office.

The Fais ombud’s role is to resolve disputes between financial services providers and their clients.

In a judgment handed down on Friday, a Financial Services Board appeal board chaired by retired Supreme Court of Appeal Judge Louis Harms upheld the appeal by Sharemax Investments, Gert Goosen, Willem Botha, Dominique Haese and Andre Brand and set aside determinations issued by the Fais ombud to complaints lodged independently by pensioners Gerbrecht Siegrist and Jacqueline Bekker.

Noluntu Bam, the Fais ombud, said yesterday that the appeal panel’s judgment was not concerned with the correctness or otherwise of the findings of fact contained in the Fais ombud’s determination, such as that the appellants had deceived the public or that the investment was a Ponzi scheme.

Bam said the procedural issues themselves were limited to whether the Fais ombud had jurisdiction over a party not cited as a wrongdoer by the complainant and the effect of the sanctioning of a scheme of arrangement on a complainant.

She said it was these matters of procedure that the appeal board had preliminarily dealt with as opposed to the legality or otherwise of the scheme itself.

Bam said both decisions were set aside on the basis that the Fais ombud had no power to join the directors of Sharemax as respondents.

The judgment was not concerned with the correctness of the Fais ombud’s findings…

“This is the only and the most important issue the (appeal) board decided in favour of the appellants, the implications of which are far reaching for the Fais ombud.

“At this point, we are still considering the decision and cannot say whether we can or will take the matter beyond this point,” she said.

However, Bam stressed that her office could not appeal the judgment.

Bam said in simple terms the judgment meant that her office would be limited to investigate complaints against the party or parties named by the complainant in the complaint and nothing more.

The Fais ombud in 2013 suspended the issuing of determinations on property syndication schemes when Sharemax and its former directors were granted leave to appeal the two determinations because the judgment on the issues raised in the appeal could affect complaints related to property syndication investments and the manner in which they were dealt with by the Fais ombud.

Bam confirmed yesterday that her office had more than 2 000 complaints related to property syndications, which were in various stages of investigation. But she would not immediately determine these complaints following the judgment because her office still needed to consider the judgment and its implications.

Sharemax collapsed in 2011 after a registrar of banks decision that its funding model contravened the Banks Act became public knowledge, leading to new investments drying up.

About 33 000 investors had invested about R4.5 billion in Sharemax’s various schemes.

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