The many thousands of property syndication investors who have lost money in imploding schemes are going to have to wait a bit longer to find out whether they have any claims against those who sold them the so-called investments or the directors of companies sponsoring the schemes.
The ombud for financial services, Noluntu Bam, has issued numerous determinations related to property syndications, ordering that financial advisers and/or the directors of some of the schemes make good on losses to investors.
A number of these determinations have been taken on appeal to the Financial Services Board (FSB) Appeal Board.
The most important have been appeals by the former directors of the now-defunct Sharemax scheme, and financial adviser Deeb Risk and his financial advice company, D Risk Insurance Consultants, of Edenvale, Gauteng.
There are currently more than 1 700 complaints before Bam about investments in property syndications that have imploded. But the complaints have all been put on hold pending the outcome of the appeals.
The situation has, unfortunately, become muddled, because some of the appeals will now not be heard, with Risk now trying to settle the determinations against him (See “Risk settles with four investors”, below).
Bam says the position of her office when it comes to property syndication complaints (regardless of the property syndication) is that “it would be unwise for us to determine any property syndication case until such time that the Sharemax appeal has been finalised”.
In all, about 34 000 people invested about R4.4 billion in Sharemax property syndication schemes. The syndication properties, which are now estimated to be worth slightly more than R2 billion, are held in a company, Nova Properties, established in terms of a scheme of arrangement sponsored by the South African Reserve Bank.
Most of the investors in the Sharemax schemes, of whom a large proportion were pensioners, invested on the basis of the syndications providing them with a steady income stream higher than they could receive from other, regulated, investment sources.
The Sharemax appeal was lodged by former directors Gerhardus Rossouw Goosen, Johannes Willem Botha, Andre Daniel Brand and Dominique Haese (the former managing director and financial director of Sharemax, who now heads the Nova Property group and Frontier Asset Management and Investments, which manages the Nova properties).
Tembisa Marele, the FSB’s head of communications, says that plans for the appeal hearing are being finalised.
The sooner the better. This has dragged on long enough. With most of the complainants being pensioners who are struggling financially, some urgency is needed.
Risk settles with four investors
Deeb Risk and his financial advice company, D Risk Insurance Consultants, of Edenvale, Gauteng, have dropped their joint appeals against four determinations issued against them by the financial advice ombud, Noluntu Bam.
Risk has advised the Financial Services Board (FSB) Appeal Board that he has reached settlement agreements with four of six people who had brought successful complaints against him and his company after he had sold them investments in Sharemax property syndication schemes, which subsequently imploded.
Risk and his company had been ordered by Bam to pay a total of R2.07 million, plus interest of 15 percent a year, from seven days after the determinations in compensation to the four complainants.
The two unsettled complaints involve |a total amount of R1.1 million.
The FSB says: “The matters (including the appeal proceedings) have been settled between the parties; the allegations by the respondents against the appellants (D Risk Insurance Consultants CC and Deeb Raymond Risk) have been withdrawn by the respondents; and the appellants withdrew the appeal”.
However, the FSB avoided answering questions about the status of the original determinations by Bam, which found that Risk and his company contravened the Financial Advisory and Intermediary Services (FAIS) Act and its general code of conduct by, among other things, not “acting with due skill, care and diligence in the interests of his client(s) and the integrity of the financial services industry”.
Bam says the settlements do not mean that the determinations have been set aside by any competent forum.
“Our understanding therefore is that the determinations stand,” Bam says.
The determinations made by Bam have the standing of a High Court judgment and must be lodged with the High Court.
D Risk Insurance Consultants is still registered as a financial services provider in terms of the FAIS Act, with Risk registered as a key individual and representative of the company. All six determinations were made jointly and severally against Risk and his company.
The FSB also did not respond to a question about the continued registration of Risk and his company.
In July last year, a 67-year-old pensioner, Bohuslav Kautsky – a Risk client – shot himself outside the Pretoria offices formerly occupied by Sharemax. At the time of the shooting, a complaint had been lodged with Bam, and Risk was on holiday in Thailand.
Risk did not respond to an email this week about the settlements. When telephoned, he initially said that his attorney would reply to the email but could not say when this would happen. When pressed on the matter and the death of Kautsky, he cut off the call.
Withdrawal of complaint
Hans Klopper, a debt restructuring lawyer involved in the Sharemax scheme of arrangement, and Derek Cohen, a trustee representing Nova debenture holders (investors in the now-defunct Sharemax syndications), withdrew a complaint to the Media Ombudsman about reports and columns in Personal Finance on the Sharemax schemes. The withdrawal followed a lengthy meeting in Cape Town this week facilitated by the ombudsman’s office.
Personal Finance made no concessions to influence the withdrawal, and adhered to its stance that the reporting was accurate and the comments were fair and based on facts.