Author: Roy Cokayne
Date Published: 18 August 2014
THE TOTAL amount financial adviser Michal Johannes Calitz and his financial advice consultancy have been ordered to date to repay investors for advising them to invest in the Relative Value Arbitrage Fund (RVAF) has risen to more than R4.25 million.
This follows an eighth determination and order being issued against them by ombud for financial services providers Noluntu Bam. In the latest determination, Bam ordered Calitz and/or Impact Financial Consultants to repay widow Hendrina Rautenbach R701 350.
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.
Rautenbach claimed she and her late husband had one meeting with Calitz prior to investing the first R600 000.
They subsequently made four further investments in the RVAF totalling a further R890 000 plus £25 000 (R442 115) in what Rautenbach believed was the UK or international component of RVAF. The various investments made in RVAF totalled R1.17m but Rautenbach subsequently withdrew R473 350.
Rautenbach recalled being advised by Calitz that Pretorius was a clever investor with an excellent track record and had a team of highly qualified people who invested in a variety of shares in the stock market.
Rautenbach and her late medical doctor husband ended up investing more than half of their retirement savings in the RVAF. She denied ever being advised that they were investing in a hedge fund or that it was not registered with the Financial Services Board (FSB).
“Calitz, as an FSB-registered financial broker, should not in the first place have invested any of our capital with a non-registered financial fund. We trust Calitz to invest our hard-earned retirement capital in safe, gilt-edged investments producing an income on which we would/could rely in our retirement years,” she said.
Calitz claimed that at no stage was Rautenbach brought under the impression that the investment would be in shares on the JSE or in unit trusts but it was explained that the RVAF was a hedge fund and that it was not regulated by the FSB.
He added that the option to invest in hedge funds was explained to Rautenbach’s husband and was not in contradiction with his risk profile.
However, Bam said nothing in the documents that Rautenbach and her late husband were required to retain persuaded her office that they were even aware or could have understood that they were investing in a hedge fund.
Bam referred to a previous determination, which dealt with the key issues pertaining to the rendering of advice to invest in the 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.