Bids to block justice irritate Fais ombud

Bids to block justice irritate Fais ombud
November 5 2013 at 08:00am
By Roy Cokayne



The Financial advisory and intermediary services (Fais) ombud has taken a sideswipe at the many commercial entities, which include Sharemax Investments, that collect money from the public but end up on the high court roll for liquidation proceedings, business rescue or compromise arrangements when the money supply peters out.

Noluntu Bam, the Fais ombud, stressed that these incidents presented a serious challenge to her office’s ability to deliver justice.

“There is also a feeling of helplessness when a determination of this office cannot be executed against the entities that actually received the money collected from consumers due to… the aforementioned legal impediments,” she said in her office’s latest annual report.

Sharemax defaulted on payments to investors in its schemes when the registrar of banks’ decision in 2010 that its funding model contravened the Banks Act became public knowledge, resulting in new investments into its schemes drying up.

Sharemax defaulted on payments to investors at the end of August 2010. In September 2010 the registrar appointed statutory managers to manage the repayment of funds illegally obtained from the investors in Sharemax’s various schemes.

Sharemax was still under statutory management when a scheme of arrangement and offer of compromise to shareholders was presented to, and sanctioned by, the North Gauteng High Court in January last year.

Bam said her office had also come across more ingenious attempts by respondents to deny complainants access to the ombud by unsuccessfully arguing that what they sold to complainants was actually not a financial product and therefore fell outside the jurisdiction of the ombud.

She stressed that, in the absence of the Fais ombud, a large number of complainants would not have access to justice because going to court was not an option for many South Africans.

Bam said it appeared that complaints arising from investments in property syndication companies “and other phoney investments” would be with her office for a long time.

She said these were not complaints that were capable of speedy resolution because they required extensive and specialised investigation and involved the task of going through volumes of paper to piece together a cogent, factual and legally sound conclusion.

“We have geared up our resources and remain committed to this process,” she said.

Bam referred to her determination in a complaint lodged by Elizabeth Siegrist that “cracked wide open the myth behind the supposedly great offering that Sharemax Investments, its alter ego, FSP Network, trading as USSA, and its foot soldiers sold to consumers”.

She said investors were told their money would be kept safe until the immovable properties were transferred into the names of their Sharemax companies, Zambezi Retail Park and The Villa Retail Park.

“In both cases, the truth is there for all to see. Zambezi is unable to pay investors the promised return. The Villa, now an eyesore to the public and an attraction to vagrants and a variety of miscreants, is a constant reminder that when an investment sounds too good to be true, it usually is.”

The Fais ombud received 9 949 complaints during the financial year, of which 7 898 were resolved within the year. Including cases carried over from previous years and resolved in its 2012/13 financial year, complaint resolutions increased to 9 033.

Through the 1 387 cases that were settled or in which a determination was made, the ombud’s office recovered R51 million for consumers.