Johannesburg - The amount financial advisers have been ordered to repay their clients whom they wrongly advised to invest in the Relative Value Arbitrage Fund (RVAF) has now escalated to more than R14.8 million.
This follows the ombud for financial advisory and intermediary services (Fais) Noluntu Bam ordering L Loxton Nel and Associates and/or Llewellyn Claudius Loxton to Teresa Karwowski the R120 000 they had advised her to invest in RVAF.
Read: Adviser must pay R800 000 to RVAF client
Karwowski was a friend of Loxton’s wife.
The fund collapsed after its manager and trustee Herman Pretorius committed suicide in July 2013 after shooting dead his business partner Julian Williams.
Bam said no adviser would have recommended RVAF as a suitable component of any investment portfolio had they exercised the due skill, car and diligence required in terms of the Fais code of conduct.
She said the complaint was about being advised to invest in a scheme that “was not above board”.
Bam said L Loxton Nel and Associates and/or Llewellyn Claudius Loxton appeared to have blindly accepted whatever they were told about RVAF without any proper attempt to verify such information and this information was then recklessly conveyed to their client.
She said the fact was that they were out of their depth and therefore could not have had any understanding about the economic activity that generated the returns or the sustainability of the investment.
In a separate determination, Bam ordered Huis van Oranje Financiele Dienste and/or Stephanus Johannes van der Walt to pay Eduard Mostert of Gauteng the R267 000 he was advised to invest in Purple Rain Properties 15 trading as Realcor Cape.
The agreement constituted an application to purchase shares to the value of R267 000 in the Blaauwberg Beach Hotel, of which property holding company Midnight Storm Investments 368 was the registered owner.
After the completion of the hotel, the shares were to be purchased by the investment company for the benefit of the investor.
No losers
Mostert was allegedly told by Van der Walt that it was a good, safe investment with a healthy interest rate “in which there could be no losers”.
The investor concluded the agreement in December 2009 and continued to receive his monthly dividend until October 2010 when the payments suddenly stopped.
He was assured that the delayed payments were due to an administrative problem and payments would resume shortly but subsequently learned via Radio Pretoria that the investment scheme was experiencing financial trouble.
An inspection conducted in terms of the SA Reserve Bank Act concluded that Realcor Cape and/or related individuals obtained money by conducting the business of a bank without being registered as a bank and directed them to repay all money raised.
A business rescue process failed and an application for the liquidation of Midnight Storm Investments resulted in the hotel being sold in May 2013 for R50 million, dashing any hopes of investors recouping their investments.
A total of R616m was lost.
Bam said Van der Walt advised Mostert to make the investment without first assessing his financial needs and determining his risk profile, which was in contravention of the Fais code of conduct.
The Fais ombud said Van der Walt had also failed to maintain his records of advice, which was also in contravention of the code, and failed to provide financial services honestly, fairly with due skill, care and diligence and in the interests of his client and the integrity of the financial services industry.
BUSINESS REPORT