THE OMBUD for financial services providers has issued a seventh order against financial adviser Michal Johannes Calitz along with his consultancy, increasing to more than R3.5 million the total amount to date that they have been ordered to repay to investors for giving advice to invest in the Relative Value Arbitrage Fund (RVAF).
In her latest determination, the ombud, Noluntu Bam, ordered Calitz and/or Impact Financial Consultants to repay Johannes Matthys Coetzee R500 000.
Bam previously ordered Calitz and/or Impact Financial Consultants to repay Loredana Hansen from Durbanville, Cape Town R630 000; Garvitte Lombard of Ferndale, Johannesburg R700 000; Dr Craig Stewart Inch of Mpumalanga R500 000; Martha Jooste R165 000; Dr Johannes Hartshorne from Cape Town R460 000; and Robert Whitfield-Jones R600 000.
The RVAF is in liquidation. It collapsed after the fund’s manager and trustee, Herman Pretorius, committed suicide in July last year after shooting dead his business partner.
Coetzee said he was introduced to Calitz by a friend in 2007 and Calitz had invested his pension fund monies in unit trusts and a money market fund in February 2008.
He said Calitz had advised him a year later to disinvest R500 000 and place it into the RVAF Trust when Coetzee visited Calitz to discuss the performance of his unit trusts and money market fund.
Coetzee said he had relied exclusively on the advice and recommendation of Calitz when making this investment, stressing that he had no prior knowledge of the RVAF and neither the risks nor the product were explained to him.
He contacted Calitz on July 12, 2012 because of negative publicity surrounding the fund but was assured by Calitz that there were no risks and that there was no need for him to retrieve his investment.
Coetzee added that he had e-mailed Calitz on July 20, 2012 with an urgent request for the financial adviser to provide him with written feedback on the allegations against the RVAF and advice on the continuation of the investment but did not receive a response.
He said that Calitz did not properly apply his mind when advising him to switch a substantial amount of his investment to RVAF and as a professional adviser should have properly investigated and assured himself of the credibility of the fund.
Coetzee stressed that Pretorius was taking in millions of rand in investments but was not registered with the Financial Services Board, the RVAF never produced any financial statements, was not audited and did not have any third party verification of returns.
Calitz claimed he discussed alternative investments, such as hedge funds, and the workings of a hedge fund with Coetzee in 2008, regular statements were sent to Coetzee, there was no reason to believe the investment was not above board, and the option to invest in hedge funds was not in contradiction with Coetzee’s risk profile.
Bam in her determination referred to a previous determination, which dealt with key issues pertaining to the rendering of advice to invest in RVAF.
These included Calitz’s failure to understand the RVAF, the risks he was exposing his clients to when advising them to invest in this fund and the material deficiencies in the RVAF application forms.
Bam stressed that no adviser would have recommended the RVAF as a suitable component of any investment portfolio had they exercised the required due skill, care and diligence and in rendering financial advice, Calitz had failed to act in accordance with the Financial Advisory and Intermediary Services Act.