Reserve Bank issued directives against Sharemax in 2010

Reserve Bank issued directives against Sharemax in 2010 Despite being warned of the disastrous consequences for investors. By Roy Cokayne 2 Feb 2021  00:01 The abandoned Villa Retail Park development in Pretoria. Its prospectus was issued after the launch of a Sarb investigation into Sharemax in 2007. Image: Moneyweb The abandoned Villa Retail Park development in Pretoria. Its prospectus was issued after the launch of a Sarb investigation into Sharemax in 2007. Image: Moneyweb The South African Reserve Bank (Sarb) issued directives against Sharemax in 2010 despite a warning by a senior advocate about the disastrous financial consequences “an over hasty approach” could have for investors because urgent high court winding-up applications were pending against the failed property syndication company. This was confirmed by former Sarb deputy registrar of banks Michael Blackbeard on Monday during the Independent Regulatory Board for Auditors (Irba) disciplinary hearing against the former auditors of Sharemax. Read: Three former Sharemax auditors, 413 improper conduct charges Mboweni dissolves entire Irba board after controversial CEO appointment The three audit practitioners are facing a total of 413 improper conduct charges related to Sharemax. Jacques Andre van der Merwe is facing a total of 340 charges, Danie Dreyer 40 charges and Petrus Johannes Jacobus Bekker 33 charges. All of them were directors of ACT Audit Solutions Incorporated at the time they allegedly committed the offences while Van der Merwe was also the managing partner of the firm. They previously all pleaded not guilty to all the charges against them. Blackbeard said the Reserve Bank launched a desktop investigation into Sharemax in 2007 after it received a query from a large financial institution, which later became a full forensic investigation into the company. Explaining what underpinned the decision to issue the directive that all monies in Sharemax must be repaid, Blackbeard said this was the only remedy available to the Reserve Bank in terms of the Banks Act once it was satisfied that Sharemax’s funding model was illegal. Blackbeard said the Reserve Bank was trying to prevent a wholesale collapse of Sharemax and did an impact study to see what the impact would be and whether there could have been a change of the funding model so the schemes could still be operated. Sharemax fate sealed by Sarb? Mike Maritz, counsel for the three audit practitioners, asked Blackbeard if it was fair to say that as a result of the directives issued and the negative media publicity following the issuing of the directives that it was inevitable that the Sharemax schemes could not continue. “We were obviously hoping for a different result but taking all the facts into consideration, it was one of those difficult decisions,” Blackbeard said. “With these schemes, you are either criticised because you are not acting quick enough or because you are acting too late,” he said. Blackbeard confirmed that the entire Zambezi and The Villa series of prospectuses were only issued after the Reserve Bank had already earlier received the complaint or query from the financial institution. Read: Part 1: ‘Corporate capture’ of Sharemax rescue vehicle (Nov 2016) Part 2: Shareholder structure hides how directors acquired 87.1% of Nova shares (Nov 2016) Is the Sharemax landmark worth R1.6bn or R616m? (Jan 2017) Maritz asked why it had taken the Reserve Bank three years to act, suggesting that had steps been taken timeously by the bank, it would not have ended up in a situation where billions of rands were collected from the public for the The Villa, for example, which to this day 10 years later is uncompleted and for practical purposes is of no use to anyone. “The category of people who invested in the Villa scheme will be [in] an unfortunate situation where money will be lost,” he said. Reserve Bank ‘did not drag its feet’ Blackbeard said putting it that way seems to suggest the Reserve Bank was dragging its feet but stressed the bank did not and it is unfortunate money will be lost. He said actions were taken, there were processes to go through, and the Reserve Bank did not know Sharemax or its companies. Blackbeard added that the Reserve Bank had to get information through other means before it could make a decision and Eckaard Le Roux of Weavind & Weavind, Sharemax’s attorneys, was very assertive in disputing that Sharemax was contravening the Banks Act. “We did have some administrative difficulties upfront but those are processes that have to be done properly and considered responsibility,” he said. “There are a lot of practical, legal [issues] and steps to be taken with responsibility before you tackle a big scheme like this.” ‘Harsh’ judgment Maritz asked Blackbeard if he took issue with a 2018 judgment in the KwaZulu-Natal division of the high court in Pietermaritzburg in litigation between an investor and his broker, where Judge Johan Ploos van Amstel concluded that the cause of Sharemax’s collapse was the unforeseeable intervention of the Reserve Bank – in the absence of which, the scheme on the evidence would probably have succeeded. He added that what went wrong and resulted in the collapse of the Sharemax schemes was the unforeseeable intervention by the Reserve Bank and not some inherent defect in the schemes. Blackbeard said on first reading he thought the judgment was harsh and wrong. “It was a factual finding that between contracting parties he could not find a nexus for the breach but it was an unforeseen external event, the Reserve Bank. “He [Judge Van Amstel] does not make the finding that the Reserve Bank’s actions were wrong. The Reserve Bank was not a party to that case either,” he said. The disciplinary hearing commenced on January 25 2021 and has been mired in frequent technical legal arguments about the admissibility of evidence, particularly evidence that constitutes opinion or interpretation. Read: Objection to witness evidence delays former Sharemax auditors’ disciplinary hearing The hearing is continuing. COMMENTS James Kingston 10 months ago The apparent transgressions occurred prior to 2010. It is now 2021… 11 years later. Justice delayed is justice denied. All regulators and the police should hang their heads in shame. Irba = not good enough SAICA = protecting its own Hawkes = useless 19 000 investors = fleeced twice by the Sharemax bunch as well as the pathetic and possibly fraudulent “rescue” effort. Thank you Moneyweb for reporting about this. All other media houses have stopped. Illphil 10 months ago And do not forget Connie and his lady – – – – but I see they are hiding behind auditors. Nail them all – I say...... Gismho 10 months ago South Africa has become a country of scam artists, thieves, fraudsters, hijackers, etc. It has become a safe haven for all those who wish to “lie low”, knowing that “the law” is toothless, rendered so by the ANC (who need to protect their own). Lemon 10 months ago Agreed. Refer to “Project Justice” run by the State Security Agency. Seve Roux 10 months ago And who remembers this article about a South African? Slap on the wrist and barred from being a Company Director for 12 years http://www.iomtoday.co.im/article.cfm?id=44652&headline=Head+of+collapsed+investment+group+arrested§ionIs=NEWS&searchyear=2018 10 months ago The SA Reserve Bank is the Lender of Last Resort – and never wrong, period! Objectives of the South African Reserve Bank: I’ts key objective is to achieve and maintain price stability of the rand in the interest of balanced and sustainable economic growth within South Africa. More specifically, the bank aims to maintain the South African consumer price index to an inflation rate between 3% and 6% annually. Other mandates include the restoration of financial stability if a systemic event occurs or is imminent; to integrate prudent regulation and supervision of financial institutions and markets, and to monitor the financial system overall. Pine Flexi 10 months ago Thanks Roy, Ryk and others for your comprehensive reporting on Sharemax, Picvest and other financial organisations. No other newspaper or financial magazine apparently wants to report on this. Why not ? This must be one of the major and biggest corporate crimes in the history of SA. With all the investigations and court cases it seems that more and more fingers point to the SA Reserve Bank and other state organizations such as FIC, CIPC, SARS, IRBA and others, whom I believe is totally non-compliant in their duties to protect the Companies Act and other Acts. I agree with James Kingston and his comments. I repeat, what a shame and disgrace. R 9 BILLION Fraud plus another R 3 billion in investment income withheld from investors and only Moneyweb reports on this. This should be headlines in every paper and published every day, like a Zondo Commission. FrenchM 10 months ago Who’s interest had the complaining ‘large financial institution’ at heart, the Sharemax investor’s or his own? They only start complaining when Sharemax got involved in mega developments close to big established shopping centres, in which they probably had a stake. Using the Reserve Bank to get rid of the competition was a clever trick, but in the process many shareholders lost their money. Logic 10 months ago State Capture Zondo Commission Property Capture No Commission What a shame! The Reserve Bank appointed Neels Allant and Spies to monitor Picvest via the white horse Ortotouch escape model but in vain. Where is the proof of the monitoring process and their OUTCOME??? WHY CANT THE AUTHORITIES DEMAND ANSWERS of the so called monitoring and include other schemes as well.Dragging feet from revelant institutions led to the suffering of thousands investors who have the right to be protected against ruthless scavengers. End of comments