A financial adviser who advised a retired married couple from Cullinan to invest R695 000 in the Blaauwberg Beach Hotel property syndication promoted by Cape-based Realcor has been ordered to repay the couple the money they invested in the scheme.
Stephanus Johannes van der Walt or Huis van Oranje, his financial service provider based in Rayton, have been ordered by deputy financial and intermediary services (Fais) ombud Sydwell Shangisa to repay R430 000 to Carel Johannes Weideman and R265 000 to his wife, Anna Maria Jacomina Weideman.
In a determination released this week, Shangisa said Van der Walt had failed to adhere to the provisions of the Fais Act and the general code because he had asked the complainants to sign pre-completed documents without explaining the contents of these documents and the consequences of signing them.
Shangisa added that contrary to the objective facts and true state of affairs and in violation of the Fais Act, Huis van Oranje and/or Van der Walt had advised the complainants that Grey Haven Riches (Riches 9) and Grey Haven Riches 11 (Riches 11) were “safe investments”. Riches 11 was an investment company and Riches 9 was the first invitation to the public to invest in the scheme.
The complainants were therefore not put in a position where they could make an informed decision when they purchased the unlisted shares and debentures, he said.
Shangisa said Van der Walt also failed to act with due skill, care and diligence and in the interests of his clients. The Weidemans would not have invested in the “high-risk scheme of Realcor” but for Van der Walt’s conduct, he found.
He said there was no prospect of recovering the invested money and held Huis van Oranje and Van der Walt jointly liable to repay the couple.
Shangisa said Riches 11 had secured the right to purchase the shares of property holding company Midnight Storm Investments 386, on completion of the Blaauwberg Beach Hotel “only in the event the shares were sold in full”.
The prospectus for Riches 9 opened on November 1, 2008, and expired on January 31, 2009, but did not manage to sell all its shares before the expiry date.
Shangisa said the fact that the hotel was “nowhere towards completion while investors continued to receive the so-called income” should have raised Van der Walt’s suspicions but unfortunately did not.
“The probability that the income was actually investments from new entrants into the scheme is overwhelming. This is why the registrar of banks stepped in, and income paid to investors ceased. All of these risks, which respondent [Van der Walt] could not identify, only serve to prove… that respondent was completely out of his depth when it comes to assessing the risk inherent in the financial product in question,” the deputy ombud said.
An investigation by the registrar of banks found all the companies comprising the Realcor Group had contravened the Banks Act by illegally collecting deposits from the public while not registered as a bank.
The registrar issued a directive to Realcor to repay the funds it had obtained illegally and a manager was appointed by the registrar to manage the repayment process.