The Ombud for Financial Services Providers has handed down another ruling against financial planner Michal Calitz of Impact Financial Consultants in Bellville.
Calitz earned R8.4 million in so-called share profits from the Relative Value Arbitrage Fund (RVAF), which purported to be a hedge fund but was, in fact, a scam.
The RVAF collapsed after its architect, Herman Pretorius, shot himself in July 2012. The fund is in liquidation, and its trustees have indicated that some, if not all, investor funds have been lost.
Both of Bam’s rulings against Calitz are the result of complaints by clients who invested in the RVAF on his advice.
The latest ruling states that, acting on Calitz’s advice, Robert Whitfield-Jones invested two amounts in the RVAF: R350 000 in March 2009 and R250 000 in February 2012. The money for both investments came from Whitfield-Jones’s unit trust fund investments. Calitz told his client that he could earn a better return if he invested in the RVAF.
Whitfield-Jones says he knew nothing about the risks associated with investing in a hedge fund and trusted Calitz to render the best advice, particularly because they had a relationship that went back several decades.
Holding Calitz accountable for his loss of R600 000, Whitfield-Jones turned to Bam for compensation.
In her determination, Bam refers to her previous ruling against Calitz in which she found that, “on the objective evidence, he could not have conducted even the most basic due diligences on the RVAF”.
The issues pertain to Calitz’s failure to understand the RVAF and the risks to which he exposed his clients when he advised them to invest in it, she says.
“Quite simply, no adviser would have recommended this product as a suitable component of any investment portfolio had they exercised the required due skill, care and diligence,” Bam says.
Whitfield-Jones, as a client of a registered financial adviser, relied on Calitz’s advice when he made the investment. When rendering financial services to clients, the financial services provider is required to act in accordance with the Financial Advisory and Intermediary Services Act and its code of conduct. Calitz failed in this regard, Bam says.
She ordered him and his company, jointly and severally, to pay Whitfield-Jones R600 000.
Calitz holds a postgraduate diploma in financial planning and has the Certified Financial Planner accreditation. He is a member of the Financial Planning Institute (FPI), which has its own code of conduct.
The FPI has yet to discipline any of its members who advised clients to invest in the RVAF. In October 2013, the FPI said it was expecting to hold disciplinary hearings in December. The outcomes of the disciplinary hearings would be published once the appeal period had expired. But to date no outcomes have been published. Personal Finance has had no response to questions put to the FPI’s legal and compliance services manager.
* You can contact the Ombud for Financial Services Providers in the following ways: telephone 012 470 9080, email [email protected] or write to PO Box 74571, Lynnwood Ridge 0040.