The financial advice ombud has issued two more determinations against advisers who persuaded pensioners to invest in the now-liquidated Blaauwberg Beach Hotel development via the property syndication company Realcor.
Noluntu Bam, the Ombud for Financial Services Providers, recently ordered Mof van Niekerk Makelaars of Brits in North West province and its key representative, Ockert van Niekerk, to repay Mr JR the R110 000 he had invested in the development. This week, she also ordered Stephanus van der Walt, of Huis van Oranje Financial Services in Pretoria, to repay Ms K R1.1 million, which she had lost in two separate investments.
Bam has now issued 11 determinations against the now defunct Huis van Oranje and its representatives Van der Walt, Barend Geldenhuys and Pierre Wilsenach, who made commissions of up to 10 percent on the Realcor investments. They must repay a total of almost R4.5 million, mostly to pensioners.
Realcor, an authorised financial services provider registered with the Financial Services Board, used a complex web of subsidiary companies to raise money for its development projects. The subsidiaries did this by issuing one-year and five-year debentures and various classes of shares. These instruments were marketed on the basis that investors would receive monthly interest payments and dividends of more than 10 percent a year, when bank savings accounts were offering single-digit interest rates. The target market was mainly pensioners and people approaching retirement.
Significantly, the investment was marketed as safe and guaranteed, with a minimal risk of loss of capital.
In 2008, Realcor was investigated by the Reserve Bank for taking deposits, which only deposit-taking institutions, such as banks, are allowed to do. Realcor was prohibited from taking further deposits from the public. It was liquidated in 2011, and the Blaauwberg hotel was sold for R50 million, dashing the hopes of investors, who had collectively ploughed about R650 million into the development, of recouping their money.
Van Niekerk advised Mr JR, who was 67 at the time, to invest in the hotel development via Realcor in 2010, when it was already under investigation by the Reserve Bank. In his complaint to Bam, Mr JR says he received only about three months’ interest payments before the scheme folded, and he was unable to retrieve any of his capital.
In Ms K’s case, she invested R300 000 in 2009 and R1.3 million in 2010.
In both cases, the pensioners were not prepared to and could not afford to take any risks with their capital.
In her determinations, Bam says the advisers failed to comply with the code of conduct contained in the regulations under the Financial Advisory and Intermediary Services Act. Neither adviser questioned the provisions in the prospectus for the Blaauwberg hotel investment, which showed little regard for investors’ interests. “Investors had no chance in this cesspit,” she says.
In the Huis van Oranje determination, Bam states that, even if Ms K had wanted to invest in Realcor, [Van der Walt] had a duty to state in, no equivocal terms that:
* Realcor had been directed by the Reserve Bank not to collect investor funds, following the inspection;
* Information in the prospectus was conclusive that investors carried all the risk;
* The product was high risk and not suitable for Ms K; and
* She could lose her capital.
“Had these statements been made, the probability that Ms K would have gone ahead with the investments is zero,” Bam concludes, having come to the same conclusion in the Mof van Niekerk case.