The Ombud for Financial Services Providers, Noluntu Bam, has issued two determinations against an adviser for putting clients’ money into a microlending business that collapsed in 2013. The adviser must pay back over R1.5 million.

In 2011 and 2012, Willem Johannes Abraham, the owner of Jam Financial Planning of Hermanus in the Western Cape, channelled the investment capital of Mr O (R2m) and Ms K (R760 000) into Fundco, a microlender that relied on “wholesale borrowing from individuals and companies to ensure sufficient capital was available to meet the demand for credit”. According to Bam’s determinations, money from investors was lent to Fundco at a certain interest rate and repayable on an agreed date. But Abraham’s clients were not informed about the Fundco connection and had no idea that their money was being used to fund such a high-risk operation.

Mr O and Ms K were promised guaranteed interest on their capital, invested for a two-year term, of 1.5% a month, or 18% a year.

They received income from their investments until February 2013, and shortly thereafter Fundco went into liquidation. Mr O was able to withdraw part of his investment before the scheme went belly up.

Bam ruled that Abraham had not assessed the risks of the Fundco operation and, if he had been aware of the risks, he had not conveyed this information to his clients.

Her office received no communication from Abraham or his company in response to the complaints.

She ordered the adviser and his company to repay Mr O R800 000 (the maximum under her jurisdiction) and Ms K the R760 000 she had invested.

• You can contact the Ombud for Financial Services Providers as follows: phone 012 470 9080 or 012 762 5000; fax 086 764 1422 or 012 348 3447; or email [email protected]. The website is www.faisombud.co.za