Illustration: Colin Daniel

Mis-selling financial products, even in the name of a religious affiliation, and even when the targeted person has since died, will not get any miscreant product-flogger off the hook.

Financial advice ombud Noluntu Bam made this clear this week in yet another determination on a mis-sold high-risk property syndication, which has failed.

The targets of the mis-selling were Roelof Germishuys, who invested R600 000 and his wife Maria, who invested R585 000, on the advice of the product flogger, Bernard Marc Edgcumbe of Bellville, Western Cape.

Wheelchair-bound Roelof Germishuys, who retired in 2004 at the age of 60 because of ill-health, used part of his pension savings for the investment. Germishuys has since died.

But his executrix, Louise Danielz of BOE Private Clients, did not let matters lie. She continued with a complaint to the financial advice ombud that the Germishuyses had already initiated.

Bam has determined that jointly and severally responsible for making good to the Germishuys estate and Germishuys’s widow are Edgcumbe and various financial advice companies associated with Edgcumbe: UC Private Wealth, trading as Liberty Moon Investments; Mountain Brokers; and Mountain Brokers Trust, all of the Western Cape. All four were registered with the Financial Services Board (FSB) as financial service providers. Their licences have since lapsed.

Edgcumbe advised the Germishuyses to invest in a property syndication known as Fairhaven Estate, which was sponsored by the now-bankrupt Western Cape-based property syndication company, Genesis (formerly the Property Inter Action group, which was founded by Marelize Lombard).

The syndication was marketed as a low-risk investment providing annual returns of 25 percent on capital and income of 15 percent paid monthly.

And in doing so, the company claimed the business was managed on what it called “uncompromised ethics and on sound biblical business principles”, calling itself a “mature Christ company”.

The company was also among those instrumental in establishing the South African Association of Property Syndicators.

Edgcumbe, in common with many other property syndication product-floggers, tried to challenge the authority of the ombud to rule on the complaint, even producing what turned out to be a fraudulent legal opinion which he claimed had been given to the FSB.

Bam says in her determination that Edgcumbe had:

* Contravened the Financial Advisory and Intermediary Services Act by selling a product that he was not licensed to sell;

* Never undertaken a proper due diligence of Genesis or even had a clue what governance arrangements were in place at the company;

* Failed to appreciate the risk of the property syndication investment;

* Failed to follow proper procedures in having the Germishuyses switch investments into the property syndication; and

* Failed to disclose he was paid commission of R51 903 (4.38 percent of the total amount invested).

Adviser’s liabilities to former clients mount

The cost to financial adviser Deeb Risk and his company, D Risk Insurance, of advising pensioners to invest in property syndication schemes ticked up again this week, when financial advice ombud Noluntu Bam handed down yet another determination against them.

Bam ordered Risk and D Risk Insurance, which is based in Edenvale, to repay R170 000 to 86-year-old Margaret Posgate, whom he advised to invest in the now-imploding Sharemax Zambezi property syndication scheme.

The latest determination brings to R4.06 million the total amount that Risk must repay to seven pensioners, all of whom are over the age of 70.

Risk, who in September failed to have the High Court block Bam from issuing determinations against him, is still waiting to hear whether his applications to the Financial Services Board (FSB) Appeal Board for leave to appeal against Bam’s determinations will be granted, and if so, whether any of his appeals will succeed.

Risk, with his High Court application, wanted to force the pensioners to take the lengthy and expensive route of suing him in the High Court for their losses.

In the meantime, the R4.06 million that Risk must repay is rising steadily, because interest at a rate of 15.5 percent a year is due on any amount that Risk does not refund within seven days of each of the seven determinations made against him.

Risk remains licensed as a financial services provider.

In her latest ruling against Risk, Bam found that he had contravened the Financial Advisory and Intermediary Services Act and its code of conduct on numerous counts when he advised Posgate to invest in the Zambezi scheme.

Thapelo Mamuno, the FSB’s legal adviser, says the appeals by Risk and his company are at various stages.

He says Risk has launched applications for leave to appeal against the ombud’s determinations; for condonation, to the extent that it is necessary, for launching his applications late; for an order that various determinations by the ombud be suspended pending the outcome of the applications for leave to appeal; and, if the applications for leave to appeal are successful, to appeal against the determinations.

The appeals involve five determinations. They do not as yet include the latest two determinations. In four of the five determinations, the complainants have opposed the appeals, while the fifth is still deciding on his course of action.

In two of the applications, Risk has been allowed until December 5 to file replying papers. Opposing and replying papers in one determination have been submitted to the chairperson of the Appeal Board.

Mamuno says leave to appeal must be granted before the Appeal Board can consider the appeals.

Insurance broker told to pay

Short-term insurance salespeople beware: you must inform your clients if an insurer adds any condition to a policy after it has been taken out. If you do not, you may very well have to pay a claim out of your own pocket. This is what happened to insurance broker Willem Lombard and his company, Consult Us Brokers of Klerksdorp.

According to a determination issued by financial advice ombud Noluntu Bam, Otto Fourie of Pretoria, on the advice of Lombard, took out a household and vehicle insurance policy with Zurich in 2006. In 2008, the policy was moved to BSG Hollard.

There was a robbery on Fourie’s property in November 2008, and he lodged a claim for R120 369.

Hollard repudiated the claim, because Fourie did not have security bars on the windows of his home or security gates on the doors. These conditions had become requirements of the cover after Hollard took on the insurance risk.

Fourie complained to the Office of the Ombudsman for Short-term Insurance, which endorsed Hollard’s repudiation of the claim but referred Fourie’s complaint to the office of the financial advice ombud.

Bam determined that Lombard should have brought the additional requirement to Fourie’s attention so that he could have made “an informed decision” whether or not he was prepared to accept the condition added by the insurer.

“It was as a result of the failure to properly and timeously inform the complainant of the insurer’s requirement that ultimately led to the rejection of the theft claim by the insurer,” she says.

Bam did not name the amount of money that Lombard must pay Fourie. The ombud says she cannot do so because the amount has not been assessed by a claims adjuster.

She says, however, that if a settlement cannot be reached, the matter can be referred back to her office for a ruling on how much Lombard must pay.