Tag Archives: Angelique Arde

More rulings against Calitz up his bill to R6.8m

5 Oct

Author: Angelique Arde

Publications: iOL

Date Published: 4 October 2014

Over the past three months, the Ombud for Financial Services Providers has handed down eight more rulings against financial adviser Michal Calitz, who advised clients to invest in the Relative Value Arbitrage Fund (RVAF), a Ponzi scheme that was marketed as a hedge fund. This brings the number of rulings against Calitz to 12 and the total amount he must repay investors to more than R6.8 million.

The RVAF was “nothing short of a scam”, Noluntu Bam, the Ombud for Financial Services Providers, said in her first ruling against Calitz, which was handed down in June.

Following the collapse of the RVAF, in July 2012 Herman Pretorius, the mastermind of the scheme, shot his business partner before turning the gun on himself. The RVAF reportedly reaped in about R2.2 billion from investors.

In Bam’s first ruling against Calitz, she says Calitz conceded that he had received “profit share” from the RVAF amounting to about R8.4 million. This was contained in a report addressed to creditors, by the trustees of the insolvent fund.

Calitz, who operates from Bellville in the Western Cape, holds a Certified Financial Planner accreditation. This means he has a Post Graduate Diploma in Financial Planning and is a member of the Financial Planning Institute (FPI).

The latest rulings against him read much like the previous four. Bam holds Calitz and Impact Financial Consultants, a close corporation and an authorised financial services provider (FSP), jointly and severally liable to pay the complainants, as follows:

* Garvitte Lombard – R700 000;

* Hendrik du Plessis and Erna du Plessis – R800 000 each;

* Johannes Coetzee – R500 000;

* Hendrina Rautenbach – R701 350;

* Carolina Olivier – R360 000;

* Fiona King – R494 000;

* Loredana Hansen – R630 000; and

* Natalina Natali – R120 000.

In previous rulings, and repeated in the latest rulings, Bam says nothing in the evidence persuades her office that the complainants were aware of or could have understood the implications of what they were investing in. “In particular, there is no mention of the risks of investing in an unregulated entity, one without so much as a set of audited financials.”

Hedge funds are currently not regulated in South Africa. Hedge fund FSPs may operate, but are subject to a code of conduct.

Calitz contends that he dealt through Abante Capital, a licensed FSP, but Abante Capital is not mentioned in any contractual documentation, Bam says. A hedge fund must also obtain a signed mandate from the client and ensure that the client understands the risks.

Investors in the RVAF paid money directly to the RVAF, instead of to a nominee account, “a safety mechanism to distinguish investor funds from those of the service provider”, Bam says.

She says no adviser would have recommended the RVAF as a suitable component of any investment portfolio had they exercised the required skill, care and due diligence.

Bam’s first ruling against Calitz states that, in terms of the law, a financial adviser must carry out a needs analysis on his or her client, provide a record of advice, and make proper disclosure about product suppliers. Clients must be given details of the services the adviser is authorised to provide, and whether the adviser holds guarantees or professional indemnity cover.

Ashley Percival, an assistant ombud at Bam’s office, says the office of the ombud is finalising investigations in respect of other financial advisers who advised their clients to invest in the RVAF.

This week, Jacqui Grovè, the legal and compliance services manager for the FPI, told Personal Finance that Calitz’s disciplinary hearing is scheduled for November 10. Although the ombud’s rulings carry the weight of a High Court ruling, Grovè says an FPI member is “deemed innocent until found guilty by a competent FPI disciplinary panel of his or her peers”.

More woes for hedge fund adviser

4 Aug

Author: Angelique Arde

Publications: iOL

Date Published: 03 August 2014

The Ombud for Financial Services Providers has handed down another ruling – the fifth so far – against financial adviser Michal Calitz, who advised a number of his clients to invest in the Relative Value Arbitrage Fund (RVAF), which turned out to be a scam.

Calitz was paid R8.4 million in share profits from the RVAF before it collapsed in July 2012, the month the master-mind of the scheme, Herman Pretorius, committed suicide. The RVAF collected an estimated R2.2 billion from about 3 000 investors.

In the latest ruling, ombud Noluntu Bam ordered Calitz to repay Garvitte Herman Lombard R700 000.

According to the ruling, Calitz alleged that he did not introduce Lombard to the RVAF. He claimed that another of his clients who had invested in the scheme had. He also claimed that he told Lombard that the RVAF was an unregulated hedge fund, and that the fund manager, Abante Capital, was registered with the Financial Services Board. He contested that Lombard was satisfied with the risk and that the funds invested constituted about 10 percent of Lombard’s portfolio. The RVAF investment was to diversify the client’s portfolio.

In the latest ruling, ombud Noluntu Bam ordered Calitz to repay Garvitte Herman Lombard R700 000.

According to the ruling, Calitz alleged that he did not introduce Lombard to the RVAF. He claimed that another of his clients who had invested in the scheme had. He also claimed that he told Lombard that the RVAF was an unregulated hedge fund, and that the fund manager, Abante Capital, was registered with the Financial Services Board. He contested that Lombard was satisfied with the risk and that the funds invested constituted about 10 percent of Lombard’s portfolio. The RVAF investment was to diversify the client’s portfolio.

But in her determination, Bam refers to her first ruling against Calitz and the “key issues”: his failure to understand the entity and the risks to which he was exposing his clients, whose funds were transferred directly into the RVAF “without even the protection afforded by a nominee account”.

“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.

Lombard relied on Calitz’s advice, and Calitz failed to act in accordance with the Financial Advisory and Intermediary Services Act.

Calitz is the owner of Impact Financial Consultants, an authorised financial services provider in Bellville, Western Cape. He is a member of the Financial Planning Institute and is an accredited Certified Financial Planner.

Hedge fund scam: second ruling

13 Jul

Author: Angelique Arde          

Publications: iOL

Date Published: 13 Jul 2014

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.

‘Hedge fund’ advice slammed

22 Jun

Author: Angelique Arde

Publications: iOL

Date Published: 22 June 2014

The Ombud for Financial Services Providers has handed down a scathing determination against a financial planner who placed R500 000 of his client’s savings in the Relative Value Arbitrage Fund (RVAF), which was a scam posing as a hedge fund.

The RVAF collapsed after the architect of the scam, Herman Pretorius, reportedly shot his former business partner and then himself in July 2012.

The determination handed down by ombud Noluntu Bam this week reveals that adviser Michal Calitz of Impact Financial Consultants in Bellville, Western Cape, earned R8.4 million in so-called share profits from the RVAF, “yet on the objective evidence he could not have conducted even the most basic due diligence [tests] on the RVAF”.

Calitz placed his client’s funds in a scheme which did not have a financial services provider number, nominee account or even audited financials, Bam’s determination states.

“Schemes such as the RVAF cannot exist without professionals such as Calitz turning a blind eye to legislative requirements,” Bam says.

Calitz holds a post-graduate diploma in financial planning and is a member of the Financial Planning Institute (FPI). This entitles him to call himself a Certified Financial Planner (CFP). He was certified to a standard above that of the average financial adviser and “must be held to that standard”, Bam says.

The ruling follows a complaint by a dentist, Dr Craig Inch, who became Calitz’s client because a friend had recommended him.

According to the ruling, Inch’s friend had told him about a hedge fund that had been performing well, and the dentist asked Calitz about it or others of a similar ilk. Calitz said he did know about it, and mentioned the RVAF.

Not knowing much about hedge funds other than that they can be risky, Inch asked Calitz to explain the fund. Calitz replied that the fund manager was a gentleman he knew very well and that the fund used a technique involving long-short strategies.

When Inch asked about the risks of losing capital due to poor decision-making by the fund manager, Calitz said that although this was possible, the fund had done consistently “very, very well” and provided a return of 20 percent a year without much deviation.

Calitz explained that hedge funds are not regulated in the way that unit trust funds are, but that this fund has “all the correct paperwork”.

Bam says the RVAF had no paperwork by way of registration or licence whatsoever, and in that regard was conducting business illegally.

With all his savings (R600 000) in a money market fund, Inch was not willing to invest his capital with a high risk of loss. But Calitz assured him that the fund was not influenced by market fluctuations. Furthermore, not only had many of his clients invested in the RVAF, but so too had he. Based on this assurance, Inch deposited R500 000 into the RVAF’s bank account on March 30, 2010, the ruling says.

On July 26, 2012, Inch instructed Calitz that he wanted to withdraw R600 000. The following morning, he heard of the death of Pretorius, “the fund manager and trustee of the RVAF”.

The RVAF is in liquidation, and the trustees have indicated that some, if not all, investor funds have been lost. Bam’s ruling says that in a letter dated November 2012, Calitz wrote: “It is presumed that Dr Inch’s funds are lost, although no definite finding has been made by the liquidators.”

Inch told the ombud he trusted Calitz because he is a CFP and his company is registered with the Financial Services Board (FSB). This led him to believe that the product he was investing in was legal and registered, that Calitz had done the necessary due diligence, that the fund manager was licensed with the FSB, that there were valid financial statements and that the fund was audited.

“This is not the case at all. Had I known this, I would never have invested a cent in this fund,” Inch told the ombud. Calitz acted unethically by investing his money in this “hedge fund”, he says.

In response to questions from Bam’s office, Calitz did not provide evidence of having done a financial needs analysis, justifying investing Inch’s savings in a hedge fund, “which is high risk”, or a record of advice, to explain what other products were considered.

Bam says while Calitz supposedly had the qualifications and experience, “he either failed to properly understand what he was dealing with, or, more worryingly, turned a blind eye in favour of lucrative commission, which he received from the RVAF” .

Bam says Calitz ignored the very legislation designed to protect his client, which led to his client’s loss, and ordered him and his company pay Inch R500 000.

Bam’s office has also referred the determination to the FPI.

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