Sharemax attorneys deny ombud’s claims of irregular conduct
Share this article:
Sharemax Investments’ attorneys, Weavind & Weavind, have labelled allegations by the financial advisory and intermediary services (Fais) ombud that the firm contravened the Attorneys Act and a government prohibition as “gratuitous and unfounded”.
Raiford Johnson, Weavind & Weavind’s managing director, said on Friday that the firm rejected the contention it had contravened a government notice issued in 2006 prohibiting the release of investor funds held in trust for investment in property syndications before the properties being syndicated had been transferred into the syndication vehicle.
In a determination released last week, Fais ombud Noluntu Bam concluded that Zambezi Retail Park, which was promoted and marketed by Sharemax, was “nothing more than a Ponzi scheme” in which investors were paid interest out of their own funds.
The determination followed a complaint by Gerbrecht Siegrist, a 67-year-old pensioner from Tigerpoort in Pretoria, who invested R580 000 in Zambezi but is now destitute.
Bam ordered Siegrist’s financial advisor Cornelius Johannes Botha, trading as CJ Botha Finansiele Dienste, Sharemax Investments, FSP Network, Sharemax and USSA director Gert Goosen and Sharemax directors Willem Botha, Dominique Haese and Andre Brand to jointly and severally pay Siegrist R580 000.
Johnson stressed that the complaint related to the role of all the respondents to the complaint, which did not include Weavind & Weavind.
The issues of the determination did not concern his firm “in any way, shape or form”.
Johnson said it was unclear why Bam had found it necessary to accuse Weavind & Weavind of irregular or inappropriate conduct because these were “completely irrelevant to the issues she was required to determine”.
Bam recommended the Law Society investigate the trust account of Weavind & Weavind to establish how and under what circumstances investors’ funds were paid out of the firm’s trust account.
“It is clear the attorneys did not comply with the Attorneys Act and the Law Society guidelines. Nor did the attorneys comply with the investor protection provisions of the Government Gazette,” she said.
Bam said that in the prospectus and the marketing of the Sharemax product, two significant representations were made to the investing public: that their funds would be deposited into the trust account of the attorneys where they would enjoy protection; and that the attorneys, acting independently, had “satisfied themselves that the whole scheme was compliant with the prevailing laws”.
She said the attorneys claimed that the government notice was not applicable to the Sharemax schemes but the firm did not provide any legal or factual basis indicating why the government notice did not apply to the firm.
Bam said Weavind & Weavind’s view on this was also contrary to what was stated in the prospectus and there was a duty on Sharemax and the firm to disclose in the prospectus that the government notice did not apply to this transaction.
Johnson said the government prohibition was only applicable to “public property syndication schemes”, which referred to schemes in which investors were invited to participate by investing in entities “whose sole assets are commercial, retail, industrial or residential properties”.
“The investors who participated in the Villa and Zambezi Retail property syndication were not invited to invest, nor did they actually invest, in the property investment companies themselves. Their investments were in the investment companies’ holding companies, which did not own commercial, retail, industrial or residential properties at all, but only a share in and a claim against the subsidiaries who did own properties of that nature.”
Johnson said the properties were also not the subsidiaries’ sole assets, which also included rental businesses and other property, “such as furniture, equipment and so forth”.
The Law Society had already investigated several complaints against Weavind & Weavind and all allegations made against the firm had been rejected as “being without merit”, Johnson added.