Sharemax directors want to appeal Ombud's ruling

Financials

Author: Julius Cobbett|
12 March 2013 23:45
Sharemax directors want to appeal Ombud's ruling



We look at the appeal process, and how many have succeeded.

JOHANNESBURG – Directors of Sharemax have applied for leave to appeal a ruling against them by Fais Ombud Noluntu Bam. This was confirmed by the Ombud’s office on Tuesday.

The four directors, Willie Botha, Dominique Haese, Gert Goosen and Andre Brand, will appeal a January 29 determination that found them jointly liable for a Sharemax investor’s loss. (For more, read here).

The determination was groundbreaking because Bam normally only rules against financial advisers. Here she went a step further and found directors of the product provider – in this case Sharemax – liable too. Some have asked whether Bam went a step too far and exceeded her powers.

Bam argued that the Sharemax directors were ultimately responsible for the actions of the broker who sold the toxic products. This was because the broker was operating as a representative of Unlisted Securities South Africa, a company which Bam claimed had been established by Sharemax for the sole purpose of marketing its products.

The stakes are high for Sharemax directors Willie Botha, Dominique Haese, Gert Goosen and Andre Brand. In total 35 000 investors placed R4.5bn in Sharemax’s various syndication schemes. If the directors are held responsible for even a fraction of this amount it could easily bankrupt them. Thus it is no surprise that they wish to appeal the Ombud’s determination.

The Ombud’s office tells Moneyweb that a decision is pending on whether to grant the Sharemax directors leave to appeal.

Appeals against the Ombud’s determinations are heard by the Financial Services Board’s appeal board. The board is appointed by the Minister of Finance and consists of as many members as the minister deems necessary (usually three). The chairperson of the appeal board must be an advocate or attorney with at least ten years’ experience, or a retired judge. Other members must include people with wide experience and expert knowledge of the financial services industry.

When it comes to appeals, the Fais Ombud does not have a very high level of success. Since the Ombud’s office was established, in April 2005, the results of seven appeals have been published on the FSB's website. Of these, only three appeals were dismissed. Three appeals were upheld and one was partially upheld.

Appeals can also be a lengthy process. The speediest appeal ruling was delivered eight months after the determination date. The slowest took four and a half years.

A summary of appeals against the Ombud’s determinations follows:

Appeals against Fais Ombud determinations
Appelant Date of determination Date of appeal ruling Outcome
First National Bank 7-Sep-11 22-Jun-12 Dismissed with costs
Action Plan Management 28-Oct-08 11-Jan-12 Dismissed with costs
Wayne Ashley Gray 3-Nov-09 4-Jan-12 Dismissed with costs
JC van der Merwe 20-Mar-07 23-Dec-11 Upheld
Marius Naude 31-May-06 6-Aug-08 Upheld
SA Home Loans 21-Dec-06 14-Jan-08 Upheld
Smit Garrun Brokers 3-May-06 31-Oct-07 Partially upheld
Topics: Sharemax, Dominique Haese, Willie Botha, Gert Goosen, Andre Brand, Noluntu Bam, Fais Ombud, appeal board