Roy Cokayne
An investor in the Relative Value Arbitrage Fund (RVAF), which is in liquidation and whose manager and trustee Herman Pretorius committed suicide in July last year, has successfully obtained an order for the refund of R500 000 invested on the advice of his financial adviser.
Noluntu Bam, the ombud for financial advisory and intermediary services (Fais), yesterday ordered Impact Financial Consultants in Bellville and/or financial adviser Michal Johannes Calitz to repay dentist Dr Craig Stewart Inch the R500 000 he invested in the RVAF.
Bam said the RVAF was nothing short of a scam and initial reports by the joint trustees indicated that most, if not all, investors’ funds had been lost.
She said there were many areas where Calitz was remiss and in direct contravention of the Fais Act. At its simplest, if Calitz had merely requested a set of properly audited financials, the scam would have been revealed, she added.
Bam said this would have been part of basic due diligence. Not only was this elementary step omitted but deficiencies were similarly evident in the lack of any form of proper due diligence study into the fund, its underlying investments or their structure.
Inch said he had trusted Calitz because he was correctly registered as a certified financial planner, a member of the Financial Planning Institute and his company Impact Financial Consultants was correctly licensed with the Financial Services Board (FSB).
He was dismayed that Calitz had not made certain that the investment platform he would be investing his money into was legal, correctly registered and had performed all the necessary due diligences. He had also not checked that RVAF’s fund manager was FSB-licensed, there would be third party verification of returns and valid financial statements and the fund would be correctly audited.
“Calitz acted unethically by investing my money in this ‘hedge fund’. I would never have invested a cent had I known this information.”
Bam said that apart from the issue around the risk profile, the circumstances surrounding the investment were essentially not in dispute, leaving what were essentially allegations about the failure to comply with the Fais Act, including questions of due diligence, appropriateness of advice, licensing and disclosure related to licensing, whether Calitz acted in the interests of his client and the integrity of the financial services industry.
She added that there was no evidence that a need analysis was conducted on Inch and the decision to place the majority of Inch’s savings into such a high risk investment without any diversification defied logic.
Bam said the substantial sums in commissions received by Calitz could simply not be justified when considering the poor quality of advice offered to Inch. She said these commissions were only revealed in a report to creditors in June last year by the trustees of the insolvent estate of the RVAF and a letter dated August 15 last year in which attorneys acting for Calitz conceded that he had received a so-called profit share of R8.44 million.
“Yet on the objective evidence, Calitz could never have conducted even the most basic of due diligences on the RVAF. Calitz placed the funds in a scheme which did not have so much as a financial services provider number, nominee account or even audited financials.
“Schemes such as the RVAF cannot exist without professionals such as Calitz turning a blind eye to legislative requirements,” she said.