Sharemax appeals halt ombud rulings

Sharemax appeals halt ombud rulings

December 17 2013
By Roy Cokayne

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Johannesburg - The Ombud for financial advisory and intermediary services (Fais) has suspended the issuing of determinations on property syndication schemes.

This follows the appeal board of the Financial Services Board (FSB) granting leave to appeal to the respondents in two determinations issued this year by the Fais ombud. The appeal board said it wanted to consider “a number of procedural and substantive issues”.

In a letter received this month by an investor in a Sharemax scheme, the case manager at the Fais ombud said the appeal board’s decision on these issues could affect complaints related to property syndication investments and the manner in which they were dealt with by the Fais ombud.

“As a result, the ombud has taken a decision to suspend the issuing of determinations in respect of property syndication matters at this stage until the appeals in the matters of Siegrist and Bekker have been finalised,” it said.

It estimated the decision of the appeal board was likely only after July next year.
The letter said the Fais ombud had received “thousands of complaints” related to Sharemax and other property syndications, including Pickvest, Realcor Cape and others.

It stressed that the office continued to accept and investigate complaints related to property syndication investments “but cannot determine after such investigation until the ruling in the two matters has been delivered”.
These determinations both involved complaints by investors about financial advice given to invest in Zambezi Retail Park, a scheme promoted and marketed by Sharemax.

Apart from the financial adviser in each complaint, the following were jointly and severally held liable to repay the complainants: Sharemax Investments; FSP Network; Sharemax and Unlisted Securities South Africa director Gert Goosen; and Sharemax directors Willem Botha, Dominique Haese and Andre Brand.

In the Gerbrecht Siegrist complaint determination, Fais ombud Noluntu Bam said her office had “pierced the corporate veil” of how Sharemax operated and had concluded that Zambezi Retail Park was “nothing more than a Ponzi scheme” with investors paid interest out of their own funds.

Bam said the directors of FSP Network and Sharemax must be held “personally liable” for Siegrist’s loss and could not “hide behind the corporate veil”.

“The directors of Sharemax and FSP Network were aware of the fact that the scheme was both illegal and not commercially viable and yet they recklessly took investors’ funds,” she said.

In the Jacqueline Bekker complaint determination, Bam ruled that Sharemax Investments, its network of financial advisers and four of its directors – Goosen, Botha, Haese and Brand – were involved “in a scheme calculated to defraud” members of the public.

Caroline da Silva, the deputy registrar for Fais at the FSB, said the appeal board was a tribunal that was independent of the FSB and comment should come from the judge of the appeal board.

However, Da Silva said comment could not be provided at this stage about the nature of the procedural and substantive issues to be considered because the appeal was a legal process and subject to the sub judice rule and confidentiality provisions of the legislation.

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. - Business Report