Johannesburg - A financial adviser who advised an 81-year-old pensioner to invest in a property syndication promoted by PIC Syndications has been ordered to repay the woman the R550 000 she lost in the investment.
Michelle Georgina van Wyk, a Pretoria financial adviser and the key representative of Future-Sure Brokers, was ordered by Noluntu Bam, the Ombud for Financial Advisory and Intermediary Services (Fais), to repay Patricia Goddard the investment she made in the scheme.
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Goddard had invested R550 000, which came from her late husband’s life insurance, in Highveld Syndication No 21 with PIC Syndications.
Highveld Syndication No 21 went into business rescue in September 2011 and was subsequently liquidated.
Bam said there was no prospect that Goddard would recover her capital, adding that there was no evidence the risk of investing in PIC Syndications was explained to Goddard.
She added that the prospectus repeatedly pointed out the offer, in respect of Highveld Syndication No 21, closed on May 8, 2009, and it was not in dispute this investment was sold to Goddard on October 10, 2009, almost six months after the offer closed.
“This is illegal,” she said.
Promises
Bam added that from the prospectus it was very clear that the promised return of 12.5 percent and the further promise of capital preservation was based solely on the viability of the head lease and buy-back agreement.
Should any of these contracts fail or become breached, the promise made to investors would not materialise and there was no guarantee any of the parties had control over what would happen to these contracts and there was always a risk of failure, she said.
Bam said this risk was certainly not explained to Goddard, which was a contravention of the Fais code of conduct.
Goddard had informed Van Wyk that she needed to receive a monthly income of 12.5 percent with capital preservation, and that she had absolutely no experience of investments and at best was a “conservative” investor.
She further stressed that she had only invested in PIC Syndications because Van Wyk assured her the income of 12.5 percent was guaranteed and the company could not fail.
Van Wyk claimed her advice to Goddard to invest in PIC Syndications was not the cause of Goddard’s loss and she could not reasonably have foreseen that PIC would fail.
Risky
But Bam said if Van Wyk had acted according to her own risk analysis and considered the prospectus carefully, she would have realised this was a risky investment and not suitable for Goddard’s needs and there were insufficient safeguards against director misconduct or mismanagement.
She said Goddard’s loss was not caused by management failure or other commercial influences. If Van Wyk had done her work according to the Fais Act and code, no investment in PIC Syndications would have been made, particularly bearing in mind Goddard’s tolerance for risk.
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