Tag Archives: Fais

Taking a significant beating with legislative Act

19 May

Author: Myra Rego

Publications: FANEWS

Date Published: 19 May 2015

Intermediaries are governed by the Financial Advisory and Intermediary Services (FAIS) Act which governs their actions and regulates the way in which advice is given to a client. While this act has been a welcome addition to the industry, some intermediaries have been taking a significant beating by the Act.

This was yet again, the issue in the recent determination by the FAIS Ombudsman (FAIS Ombud). The case was between Daphne Auret Foster (hereafter referred to as the complainant), Vaidro Investments (hereafter referred to as the first respondent) and Andrea Moolman (hereafter referred to as the second respondent).

Facing stumbling blocks

In 2011, the complainant invested a combined total of R800 000 in a Relative Value Arbitrage Fund (RVAF). To make up R800 000, the first payment of R150 000 was made in February, followed by a payment of R550 000 in June and lastly, R100 000 in November.

The fund was managed and operated as a hedge fund – by one Herman Pretorius, (now deceased) – with no license of its own.

The investments were made in consequence of the recommendation and advice of the second respondent, who acted as the complainant’s financial adviser. The complainant states that the purpose of the investment was two-fold, namely capital growth for an imminent retirement, as well as the access to additional cash in the event of Mr Foster’s passing.

The complainant was advised that the RVAF would be less risky than investing in the JSE, in that the risks were better managed. In this regard, the complainant was advised that whilst the returns in good time would be less, conversely the returns during a downturn would not be as bad. In this respect, the complainant was advised and shown records indicating not only that the fund had shown good performance over a long period but that it even showed a positive return over the stock exchange crash of 2008.

Accordingly, the complainant, when asked by the Office what needs analysis was conducted by the respondent, replied that this was not necessary as the couple had other investments for their pension. Furthermore, the complainant advised that she was also offered another hedge fund; however, the respondent advised her that the RVAF was more secure and suitable to her requirements. The investment comprised all of complainant’s investable capital but constituted 15% of the couples total retirement savings.

The complainant blames the respondent for poor advice and the loss of her investment of R800 000. It was expected that the funds were to be invested and trade in the top 40 companies on the JSE and that certain measures would be in place to manage risk. Accordingly, the complainant states that the investment was misrepresented being in fact a Ponzi or fraudulent scheme and the complainant holds the respondents accountable.

A painted canvas

The FAIS Ombud invited the respondent to respond to the complaint. The respondent stated that the complainant’s husband wanted to invest in the RVAF, but wanted to do so in his wife’s name (the complainant) for tax purposes. The husband wished to meet with Herman Pretorius in order to ask several questions.

According to the respondent, the husband advised that he is well informed and knowledgeable regarding trading shares and that he himself in his own capacity trades Satrix top 402 and hence understood that the investment made use of a partnership agreement. No Financial Needs Analysis (FNA) was conducted as this was treated as a single need. The complainant required nothing more as he is already well invested for retirement.

The record of advice evidences that the complainant was warned by the respondent about the high risks of the product.

The respondent only provided factual information on hedge funds and did not provide advice. The respondent advised that Herman Pretorius explained the strategies and how the risk was managed. She stated that by having reasonable knowledge of Hedge Funds, she concluded that the strategy, as explained to her, was a suitable investment for the client. The respondent contended that she was satisfied that persons investing in the fund were fully appreciative and aware of the risks involved.

What is not in dispute, is that the complainant sought guidance from a licensed financial adviser; namely the respondent. In so doing, the respondent had a duty to ensure that the advice that was provided was correct and appropriate for the complainant’s circumstances. Other than taking an interest in his own financial affairs, there is no evidence that the complainant’s husband possessed any particular investment knowledge or experience. Had the complainant’s husband been the experienced investor the respondent makes him out to be, he would have certainly steered clear of RVAF.

Immeasurable accountability

The inescapable conclusion is that the respondent knew nothing about the fund or its underlying investment and was in no position to advise her clients to invest in it.

No sensible person having been given the correct material information or advice would have invested in RVAF. Nothing in the records explains why it was necessary to take such a risk with a substantial portion of the complainant’s capital.

The issue determined is that the respondent failed to act honestly, with care and diligence. The complaint is upheld and the respondents are ordered, jointly and severally, the one paying the other to be absolved, to pay to complainant the amount of R800 000.

Editor’s Thoughts:
We need to be honest and also admit that poor advice is also a major contributor in some of the FAIS determinations – it is such a pity that some “bad apples” give the industry a bad name and thus give professional advisers a harder time with selling and compliance with regulation. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.

 

 

 

 

 

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Investment red flags

16 Apr

Author: Hanna Barry

Publications: MoneyWeb

Date Published: 14 April 2015

JOHANNESBURG – Unregulated investment schemes may be a dime a dozen in South Africa, but they’re pretty easy to spot so there’s really no excuse to get caught out.

Be wary when promised abnormally high and consistently positive returns that are guaranteed even when the market is down, cautions Marc Alves, senior case manager at the Financial Advisory and Intermediary Services (FAIS) Ombud.

“It’s very difficult to get a 10% return in the market through an established financial services provider, so if someone is offering you 2% a month or 30% per annum, be very cautious,” he says.

The JSE’s All Share Index (Alsi) returned 7.6% last year. The Top 40 Index, which holds South Africa’s largest blue chip companies, returned just 6%. Listed Property and the Financial 15 (which includes the largest banks and insurers) fared significantly better, returning around 19% and 23% respectively.

But even at the upper end, these numbers are significantly lower than the 300% annual returns promised by Zantech Trading or the 2%-a-day returns promised by Chris Walker’s Defencex. Both schemes were found guilty of contravening the Banks Act and ordered to repay investors.

“Empower yourself with sound financial planning and don’t make decisions based on pressure and emotions,” advises Alves, noting that those exploited are often people who have not provided sufficiently for their retirement or other financial needs.

“Ask about the risks and how easy it is to get your money out. A lot of these schemes are willing buyer, willing seller. It’s difficult to get your money out if there is no willing buyer,” he points out.

Make sure you understand how the investment works (could you explain it to someone else?) and where your money is going, Alves adds.

Know the laws

If a company is providing a financial service it must be registered under the FAIS Act and have a financial services provider (FSP) licence number, issued by the Financial Services Board (FSB). An unregistered FSP would be in contravention of the Act. You can check whether a company has an FSP licence on the FSB’s website by running a search on the company’s name (‘Search for FSP name’).

Herman Pretorius’s Relative Value Arbitrage Fund (RVAF) was not a registered fund with the FSB. Yet it is believed to have amassed R1.8 billion from 3 000 investors.

Fortunately, because it fell within the definition of a financial product, the FAIS Ombud was still able to pronounce on it despite it not being registered and has made numerous awards in favour of consumers. Last year alone, one financial advisor was ordered to repay more than R10.7 million to around 20 consumers who he had advised to invest in the RVAF.

However, a number of schemes set themselves up so as to fall outside the definition of a financial product. This leaves consumers with very little recourse since financial regulators can only enforce the laws they have jurisdiction over and only where these laws have in fact been broken. If a company is not registered with either the South African Reserve Bank (Sarb), FSB or National Credit Regulator (NCR), ask why.

The role of financial advisors

Financial advisors approached by clients for advice on these products must do the appropriate due diligence on the product, Alves says. “We’re not saying there’s not a place for alternative investments, but definitely advisors should do their homework and make sure that the products are sound and meet all the criteria,” says Alves.

“If you don’t understand the product yourself, if you haven’t done any due diligence and can’t answer the questions, don’t advise on it and certainly don’t earn fees,” cautions Gavin Came, a financial planner with Sasfin Wealth.

“Product providers have over time caused more damage than intermediaries, although advisors have borne the vast majority of the regulator’s wrath,” he maintains. “When investments don’t pan out, the intermediary carries the can for an ill-designed product at best and a ponzi scheme at worst,” Came says.

Beleggers kry glo iets terug

16 Apr

Author: Marelize Barnard

Publications: Die Burger

Date Published : 16 April 2015

Goeie nuus vir beleggers wat in Herman Pretorius se beleggingskemas belê het, is dat hulle wél van hul geld sal terugkry.

Die gesamentlike trustees van die insolvente boedel van Pretorius se Relative Value Arbitrage Fund (RVAF) Trust het in die jongste vorderingsverslag dié nuus aan beleggers bekend gemaak.

“Dit is duidelik dat daar wesenlike fondse vir verspreiding onder beleggers beskikbaar sal wees,” lui die verslag.

Die trustees het aangedui dat hulle binnekort aansoeke in die Wes-Kaapse hooggeregshof gaan indien vir die tersydestelling van hofbevele wat verkry is om die bates van verskeie van Pretorius se entiteite te bevries.

Die trustees het die bates bevries uit vrees dat Pretorius se weduwee, Susan-Ann, die bates vir haar sou vat.

Nou is dit nodig om die hofbevele tersyde te stel sodat daar ’n vollediger prentjie verkry kan word van die bedrag geld wat vir beleggers beskikbaar is.

Beleggers wat reeds eise ingedien het, asook nuwe eise wat deur beleggers ingedien word, sal ingevolge die Insolvensiewet deur die trustees beoordeel word vir moontlike uitbetalings.

 Pretorius se geldsake van 2004 tot 2012: ’n Opsomming van Pretorius en die RVAF-groep se finansiële situasie van 2004 tot sy skietdood in 2012 toon volgens kwitansies dat R2,5 miljard van beleggers en ander bronne ingevorder is. 

Altesaam R2,1 miljoen van dié bedrag was ten tyde van Pretorius se dood in die RVAF-rekening. 

Vir eie gewin: Pretorius het R753 miljoen van dié geld gebruik vir alles behalwe uitbetalings aan beleggers, volgens ’n opsomming van die RVAF-groep se inkomste en uitgawes wat deur forensiese ouditeurs in opdrag van die trustees opgestel is.

Goeie nuus vir beleggers wat in Herman Pretorius se beleggingskemas belê het, is dat hulle wél van hul geld sal terugkry.

Die gesamentlike trustees van die insolvente boedel van Pretorius se Relative Value Arbitrage Fund (RVAF) Trust het in die jongste vorderingsverslag dié nuus aan beleggers bekend gemaak.

“Dit is duidelik dat daar wesenlike fondse vir verspreiding onder beleggers beskikbaar sal wees,” lui die verslag.

Die trustees het aangedui dat hulle binnekort aansoeke in die Wes-Kaapse hooggeregshof gaan indien vir die tersydestelling van hofbevele wat verkry is om die bates van verskeie van Pretorius se entiteite te bevries.

Die trustees het die bates bevries uit vrees dat Pretorius se weduwee, Susan-Ann, die bates vir haar sou vat.

Nou is dit nodig om die hofbevele tersyde te stel sodat daar ’n vollediger prentjie verkry kan word van die bedrag geld wat vir beleggers beskikbaar is.

Beleggers wat reeds eise ingedien het, asook nuwe eise wat deur beleggers ingedien word, sal ingevolge die Insolvensiewet deur die trustees beoordeel word vir moontlike uitbetalings.

 Pretorius se geldsake van 2004 tot 2012: ’n Opsomming van Pretorius en die RVAF-groep se finansiële situasie van 2004 tot sy skietdood in 2012 toon volgens kwitansies dat R2,5 miljard van beleggers en ander bronne ingevorder is. 

Altesaam R2,1 miljoen van dié bedrag was ten tyde van Pretorius se dood in die RVAF-rekening. 

Vir eie gewin: Pretorius het R753 miljoen van dié geld gebruik vir alles behalwe uitbetalings aan beleggers, volgens ’n opsomming van die RVAF-groep se inkomste en uitgawes wat deur forensiese ouditeurs in opdrag van die trustees opgestel is.

Pretorius het die miljoene rande eerder gebruik om onder meer vir homself luukshede, soos ’n Aston Martin-sportmotor (R1,7 miljoen), aan te skaf asook talle eiendomme en duur juwele vir sy vrou, Susan-Ann, en hul seuns.

Aandele vir homself gekoop:Pretorius het R80 miljoen gebruik om onder meer vir homself aandele in Wesizwe Platinum te koop, luidens die trustees se verslag.

Die trustees is nog in die duister oor waarom Pretorius verskeie groot bedrae in Wesizwe belê het.

Die vermoede is dat hy daarmee wou spekuleer in die hoop dat hy daardeur sy jare lange Ponzi-skema kon verdoesel.

  Makelaars: Die makelaars wat onder meer niksvermoedende pensioentrekkers oortuig het dat Pretorius se RVAF-groep ’n veilige keuse is om hul pensioengeld in te belê, het R124,6 miljoen se betalings van Pretorius ontvang, luidens die verslag. 

Vordering word tans gemaak met eise teen die onderskeie makelaars wat uitbetalings ontvang het. Wanneer die geld ingevorder word, sal dit meer geld vir beleggers beteken.

Susan-Ann het R4,18 miljoen van haar man ontvang.

Ander betalings wat deur Pretorius gemaak is (wat nie deur die forensiese ouditeurs gespesifiseer is nie) beloop R164 miljoen.

Die trustees noem verder dat Pretorius se familietrusts intussen met welslae gesekwestreer is.

Pretorius het oor die jare verskeie trusts gestig om homself, sy vrou en hul twee seuns te begunstig.

Die bates wat deur die trusts bekom is, sluit in ’n luukse vakansiehuis in Hermanus, die Pretorius-gesin se huis in Welgemoed en twee eiendomme vir sy seuns in onderskeidelik Higgovale en Claremont – wat intussen op openbare veilings deur die RVAF-trustees verkoop is.


KLEINGELD

R2,1 miljoen

Van die R2,5 miljard wat van beleggers ingevorder is, was net R2,1 miljoen in die RVAF-rekening oor.

Piramideskema se eise kan begin verjaar

12 Apr

Author: Nellie Brand-Jonker 

Publications: Die Burger

Date Published : 12 April 2015

Beleggers wat geld verloor het in Herman Preto­rius se piramideskema, moet opskud as hulle nog eise wil instel teen die makelaars wat hulle oorreed het om in die skema te belê. 

Pretorius is in Julie 2012 dood nadat hy eers sy sakevennoot Julian Williams van die Basileus-groep en toe homself doodgeskiet het.

Sedertdien het dit aan die lig gekom dat beleggers R2,2 miljard in Pretorius se Relative Value Arbitrage Fund (RVAF) belê het.

Die RVAF-fonds het al sedert die vroeë 2000’s geld van beleggers gekry. Opbrengste van sowat 20% per jaar is belowe en is jare lank gelewer.

Noluntu Bam, ombudsman van finansiëlediensteverskaffers, het pas nog twee uitsprake gelewer ten gunste van beleggers wat in die RVAF-skema belê het. Dit bring die getal positiewe uitsprake op 23 te staan.

Sowat R13 miljoen moet reeds deur finansiële adviseurs terugbetaal word aan van die beleggers.

Franscois van Gijsen, direkteur van regsdienste van Finlac, wys daarop dat beleggers wat nog eise by die Fais-ombudsman wil indien, dit gou moet doen. In Julie sal dit drie jaar wees sedert die skietdood van Pretorius en dan kan die eise verjaar.

Hy help nou vier mense wat destyds in die RVAF-fonds belê het, om eise in te dien.

Oor die moontlikheid dat die eise kan verjaar, het Bam by navraag gesê die proses vereis dat ’n klagte “die ombudsman nie later moet bereik nie as drie jaar vanaf die datum dat die finansiële diens gelewer is of nie later nie as drie jaar vanaf die datum dat die klaer redelikerwys bewus geraak het of behoort bewus te geraak het dat iets fout is”.

Sy wou nie kommentaar lewer op ’n vraag of dit so is dat eise binnekort kan verjaar nie en sê: “Ons kan nie ja of nee op die vraag antwoord nie omdat elke saak op eie meriete gehanteer moet word.”

Die ombudsman het nie die mag om die verjaring van eise uit te stel nie.

Van Gijsen glo egter dit gaan moeilik wees vir beleggers om te bewys hulle het nie geweet dat iets fout is nadat die nuus oor Pretorius se selfmoord in Julie 2012 bekend geword het nie.

“As jy nie teen Julie ’n eis ingedien het nie, gaan jy die geleentheid verbeur.”

Volgens Van Gijsen het hulle ná Pretorius se skietdood in 2012 aanvanklik baie navrae gekry van beleggers wat wou weet hoe om klagte by die Fais-ombudsman in te dien. Min beleggers het egter opgetree teen die bepaalde makelaars – vermoedelik omdat hulle wag om te kyk wat uit die likwidasieproses spruit.

Die makelaar Michal Johannes Calitz wat in Stellenberg in Kaapstad woonagtig is, het in dié stadium verreweg die meeste geld terugbetaal. Daar is al berig dat sy kliënte op sy advies meer as R86 miljoen in die skema belê het. Daar is reeds 17 uitsprake teen hom om altesame R10 miljoen aan beleggers terug te betaal.

Die eerste belegger wat verlede jaar teen Calitz ’n uitspraak gekry het, het Vrydag gesê hy is nog nie die geld terugbetaal nie omdat Calitz besig is om by die Raad op Finansiële Dienste (RFD) te appelleer teen die uitspraak.

Regstappe kom teen makelaars

8 Apr

Author: Marelize Barnard

Publications: Die Burger

Date Published : 8 April 2015

Wes-Kaapse makelaars wat miljoene rande gemaak het deur beleggers na die Ponzi-skema van wyle Herman Preto­rius te lok, weier nou om hul kommissiegeld terug te betaal.

Die trustees van Pretorius se Rela­tive Arbitrage Fund (RVAF) en Seca Trust se volgende stap is om “een vir een op die ry af” die makelaars met regstappe te dwing om die geld terug te betaal, het Rynette Pieters van Independent Trustees Dinsdag gesê.

Intussen het die ombudsman vir finansiële adviseurs en tussengangers (Fais) Dinsdag die makelaars Simon Morton en Carol Louw, voorheen verbonde aan Catwalk Investments 592 met ’n besigheidsadres in Durbanville, beveel om R600 000 te betaal aan ’n belegger wat deur hul toedoen by die RVAF belê het.

Morton, wat ’n kantoor in Durbanville gehad het, het intussen na Auckland in Nieu-Seeland geëmigreer. Louw woon in Goedemoed.

Die klaer aan wie die geld terugbetaal moet word, Nigel Andrew Freddy, noem in die klag wat by Fais ingedien is dat hy R450 000 van sy R600 000-beleggingsgeld by Allan Grey wou belê, maar dat Morton hom anders oortuig het.

Noluntu Bam, ombudsman vir finansiële diensteverskaffers, het bevind dat Morton en Louw “blindelings” aanvaar het wat oor Pretorius se RVAF aan hulle vertel is. ’n Behoorlike ondersoek na die bestuur van die RVAF-beleggings is nie gedoen nie en albei het versuim om hul plig teenoor die belegger na te kom.

Bam het verder bevind dat die belegger nie ’n ingeligte keuse kon maak nie omdat dit nie aan hom genoem is dat sy geld belê sou word in ’n entiteit wat nie gereguleer of geregistreer was nie.

Morton en Louw het as “geregistreerde finansiële diensteverskaffers versuim om die Fais-wetgewing na te kom en kan nié die skuld vir die beleggingskeuse op die belegger plaas nie”, het Bam bevind.

Morton is een van die makelaars wat ook miljoene rande kommissie moet terugbetaal – tussen R8 miljoen en R10 miljoen.

Nog ’n makelaar, Wilhelm Erwee van Moorreesburg, moet meer as R12 miljoen aan kommissie terugbetaal.

Die makelaar Michal Calitz van Impact Finansiële Konsultante in Bellville weier om R9,06 miljoen terug te betaal nadat regter Monde Samela ’n bevel daaroor in die Wes-Kaapse hooggeregshof gemaak het.

Calitz het aansoek gedoen om verlof tot appèl teen Samela se uitspraak en daar word gewag op ’n datum waarop die appèl aangehoor kan word.

Pierre du Toit van Mostert en Bosman, regsverteenwoordiger van die kurators, het gesê die volgende stap is om teen elkeen van die makelaars op te tree sodat al die kommissiegeld terugbetaal kan word.

Adviser who put clients in RVAF must repay R1.6m

4 Apr

Author: Angelique Arde

Publications: iOL

Date Published: 4 April 2015

The financial advice ombud has handed down five scathing rulings against financial adviser Andrea Moolman of Vaidro Investments in Wilro Park, Roodepoort, for advising her clients to invest in the Relative Value Arbitrage Fund (RVAF), which is in liquidation following the suicide of Herman Pretorius, the architect of the scheme. 

Although it was promoted as a hedge fund, the RVAF was a Ponzi scheme, according to the ombud. The fund reportedly owes more than R2 billion to about 3 000 investors, and the trustees of the fund have said that most, if not all, investors’ funds have been lost. 

In the first of five rulings handed down last month against Moolman, the Ombud for Financial Services Providers, Noluntu Bam, said her office had received a number of complaints from the adviser’s clients who were invested in the RVAF.

he key issues in all complaints were identical, and the essence of Moolman’s response was to renounce liability for any breaches of the Financial Advisory and Intermediary Services (FAIS) Act, the ruling states. Additionally, Moolman claimed she had carried out a due diligence on the RVAF and that her actions were in the best interests of her clients. 

All the investors who have lodged complaints against Moolman say she advised them that, not only had the RVAF won a top award in 2008, but it was part of a financial services provider (FSP) known as Abante Capital, which had been in existence for years. 

“In reality, Abante Capital was a separate legal entity and was licensed as an FSP by the Financial Services Board (FSB), while RVAF was not,” Bam says. 

There was no mention of Abante or its licence number in the contractual documents between clients and the RVAF, and client funds were transferred directly into the fund without the protection of a nominee account, the ombud says. “Furthermore, there were no financials or even so much as a fund [fact] sheet.” 

Without these, Moolman could not have understood the economic activity that generated the returns, she says. 

When, in November 2011, the first complainant heard a warning about RVAF and its lack of transparency, he took this up with Moolman. She reassured him that the fund had weathered the recession and sent him a survey of South African hedge funds. 

Bam says the survey is pertinent because it was sent to substantiate her advice, yet the RVAF was “conspicuously absent” from the survey. Moolman’s action placated her client but “provides evidence that the RVAF did not exist as a hedge fund”, Bam says. When asked to explain the glaring absence of the fund among the funds listed, Moolman’s response showed that she relied on the supposition that Abante was the fund manager. 

Bam’s rulings against Moolman refer to her determination Inch vs Calitz, which unpacks all the issues on the rendering of advice to invest in the RVAF. These relate to the adviser’s failure to understand the RVAF and the risks to which clients were exposed. 

The Inch ruling was the first of 16 rulings by Bam against financial adviser Michal Calitz, who has the Certified Financial Planner accreditation and who is a member of the Financial Planning Institute. Calitz received R8.4 million in share profits from the RVAF. 

In terms of the FAIS Act, a financial adviser must recommend products that suit your needs and your investment objectives, and the risk inherent in the product must suit your risk profile. Your adviser is also obliged to ensure that the investment that he or she recommends is legitimate, and that the person offering the investment, or acting as an FSP, is licensed. Pretorius wasn’t licensed as an FSP. 

In the five rulings, Bam has ordered Moolman to pay back more than R1.6 million to the complainants. 

Under new regulations passed last month, hedge funds will be regulated by the FSB. They must, by March next year, be regulated as collective investment schemes, offering you, the consumer, a great deal more protection. 

Although they were not regulated at the time of Moolman’s advice, any advice rendered in respect of a hedge fund was subject to the FAIS code of conduct and a notice issued by the FSB. 

In terms of this code, a hedge fund service provider must obtain a signed mandate from a client before rendering any intermediary service to the client, and the mandate must be approved by the regulator. An additional signed mandate, confirming the contents of the first, is also required. 

Bam’s ruling states: “The legislature has made every effort to require not only that a client be appropriately appraised as to the risks inherent in, and the processes and strategies followed by, a hedge fund, but that the client confirms such disclosure having taken place.” 

Bam says Moolman was out of her depth in advising on the RVAF and failed in her duties to her clients. 

“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,” she says.

How to lay a complaint with the FAIS Ombud

27 Jan

Author: Hanna Barry

Publications: MoneyWeb

Date Published: 26 January 2015

JOHANNESBURG – To help you navigate the world of financial services in 2015, Moneyweb has put together a guide to understanding how the complaints process of the Financial Advisory and Intermediary Services (FAIS) Ombud works. Since the FAIS Ombud handles complaints from members of the public against financial advisors and product providers it could come in handy.

1. Try make amends

Before submitting a complaint to the FAIS Ombud, you must try to resolve it with the responding party (financial advisor or product provider) within a six-week time frame. Once you’ve received the final word from the respondent and are still not satisfied, you then have six months to approach the Ombud with your complaint.

2. Fill out a form

Your complaint should be outlined in a six-page form under the How to complain tab on the Ombud’s website. You can phone the Ombud on 012 470 9080 if you need help completing the form, but it’s fairly self-explanatory. The form requires a detailed explanation of your complaint, including background, product details, as well as date-stamped phone calls and emails exchanged with the person or company you are complaining against. Supporting documentation, such as proof of your investment and any relevant correspondence you may have, should be attached to your complaint. There’s even a section that asks you to describe how you would expect your complaint to be resolved.

3. Know your limits

The Ombud has a jurisdictional limit of R800 000 per complaint and complainants must agree to forego any amount in excess of R800 000 in order for the Ombud to consider their complaint. However, it’s important to understand that one complaint can comprise a number of causes of action, which for the purposes of this rule are considered as separate complaints.

“Where a person makes an investment of R790 000 in July 2013 as a result of advice offered by their financial advisor and then in May 2014 a further amount of R1 million is invested, following the advice of the same financial advisor, the two transactions make two separate causes of action,” explains FAIS Ombud, Noluntu Bam.

“In other words, even though the person will send us one complaint detailing all the investments they made, the two transactions remain two separate causes to institute a complaint,” Bam tells Moneyweb.

If this complaint were to succeed, the full R790 000 would be awarded in respect of the first cause of action, while the second cause of action would be limited to R800 000. The complainant would ultimately walk away with R1.59 million.

Importantly, the Ombud is precluded from looking at complaints pending before a court of law. The office’s eventual determination has the effect of a civil judgment of the court.

4. Wait for an outcome

Once the FAIS Ombud has received your complaint, the office “may follow and implement any procedure which the FAIS Ombud deems appropriate, and may allow any party the right to legal representation,” an information leaflet on the Ombud’s website broadly explains.

The respondent is naturally given a chance to respond and the Ombud must first attempt to mediate a settlement between the parties. If the parties refuse to accept the Ombud’s recommendations, the Ombud will make a final determination. This could include either the dismissal of the complaint or the upholding of the complaint wholly or partially by compensating the complainant for financial harm suffered.

R10m for one advisor

Of the 9 400 odd new complaints received in the 2013/14 financial year, the Ombud settled 7 587 within the same year (including 49 determinations), returning around R30.6 million to consumers.

Of the 49 determinations made, 17 were made against Impact Financial Consultants CC and Michal Johannes Calitz in respect of Herman Pretorius’s Relative Value Arbitrage Fund (RVAF).

Excluding the annual interest accumulating from the date of determination to the date of final payment (varying between 9% and 15.5%), the total awards made to consumers in respect of this one advisor and product came to more than R10.7 million.

Investment red flags

13 Jan

Author: Hanna Barry

Publications: MoneyWeb

Date Published: 13 January 2015

If it sounds too good to be true…

JOHANNESBURG – Unregulated investment schemes may be a dime a dozen in South Africa, but they’re pretty easy to spot so there’s really no excuse to get caught out.

Be wary when promised abnormally high and consistently positive returns that are guaranteed even when the market is down, cautions Marc Alves, senior case manager at the Financial Advisory and Intermediary Services (FAIS) Ombud.

“It’s very difficult to get a 10% return in the market through an established financial services provider, so if someone is offering you 2% a month or 30% per annum, be very cautious,” he says.

The JSE’s All Share Index (Alsi) returned 7.6% last year. The Top 40 Index, which holds South Africa’s largest blue chip companies, returned just 6%. Listed Property and the Financial 15 (which includes the largest banks and insurers) fared significantly better, returning around 19% and 23% respectively.

But even at the upper end, these numbers are significantly lower than the 300% annual returns promised by Zantech Trading or the 2%-a-day returns promised by Chris Walker’s Defencex. Both schemes were found guilty of contravening the Banks Act and ordered to repay investors.

“Empower yourself with sound financial planning and don’t make decisions based on pressure and emotions,” advises Alves, noting that those exploited are often people who have not provided sufficiently for their retirement or other financial needs.

“Ask about the risks and how easy it is to get your money out. A lot of these schemes are willing buyer, willing seller. It’s difficult to get your money out if there is no willing buyer,” he points out.

Make sure you understand how the investment works (could you explain it to someone else?) and where your money is going, Alves adds.

Know the laws

If a company is providing a financial service it must be registered under the FAIS Act and have a financial services provider (FSP) licence number, issued by the Financial Services Board (FSB). An unregistered FSP would be in contravention of the Act. You can check whether a company has an FSP licence on the FSB’s website by running a search on the company’s name (‘Search for FSP name’).

Herman Pretorius’s Relative Value Arbitrage Fund (RVAF) was not a registered fund with the FSB. Yet it is believed to have amassed R1.8 billion from 3 000 investors.

Fortunately, because it fell within the definition of a financial product, the FAIS Ombud was still able to pronounce on it despite it not being registered and has made numerous awards in favour of consumers. Last year alone, one financial advisor was ordered to repay more than R10.7 million to around 20 consumers who he had advised to invest in the RVAF.

However, a number of schemes set themselves up so as to fall outside the definition of a financial product. This leaves consumers with very little recourse since financial regulators can only enforce the laws they have jurisdiction over and only where these laws have in fact been broken. If a company is not registered with either the South African Reserve Bank (Sarb), FSB or National Credit Regulator (NCR), ask why.

The role of financial advisors

Financial advisors approached by clients for advice on these products must do the appropriate due diligence on the product, Alves says. “We’re not saying there’s not a place for alternative investments, but definitely advisors should do their homework and make sure that the products are sound and meet all the criteria,” says Alves.

“If you don’t understand the product yourself, if you haven’t done any due diligence and can’t answer the questions, don’t advise on it and certainly don’t earn fees,” cautions Gavin Came, a financial planner with Sasfin Wealth.

“Product providers have over time caused more damage than intermediaries, although advisors have borne the vast majority of the regulator’s wrath,” he maintains. “When investments don’t pan out, the intermediary carries the can for an ill-designed product at best and a ponzi scheme at worst,” Came says.

Fais-wet: Wyer toesig nodig

7 Nov

Author: Ekonomiese Redaksie

Publications: Die Burger

Date Published : 7 November 2014

Verbruikersbeskerming is sterker as ooit, skryf Ian Middleton, besturende direkteur van Mast­head, maar daar is steeds gebreke.

Sedert die Wet op Finan­siële Advies- en Tussengangerdienste (Fais) in 2004 van krag geword het, het reguleerders – veral die Raad op Finansiële Dienste (RFD) – verskeie kodes en beginsels ingestel om te verseker dat elke finansiële-adviesonderneming kliënte se belange op die hart dra.

Dit sluit in die kode oor die billike behandeling van kliënte.

Voor Fais het Suid-Afrika ’n hoogs ongereguleerde finansiëledienste-omgewing gehad. Enigeen kon homself ’n finansiële raadgewer noem. Die hoofdoelwit met Fais was om mense wat finansiële raad betref, te beskerm en die professionaliteit en integriteit van die finansiëledienstebedryf te verhoog.

Die Fais-wet het standaarde vir bevoegdheid, etiek en werkwyse gestel om mense teen onbetroubare en beginsellose raadgewers te beskerm.

Raadgewers en die sleutelindividue moet gelisensieer word. Kliënte kan dus by die RFD nagaan of iemand geakkrediteer is en wat hulle by magte is om te verkoop. Adviseurs mag slegs binne hul kundigheidsveld raad gee of dienste lewer.

Raadgewers is ook onderworpe aan jaarlikse oudits en moet eksamens slaag.

Kliënte het nou ook ’n maklike, goedkoop en vinnige manier om dispute met hul raadgewer te besleg deur die kantoor van die Fais-ombudsman.

Dit bevoordeel kliënte, maar beklemtoon ook die belangrikheid van raadgewers. Deur kwalifikasies vir die bedryf amptelik te maak, het dit die beroepstatus van raadgewers verhoog.

Voldoening aan die Fais-wet verg regstreekse en onregstreekse koste – tyd en mensehulpbronne.

Dit het ’n groot las geskep vir klein raadgewende firmas en raadgewers wat alleen sake doen. Die aantal onafhanklike finansiële raadgewers het gevolglik afgeneem. Sommige het weens die reguleringshekkies uitgeval, ander het werk gaan soek by groter organisasies.

Die veranderinge was nie so erg soos in Brittanje nie waar soortgelyke regulasies jare voor Fais ingestel is.

Wat die raad van adviseurs betref, is ons in die algemeen positief.

Dit lyk dalk asof daar baie klagtes oor finansiële raadgewers is, maar dit moet in konteks gesien word.

Sowat 30 van die Fais-ombudsman se beslissings haal jaarliks nuusopskrifte, maar niks word gesê oor die miljoene kliënte wat voordeel getrek het uit die raad wat hulle oor lang- of korttermynpolisse of beleggings ontvang het nie.

Die doeltreffendheid van verbruikersbeskerming word egter verwater weens ’n reguleringsgaping.

Hoewel die RFD alle bedrywighede wat die onder die Fais-wet val, reguleer, beheer en monitor, lê baie beleggingskemas wat waarde vir verbruikers vernietig het en die opskrifte gehaal het buite die trefwydte van die RFD in ’n ongereguleerde ruimte.

Ons meen dat daar op ’n breër vlak toesig gehou moet word oor of die beloftes wat aan kliënte gemaak word, billik en bereikbaar is.

Wanneer ongereguleerde produkte aan kliënte bemark word in openbare advertensies in druk, op radio en op televisie, moet dié produkte en verskaffers gesien word as dat hulle die gereguleerde wêreld betree het en hulle moet as sodanig behandel word.

Met so ’n ingewikkelde doolhof van keuses moet kliënte seker maak dat hulle raad by ’n geakkrediteerde, gelisensieerde, professionele raadgewer kry.

As ’n kliënt so iemand raadpleeg en sy of haar raad volg, sal hulle ’n veiliger finansiële toekoms binnegaan. Niks klop daardie gemoedsrus nie.

■ Masthead help finansiëledienstemaatskappye aan wetgewing voldoen.

 

‘Wees ingelig, dan sal jy veiliger wees’

Nico van Gijsen, ’n gesertifiseerde finansiële beplanner en gereelde rubriekskrywer vir Sake, gee sy mening oor die Wet op Finansiële Advies- en Tussengangerdienste:

Die Fais-wet het myns insiens goeie bedoelinge, maar gaan in praktyk nie naastenby ver genoeg met sy doelstellings – die beskerming van die regte van mense – nie.

Mense is in die algemeen finansieel ongeletterd of minstens oningelig en naïef, veral oor langtermyn- finansiële beplanning. Die produkte is kompleks en daar is ernstige etiese probleme wat wetgewing nie oplos nie.

Die bedryf is te veel ingestel op verkope ten koste van gepaste finansiële advies. Die Fais-wet fokus ooglopend sterk op “advies”, maar is beperk in sy definisie: “Advies” is eers advies as ’n produk te sprake kom.

Dan is daar die malligheid in die beleggingswêreld. Dink maar aan die “skemas” wat verspot groot opbrengste belowe en dan bankrot speel.

Ek meen kliënte moet sterker begin staan. Hulle kan begin deur:

■ Net professioneel opgeleide finansiële beplanners te gebruik;

■ Elke brokkie advies skriftelik verduidelik te kry;

■ Nie poliskontrakte te onderteken voordat hulle dit deeglik deurgelees en seker gemaak het hulle verstaan dit nie;

■ Nie wolhaarstories oor beleggingsopbrengste te glo nie – die sakeblaaie skryf immers gereeld daaroor; en

■ Dit sal goed wees as sakeblaaie meer op persoonlike finansiële advies fokus en as mense dié blaaie lees, want dit is hoe jy ingelig raak oor jou eie finansies.

Kurators soek steeds Pretorius-miljoene

14 Oct

Author: Marelize Barnard

Publications: Die Burger

Date Published : 14 Oktober 2014

Die kurators van wyle Herman Pretorius se maatskappye en trusts soek steeds na die geld wat in sy beleggingskema verdwyn het.

In die jongste verslag deur die kurators se prokureurs, Mostert en Bosman, oor die soektog na geld word genoem dat die meeste van die makelaars wat kommissie van Pretorius ontvang het, reeds ondervra is.

Vyf makelaars het ooreenkomste aangegaan met die likwidateurs en hulle het reeds R1,8 miljoen terugbetaal. ’n Verdere sowat R2,4 miljoen gaan deur dié makelaars terugbetaal word.

In die gevalle waar makelaars nie vrywillig hul kommissies terugbetaal nie, is aansoeke in die Wes-Kaapse hooggeregshof teen hulle ingedien.

Een van die makelaars, Michal Calitz, is besig met ’n aansoek om verlof tot appèl teen ’n uitspraak van regter Monde Samela in die Wes-Kaapse hooggeregshof. Dit is nadat Monde gelas het dat Calitz, sy beslote korporasie Impact Finansiële Konsultante, en die maatskappy EQ Prop R9,06 miljoen moet terugbetaal.

Dit sluit in kommissie, ’n lening deur ​Pretorius en ’n geskenk van R250 000 wat Calitz aan die twee gesekwestreerde trusts van Pretorius moet terugbetaal.

Die bevel is gemaak ná ’n aansoek deur die kurators van Pretorius se gesekwestreerde Relative Value Arbitrage Fund (RVAF) en sy Seca-trust.

Lesers se mening op Facebook oor Pretorius en hul geld:

Quintin Papenfus: “Ek weet van twee gesinne wat al hulle spaargeld verloor het. Dit natuurlik by Pretorius belê. Hulle kry bitter swaar vandag. Hy het soveel mense ingeloop . . . ek twyfel of hulle ooit hulle geld gaan terug kry.”

Soekie Bester: “Ons was slagoffer van hierdie skelm mense, het uit onkunde ons jarelange makelaar geglo. Nee, ek kon nog nie hierdie mense hul gulsige luukse lewe op ander se swaarverdiende lewensgeld vergewe nie!”

Annatjie Jonker: “Ja Herman Pretorius . . . dit is ’n psigopaat wat mense so in die oë kon kyk en vertel hoe hy risiko bestuur, hoe dinge beheer word, ens., welwetende dat die alles leuens is.”

Philip Meiring: “Julle moet rondkyk daar is nog baie van Herman Pretorius se eweknieë in die rondte, hulle skroom nie om jou geld te vat nie.”

Swaer getuig oor weelde voor dood

11 Oct

Author: Marelize Barnard

Publications: Die Burger

Date Published : 11 Oktober 2014

Van die Hardekraaltjie-woonwapark in Voortrekkerweg, Bellville, tot ’n multi-miljoenrand-huis in Welgemoed – dít is die pad wat die swendelaar Herman Pretorius geloop het.

Pretorius kon nie altyd ’n Aston Martin, luukse vakansiehuis in Voëlklip, Hermanus, en juwele van honderdduisende rande vir sy vrou, Susan-Ann, bekostig nie.

Daar was ’n tyd nadat sy sake in George “verkrummel” het toe die Hardekraaltjie-woonwapark al uitweg was.

Dít was gister van die getuienis van wyle Pretorius se swaer, Srecko Antun Bilobrk, ’n Kroasiër wat hom jare gelede in Suid-Afrika gevestig het en met Susan-Ann se suster, Carol-Ann, getroud is.

Bilobrk, ’n elektriese ingenieur, het in die Bellville- siviele hof in die sekwestrasie-ondervraging oor Susan-Ann se geldsake getuig.

Bilobrk was die laaste familielid met wie Pretorius gaan gesels het voor hy op 26 Julie 2012 eers sy voormalige sakevennoot Julian Williams en daarna homself in die Icon-gebou in die Kaapstadse sakekom doodgeskiet het.

Pretorius het op die dag van die skietery van sy kantoorkompleks in die Tyger-waterfront in Bell­ville gery en onverwags by sy swaer se huis in Kampsbaai opgedaag. Pretorius het gesê hy is in die stad om Williams te kom sien.

“Hy het gesê hy het R100 miljoen aan Williams geleen om die geld van die mense in sy tuisdorp (Piketberg) te betaal. En dat die hele dorp gaan ontplof omdat die geld nie betaal is nie,” het Bilobrk getuig.

“Hy het gesê hy het ’n halfuur. Hy het koffie gedrink en was gespanne. Die mense in sy tuisdorp is nie betaal nie . . . En toe hoor ons die nuus ’n paar uur later,” het Bilobrk getuig oor Pretorius se laaste oomblikke.

Adv. Almero de Villiers, wat namens die kurators van Preto­rius en Susan-Ann se trusts optree, wou by Bilobrk weet wanneer Pretorius hom gevra het om na sy (Pretorius) se gesin om te sien.

Bilobrk het geantwoord nadat Pretorius teruggekom het van ’n vakansie in Turkye het hy “vir die eerste keer in sy lewe gesê hy voel bedreig.

Pretorius het gesê Julian (Wil­liams) is bipolêr en daartoe in staat om enigiets te doen. Hy het gesê hy voel bedreig en dat hy nou met ’n ander motor ry.

Bilobrk het hierna getuig dat Pretorius hom gevra het om na sy gesin om te sien. “Ek het gedink hy maak ’n grap.”

De Villiers het hierop aangevoer dat Pretorius se seun Andrew gesê het Pretorius het ’n sak geld vir Bilobrk gegee, waarop Bilobrk dit ontken het. “Ons het nooit enige geldelike ooreenkomste gemaak nie.”

De Villiers het Bilobrk gevra waarom hy dan maandeliks R35 000 aan Susan-Ann gee sedert haar man se dood – dit beloop al tussen R500 000 en R600 000.

“Jy moet dit kan insien dat dit lyk asof Herman Pretorius geld aan jou gegee het, wat jy nou uitdeel.”

Bilobrk het geantwoord hy verwag Susan-Ann sal die geld terugbetaal uit die polisgeld wat sy ná Pretorius se dood ontvang het. Hyself het nie ’n sak geld van Pretorius ontvang nie.

■ Pretorius het R2,2 miljard van beleggers ingevorder in ’n belegging-piramideskema.

Waar kry sy nou haar geld?
■ Susan-Ann Pretorius en haar regsverteenwoordiger, Etienne Naude, was nie gister by die sekwestrasie-ondervraging nie. Hulle het ook nie sekere dokumente en bankstate oorhandig soos wat die kurators van Susan-Ann se boedel van hulle geëis het nie.

■ Pierre du Toit van die prokureursfirma Mostert en Bosman het by navraag gesê Naude het laat weet hy oorweeg dit om ansoek te doen om ’n bevel dat hy sy bankstate moet oorhandig, te laat hersien.

■ Daar is polisgeld van R8 miljoen aan Susan-Ann uitbetaal ná haar man se dood. Die geld word in ’n trust bewaar. Sy kry maandeliks R35 000 van haar swaer om kop bo water te hou, en het nog nie van die rente of die R8 miljoen-kapitaal gebruik nie, luidens getuienis in haar sekwestrasie-ondervraging.

Weduwee juwele kwyt

10 Oct

Author: Marelize Barnard

Publications: Die Burger

Date Published : 10 Oktober 2014

Die weduwee van Herman Pretorius wat luukses van miljoene rande aangeskaf het met niksvermoedende beleggers se geld, het haar “verlore” diamantring van R400 000 aan die likwidateurs van haar boedel oorhandig.

Susan-Ann Pretorius het tydens haar sekwestrasie-ondervraging op 15 Augustus in die Bellville-landdroshof eers volgehou dat die ring weg is.

Nadat sy in kennis gestel is dat die tronk haar voorland kan wees as sy uitgevang word dat sy meineed pleeg, het Susan-Ann erken dat sy die ring met ’n diamant van 3,2 karaat het.

Dit was nadat sy aangevoer het dat die ring weggeraak het in Hermanus, waar die gesin ’n vakansiehuis gehad het.

Sy is tydens die sekwestrasie-ondervraging gevra om die ring en ander duur juwele aan die likwidateurs te oorhandig, wat sy sedertdien gedoen het.

Die juwele sluit twee horlosies in – ’n “goedkoper” Rolex van R36 400, asook ’n diamant-versierde Cartier-horlosie van R170 000 wat Preto­rius vir haar gekoop het.

Susan-Ann het eers ontken dat sy enigiets van dié horlosies weet.

Verder het sy ’n Tag Heuer-horlosie en twee deftige handsakke, ’n Tod’s en ’n Louis Vuitton, aan die likwidateurs oorhandig.

Susan-Ann en haar regsverteenwoordiger, Etienne Naude, is in Augustus deur adv. Almero de Villiers (vir die kurators) gevra oor sekere doku-mente, soos byvoorbeeld bankstate, wat hulle toe reeds ingevolge ’n dagvaarding moes oorhandig het.

Nóg Naude, nóg Susan-Ann het die dokumente oorhandig, en is beveel om dit teen vandag te doen wanneer die volgende ondervraging plaasvind.

De Villiers is bygestaan deur Pierre du Toit van Mostert en Bosman.

‘Watter geheime draaie ry hy?’

19 Aug

Author: Marelize Barnard

Publications: Die Burger

Date Published : 19 August 2014

KAAPSTAD. – Watter geheime draaie het wyle Herman Pretorius gery voor hy op 26 Julie 2012 eers sy voormalige sakevennoot en daarna homself in die Kaapse middestad geskiet het?

Dít is een van die tergende vrae wat ontstaan het toe Susan-Ann Pretorius, weduwee van Pretorius, Vrydag deur die kurators van haar gesekwestreerde boedel in die Bellville-landdroshof ondervra is.

Op vrae hoe sy deesdae geldelik oor die weg kom, het sy geantwoord dat haar swaer maandeliks R30 000 aan haar gee.

Susan-Ann het Vrydag getuig dat die dag waarop haar man gesterf het, hy aan haar swaer gesê het indien daar iets met hom gebeur, moet die swaer na Susan-Ann en die Pretorius-egpaar se twee seuns omsien.

Pretorius het die dag waarop hy sy eertydse sakevennoot, Julian Wil­liams, in sy kantoor in Kaapstad geskiet het, ’n vergadering met ondersoekers van die afdeling vir finansiële adviseurs en tussengangerdienste (Fais) in sy kantoor in die Tyger-Waterfront in Bellville gehad.

Pretorius het aangedui dat hy na die badkamer gaan, maar het in plaas daarvan weggery van sy kantoor.

Wat gebeur het in die tydperk tot hy Williams geskiet het, is onseker. Dit blyk wel uit Susan-Ann se getuienis dat hy ’n gesprek met haar swaer gehad het.

Sedert Pretorius se dood is ’n lewenspolis van R8 miljoen aan die Penta-trust uitbetaal, wat belê is en waaruit Susan-Ann nog nie geld gebruik het nie.

Op ’n vraag van adv. Almero de Villiers, wat namens die kurators van Preto­rius en Susan-Ann se trusts optree, of sy nie van die R8 miljoen gebruik nie, het Susan-Ann gesê sy kry R30 000 per maand van haar swaer.

Dit is onduidelik wat van Pretorius se testament geword het.

De Villiers het Susan-Ann Vrydag uitgevra of sy kort ná Pretorius se dood na die bank gegaan het om in die veiligheidskassies in ’n kluis na sy testament te gaan soek. Gevra of sy die testament daar gekry het, het sy “nee” geantwoord.

Makelaar sê verlies is nie sy skuld nie

13 Aug

Author: Marelize Barnard

Publications: Die Burger

Date Published : 12 August 2014

KAAPSTAD. – Die rede waarom beleggers die geld verloor het wat hulle by die oorlede swendelaar Herman Pretorius belê het, was die gevolg van Pretorius se bedrog en “nie die optrede van ’n makelaar nie”.

Dít is die verweer van die makelaar Michal Calitz van Impact Financial Consultants teen wie die ombudsman vir finansiële adviseurs en tussengangers (Fais) die laaste tyd ’n rits besluite geneem het.

Die Fais-ombudsman het Calitz gelas om van sy kliënte se geld wat by Pretorius belê was, terug te betaal.

Calitz het aangedui dat hy dié beslissings gaan betwis. Hy sal dus geen geld in dié stadium terugbetaal nie.

Jean Kotzé, Calitz se prokureur van die prokureursfirma Laäs en Scholtz, het gister gesê ingevolge die regulasies van die Fais-ombudsman het Calitz 30 dae tyd nadat ’n beslissing gelewer is om aan te dui of hy appèl wil aanteken.

“Calitz voer aan dat daar geen kousale verband is tussen die skade wat beleggers gely het en sy optrede as makelaar nie. Dit was nie Calitz se toedoen nie, maar die gevolg van Pretorius se bedrog,” het Kotzé gesê.

“Die skade wat deur beleggers gely is, is ook nie die gevolg van professionele nalatigheid of Fais-regulasies waarby daar nie gehou is nie.”

Volgens Kotzé is daar van die kliënte wat klagtes by die Fais-ombudsman ingedien het wat steeds sy dienste as makelaar gebruik.

“Dit wys hulle besef die skade wat hulle gely het, is te wyte aan Pretorius se bedrog en nie Calitz se betrokkenheid nie.”

Die moontlikheid bestaan dat dié beleggers hoop dat Calitz se versekering die eise teen hom sal dek.

Beleggers het op advies van Calitz meer as R86 miljoen in Pretorius se skema belê.

Calitz het ook ’n aansoek in die Wes-Kaapse hooggeregshof teengestaan waarin die kurators van Pretorius se gesekwestreerde Rela­tive Value Arbitrage Fund (RVAF)-trust en sy Seca-trust geëis het dat hy diensgeld wat aan hom betaal is, moet terugbetaal.

Die kurators het ’n aansoek by die hooggeregshof ingedien dat Calitz R6,54 miljoen aan die RVAF-trust en byna R380 000 aan die Seca-trust terugbetaal.

Calitz het op sy beurt aangevoer dat hy geregtig is op al die betalings aan hom. Volgens hom is dit geld wat in die normale verloop van sy sake met Pretorius se Abante-groep aan hom betaal is.

Regter Monde Samela het in Mei vanjaar uitspraak voorbehou.

Makelaar moet vyf se R2,4 m. teruggee

11 Aug

MARELIZE BARNARD
Die Burger
10 Augustus 2014

KAAPSTAD. – “Daar is geen risiko nie. Ek het van my eie geld ook daar belê.”

Michal Calitz, eienaar van Impact Financial Consultants, het volgens ’n belegger in wyle Herman Pretorius se piramideskema haar met dié woorde oortuig om haar aftreegeld by Pretorius te belê.

Die belegger, Martha Jooste, is een van vyf beleggers wat suksesvolle eise by die ombudsman vir finansiële adviseurs en tussengangers (Fais) ingedien het om Calitz te dwing om hul beleggings terug te betaal.

Calitz moet R2,4 miljoen en rente aan dié vyf terugbetaal.

R165 000: Die ombudsman, Noluntu Bam, het in haar uitspraak in Jooste se aansoek uitgewys dat Jooste ’n klerk was met ’n halfdagwerk. Sy het al haar geld (R165 000) in Oktober 2004 in Pretorius se Rela­tive Value Arbitrage Fund (RVAF) belê vir haar aftrede. Volgens Jooste is sy nooit raad gegee oor die RVAF as verskansingsfonds nie. Calitz het haar glo wel gerusgestel dat daar geen risiko was nie en dat hy van sy eie geld daarin belê het.
R460 000: In nog ’n aansoek is Calitz gelas om R460 000 plus rente aan Johannes Hartshorne te betaal. Hartshorne se vrou het by Calitz navraag gedoen oor die RVAF en Pretorius, waarop Calitz haar verseker het dat Pretorius ’n man van integriteit was. Maar in die twee weke voor Julie 2012 toe Pretorius eers ’n oudkollega en daarna homself doodgeskiet het, het Calitz vir Hartshorne gebel en gesê hy is ongemaklik met die situasie by die RVAF. Calitz het in daardie stadium sy kliënte gewaarsku om eerder hul beleggings te onttrek, of Pretorius te gaan spreek. Dit was te laat.
R600 000: Bam het gelas dat Calitz aan Robert Whitfield-Jones R600 000 met rente moet betaal vir twee beleggings – van onderskeidelik R350 000 en R250 000 – wat op sy aanbeveling in die RVAF gemaak is.
R500 000: Calitz moet ook R500 000 plus rente van 15,5% per jaar aan Craig Inch terugbetaal. Inch het jare lank pensioengeld bymekaar gemaak en dit op Calitz se aanbeveling in die RVAF belê.
R700 000: Calitz moet ook R700 000 aan Garvitte Lombard terugbetaal.

Beleggers het op advies van Calitz meer as R86 miljoen in Pretorius se skema belê.

Hedge fund scam: more rulings

21 Jul

Author: Angelique Arde

Publications: iOL

Date Published: 20 July 2014

Michal Calitz, the financial adviser who was paid R8.4 million in share profits from the Relative Value Arbitrage Fund (RVAF), which was, in fact, a scam, has been ordered to compensate two more clients who lost money after he advised them to invest in it.

The RVAF collapsed after Herman Pretorius, the mastermind of the scheme, shot his business partner and committed suicide in July 2012. The scheme collected an estimated R2.2 billion from about 3 000 investors.

In the two latest rulings by the Ombud for Financial Services Providers, Calitz has been ordered to repay Dr Johannes Hartshorne R460 000 and Martha Jooste R165 000.

This brings to four the number of rulings by ombud Noluntu Bam against Calitz (Personal Finance reported recently on the previous two rulings, and the reports can be viewed at http://www.persfin.co.za).

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

Bam’s latest rulings show that in the weeks leading up to Pretorius’s death, Calitz advised both Hartshorne and Jooste to disinvest from the RVAF – “but by that stage it was already too late”.

In both cases, Calitz had been an adviser to the complainants for many years.

Hartshorne contends that Calitz never told him that neither the RVAF nor Pretorius were registered with the Financial Services Board (FSB) and that there could be potential risks.

“On the contrary, Calitz told [Hartshorne’s] wife that Pretorius was a person of integrity and that the RVAF was performing well.”

Hartshorne also told the ombud that Calitz did not carry out a risk assessment on him.

Jooste complained that Calitz assured her that there was no risk of investing in the RVAF and that he had invested some of his own money in the fund, which “was managed by professional people with industry experience”.

Jooste’s R165 000 was her entire investible capital and had been sitting in an Absa money market investment account before Calitz persuaded her that the RVAF was her best option.

In response to both complaints, Calitz claims to have explained to his clients the workings of a hedge fund and that these instruments are not regulated but that investment manager Abante Capital through which the investments were channelled was registered with the FSB.

But in both determinations, the ombud says the key issues, as with previous rulings against Calitz, pertain to the rendering of advice to invest in the RVAF – principally, Calitz’s “failure to understand the entity and the risks to which he was exposing his clients”.

She reiterates that no adviser would have recommended the RVAF as a suitable component in “any” investment portfolio had they exercised the required due skill, care and diligence.

The FPI responds

Jacqui Grovè, the legal and compliance services manager for the FPI, says that when the news broke about the RVAF, the FPI launched an enquiry to find out whether any FPI members might have been involved in the scheme.

By the end of last year the FPI had evidence of the possible involvement of two members, she says.

“Our investigation was made difficult by the fact that, despite our best efforts, we could not find sufficient verifiable evidence with respect to these members. We then took a decision to await the results of the ombud’s investigation.”

The release of the financial advice ombud’s determinations has provided the FPI with [the] information [needed] to proceed with disciplinary action, Grovè says.

“We are now proceeding as speedily as possible, having regard for due process, with finalising hearings. We shall publish the results of these hearings.”

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”.

She says the institute’s purpose is to benefit the public by ensuring that its members can be trusted always to put their clients interests’ first.

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.

Pretorius: Makelaar moet geld teruggee

10 Jul

Author: Marelize Barnard

Publications: Die Burger

Date Published : 10 Mei 2014

KAAPSTAD. – ’n Makelaar wat beleggers na wyle Herman Pretorius se beleggingskema gelok het, moet R500 000 plus rente terugbetaal aan een van dié beleggers.

Die ombudsman vir finansiële adviseurs en tussengangers (Fais), Noluntu Bam, het ’n bevel gemaak dat die makelaar van Bellville, Michal Calitz, en sy beslote korporasie, Impact Finansiële Konsultante, die R500 000 en rente van 15,5% per jaar moet terugbetaal.

Die klaer in die saak, Craig Inch, het jare lank pensioengeld bymekaargemaak en dit op Calitz se aanbeveling in Pretorius se Rela­tive Value Arbitrage Fund (RVAF) belê.

Inch se geld was vantevore in die geldmark belê en hy het dit nooit oorweeg om dit in ’n verskansingsfonds te belê nie.

Volgens Inch se weergawe in sy aansoek by Fais het Calitz hom verseker dat dit ’n stabiele fonds is en Inch se geld is op 30 Maart 2010 by RVAF inbetaal.

Hy wou op 26 Julie 2012 sy geld onttrek, maar het ’n dag later uitgevind dat Pretorius dood is.

Preto­rius het op 26 Julie 2010 selfmoord gepleeg nadat hy ’n oudkollega, Julian Williams, doodgeskiet het.

In die Fais-ombudsman se uitspraak word genoem dat Calitz aangevoer het dat hy nie verantwoordelikheid kan aanvaar vir wat blyk die “doelbewuste poging van een persoon was om beleggers te bedrieg nie”.

Verder word genoem dit is kommerwekkend dat Inch se geld reeds op 30 Maart 2010 in die RVAF Trust se bankrekening inbetaal is, terwyl ’n ooreenkoms daaroor eers op 7 April onderteken is. Die belegging is gemaak “voor enige dokumente onderteken is”.

Bam het verder gesê daar is geen bewyse deur Calitz gebied dat die ware risiko aan Inch verduidelik is nie.

“Nóg Pretorius nóg die RVAF was gelisensieer . . . Calitz moes geweet het dat die Fais-wetgewing nie nagekom is nie.”

Verder is daar geen behoorlike boekhouding of rekords deur Pretorius gehou nie. Dit is ’n belangrike kwessie wat Calitz nie kan verduidelik om te bewys dat hy ’n behoorlike ondersoek na die RVAF se sake gedoen het nie.

“Dit is duidelik dat Calitz blindelings aanvaar het wat aan hom gesê is oor die RVAF, want hy het beslis nooit die moeite gedoen om navraag te doen oor die finansiële state wat nooit bestaan het nie,” lui Bam se uitspraak.

Are industry regulators preserving the integrity of the industry?

9 Jul

Author: Jonathan Faurie

Publications: FANews

Date Published: 9 Jul 2014

Are we as an industry being protected by the regulator? We often receive determinations sent to us by the office of the Financial Advisory and Intermediary Services Ombudsman (FAIS Ombud), and there is a common thread in most of the determinations. There are certain advisers in the industry who seemingly have a blatant disregard for the Financial Advisory and Intermediary Services (FAIS) Act and they think that they can get away with defrauding clients.

Predictably they do not always get away, as the Ombud have an open door policy for the public to raise any concerns that they have regarding an adviser. The Ombud then investigates the claim and if it is found that the adviser is guilty a fine will be imposed. But is this enough? This is the question we are left with to reflect on after reading a recent determination handed down by the FAIS Ombud.

Negotiating a normal client interaction

Dr Craig Inch (complainant), a dental practitioner, was seeking an investment plan that would best suit his needs and help grow his savings. After recommendation by a college, the complainant arranged a meeting with Michal Calitz (respondent) to discuss the possible investments which would be best for the complainant.

During the original discussion, a number of unit trusts were discussed and it was recommended that the complainant look into these unit trusts. A follow-up meeting was arranged and the respondent made mention of a hedge fund that the complainant’s college, who was a client of the respondent, had spoken of. The fund was doing well and the complainant asked the respondent if he knew of any other funds which operated in a similar manner. The respondent recommended the Relative Value Arbitrage Fund (RVAF).

The complainant was hesitant to invest in a high risk fund as he was thinking of investing his whole life savings into this fund and could not afford to lose it. In the complainants version to the Ombud, he said that he made this very clear to the respondent. He asked the respondent to explain the RVAF in more detail to which the respondent explained that the fund took long positions in stocks which were expected to increase in value and short positions on stocks which were expected to decrease in value.

The complainant then asked about the performance of the fund to which the respondent assured him that the fund’s performance was in the region of twenty percent per annum.

The plot thickens

The respondent apparently told the complainant that a hedge fund was not regulated in the same way as a unit trust portfolio. The respondent then assured the complainant that the RVAF fund did have all of the correct paperwork and documentation. During the investigation of the Ombud, it was clear that this was not the case.

With regards to the fee structure, the complainant was told (as he remembers it) that he did not have to pay a fee and instead that twenty percent of the profits generated from the fund would be used as a fee.

The complainant obviously felt uneasy about the investment because he once again mentioned his reluctance to invest in a high risk vehicle as he would be investing his whole life savings of R600 000. He asked the respondent how much he should invest and the respondent recommended the complainant invest R500 000. The complainant was assured about the stability of the fund and that it was not influenced by market fluctuations. The respondent reiterated that many of his clients invested in the fund and that he was also an investor in the fund.

When the complainant wanted to withdraw R600 000 from the fund, he emailed a letter of intent to the fund, to which he was informed of the death of Herman Pretorius who was a fund manager and a trustee of the fund.

Opening a can of worms

Unlike many other recent determinations, the respondent did respond to the allegations made to the Ombud.

In his defence, the respondent said that the complainant asked about the RVAF and not the other way around. In the record of advice there was also no indication that the respondent mentioned to the complainant that hedge funds are not regulated in the same way as unit trust funds.

Two articles on a prominent media site unsettled the respondent and prompted him to withdraw all of his client’s savings out of the RVAF. However, he did not mention what particular aspects of the articles made him withdraw the funds.

The respondent further adds that he cannot accept responsibility for what seems to be one person’s deliberate intention to defraud investors.

Unearthing a long list of infringements

The list of aspects of the FAIS Act which the respondent infringed on in this case was very extensive and took up twenty pages in the Ombud’s determination, which can be read here.

One of the most important aspects of the FAIS Act which the respondent contravened was the poor selection of the vehicle in which the funds were invested. During the Ombud’s investigation it was found that there was no financial needs analysis done. The respondent did not present a range of options which could have been invested in other than the RVAF and the complainant never received any documentation that the RVAF was the fund that his capital was invested in. There was also a significant grey area on who the respondent was representing.

Was justice served?

Upon the death of Herman Pretorius, the RVAF went into liquidation and all of the capital invested in the fund was lost. However, the complaint was upheld by the Ombud as it ruled that the capital should never have been invested in this fund in the first place. The respondent was instructed to pay the complainant R500 000 and interest at a rate of fifteen point five percent per year.

What is the role of the Financial Services Board (FSB) in this debacle? Despite the fact that Calitz should have been dealt with by the regulator long before this determination took place, the issue is what will happen to Calitz now? The ruling of the Ombud can hardly be described as a slap on the wrist, but if he is allowed to continue practicing, is justice being served? In all fairness, the FSB should suspend Calitz and never allow him to practice again.

Editor’s Thoughts:
The financial services industry operates on public perception. If the public thinks that one adviser is fraudulent, they may paint a lot of other advisers in the industry with the same brush. The FSB has a duty to fight for the reputation of the industry. Is it fulfilling its role? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Investor obtains order for R500 000 refund in RVAF scam

1 Jul

Author: Roy Cokayne          

Publications: iOL

Date Published: 1 Jul 2014

Investor obtains order for R500 000 refund in RVAF scam

Noluntu Bam, the ombud for financial advisory and intermediary services (Fais), yesterday ordered Impact Financial Consultants in Bellville and/or financial adviser Michal Johannes Calitz to repay dentist Dr Craig Stewart Inch the R500 000 he invested in the RVAF.

Bam said the RVAF was nothing short of a scam and initial reports by the joint trustees indicated that most, if not all, investors’ funds had been lost.

She said there were many areas where Calitz was remiss and in direct contravention of the Fais Act. At its simplest, if Calitz had merely requested a set of properly audited financials, the scam would have been revealed, she added.

Bam said this would have been part of basic due diligence. Not only was this elementary step omitted but deficiencies were similarly evident in the lack of any form of proper due diligence study into the fund, its underlying investments or their structure.

Inch said he had trusted Calitz because he was correctly registered as a certified financial planner, a member of the Financial Planning Institute and his company Impact Financial Consultants was correctly licensed with the Financial Services Board (FSB).

He was dismayed that Calitz had not made certain that the investment platform he would be investing his money into was legal, correctly registered and had performed all the necessary due diligences. He had also not checked that RVAF’s fund manager was FSB-licensed, there would be third party verification of returns and valid financial statements and the fund would be correctly audited.

“Calitz acted unethically by investing my money in this ‘hedge fund’. I would never have invested a cent had I known this information.”

Bam said that apart from the issue around the risk profile, the circumstances surrounding the investment were essentially not in dispute, leaving what were essentially allegations about the failure to comply with the Fais Act, including questions of due diligence, appropriateness of advice, licensing and disclosure related to licensing, whether Calitz acted in the interests of his client and the integrity of the financial services industry.

She added that there was no evidence that a need analysis was conducted on Inch and the decision to place the majority of Inch’s savings into such a high risk investment without any diversification defied logic.

Bam said the substantial sums in commissions received by Calitz could simply not be justified when considering the poor quality of advice offered to Inch. She said these commissions were only revealed in a report to creditors in June last year by the trustees of the insolvent estate of the RVAF and a letter dated August 15 last year in which attorneys acting for Calitz conceded that he had received a so-called profit share of R8.44 million.

“Yet on the objective evidence, Calitz could never have conducted even the most basic of due diligences on the RVAF. Calitz placed the funds in a scheme which did not have so much as a financial services provider number, nominee account or even audited financials.

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

Fraud knows no Boundaries

15 Apr

Author Paul Kruger

Publications: InsuranceGateways

Date Published: 15 April 2014

Consumers at the lower end of the market are often more vulnerable when it comes to being defrauded.

The latest Ombud determination provides details of how the Reformed Christians for Truth Church became the victims of an “advisor” (himself a pastor) who was neither registered with the FSB, nor appointed as an agent of the licensed financial service provider he claimed to represent.

The agreement was that he would provide funeral cover for congregants of the church, and that claims would be paid out within 48 hours. The first claim arose in December 2012. When it was not paid by January 2013, the church conducted an investigation and established that “…no funeral cover was in place.”

They referred the matter to the FAIS Ombud. In response to an enquiry from the Ombud, the respondent undertook to settle the outstanding amount before 30 April 2013, but this never happened, and the respondent seems to have disappeared.

The Ombud concluded:

The second respondent’s conduct is not only illegal in terms of the FAIS Act. His conduct is also unlawful in terms of the common law and amounts to fraud. On that basis alone, the second respondent must be held personally liable for the entire amount claimed.

The respondent was ordered to repay the church’s R18 000 within 7 days from date of the determination, and interest hereafter to the date of final payment.

As in the two cases discussed last week, the perpetrator was aware that he needed to be licensed, and that he had to work through a licensed product provider. It appears that he blatantly lied about this. He even used the FSP number of a registered provider despite not being registered as a rep with them.

It is not clear how the church became aware of the office of the Ombud, but at least it managed to get a determination in its favour. What has happened since is anybody’s guess. By January 2014, the outstanding amount had still not yet been paid and the respondent, who undertook to repay the money by the end of April, is missing in action.

There is, of course, no way that the Regulator would have been able to establish or prevent this.

One can only speculate on how many other incidents of this nature occur without the victims having recourse to remedy through ignorance. It is likely that such occurrences are prevalent in this sector of the market. The only long-term remedy appears to be consumer education regarding the safeguards in place to protect them from such scams.

One of the recent amendments to the FAIS Act concerns fit and proper requirements. The following is an extract from a summary written by Alan Holton, a compliance officer and associate of Moonstone:

A new S 6A (Fit and Proper Requirements) has been added to this statute. In terms of S 6A, the registrar must classify financial services providers into different categories and determine fit and proper requirements for each category of providers.

The registrar must then, in each category of providers, determine fit and proper requirements for the key individuals of providers, representatives of providers, key individuals of representatives of providers and compliance officers.

The challenge, of course, does not lie in regulating those in the flock, in a manner of speaking – it is those who opt to operate outside the legal parameters that are most likely to cause harm.

There are currently a number of investment schemes offering above average returns. They do not operate under the radar, advertise brazenly and must be making millions if one looks at their advertising campaigns. Some may well be doing what they promise, but so did major property syndications before market conditions changed.

It seems that the starting point for many of these operators is to set up structures which fall outside the jurisdiction of the regulatory authorities. This appeared to be the case with the Relative Value Arbitrage Fund which camouflaged its business operations in such a way that the FSB was unable to detect anything untoward during an inspection in May 2011. During a further investigation a year later, Herman Pretorius shot his business partner and himself.

There are no easy solutions to the problem of rogue operators. Hopefully, the implementation of Twin Peaks will cast the net wider, and contribute to a safer financial services environment.

FAIS Supervision Annual Report

5 Dec

Author: Unknown

Publications: InsuranceGateways

Date Published: 05 December 2013

The FAIS Supervision Department of the FSB supervises financial services providers (FSPs) in terms of a risk-based approach. In response to the changing face of the regulatory landscape, international trends and outcomes of previous years’ on-site visits, the department introduced a new Medium to High risk category to define the risk of non-compliance more accurately.
A total of 10 297 FSPs were categorised. Interestingly, the number “only” decreased by 493, but a closer look at the table below shows a marked decline in the number of small FSPs from 6 839 to 3 362 – a loss of 3477, or nearly 51%. The table below reflects the categorisation of FSPs in terms of the new risk-based supervision approach as at 31 March 2013. The categorisation was changed with the introduction of a Medium-High Impact (MHI) category. During the period under review, the emphasis was placed on off-site monitoring of High Impact and MHI FSPs.

2012/2013

2011/2012

High Impact

283

262

Medium-High Impact (MHI)

973

0

Medium Impact

3 411

2 331

Small-Medium Impact (SMI)

2 268

1 358

Small FSPs

3 362

6 839

Total

10 297

10 790

Risk Assessment Visits to FSPs
A total of 643 FSPs received visits. Of these, 490, or 76.2% occurred at the medium to high impact categories.
The report states that the overall compliance of FSPs was satisfactory, and a definite improvement was noticeable during the period under review. The overall understanding of key individuals and representatives with regard to compliance was far better, which can mainly be attributed to the knowledge gained in their preparation for the regulatory examinations. The following issues of concern were noted:

Description

Percentage occurrence %

Sections 4 and 5 of the General Code of Conduct (GCOC): Disclosure of documentation is non-compliant

35.40

License conditions: Business information is not updated within 15 days of change taking place

26.55

Good business practices are not followed

20.06

None-compliance with part VIII of the Determination of Fit and Proper Requirements: FSPs not having a business continuity plan in place

16.81

Sections 11 and 12 of the GCOC: FSPs of which the Risk Management Plan is inadequate

16.22

No register/records kept of training undergone by key individuals and representatives

14.75

Section 7 of the GCOC: Disclosure made to client in terms of the product and services are inadequate

14.16

Non-compliance with part IX of the Determination of Fit and Proper Requirements: FSPs not complying with the financial soundness requirements

14.16

Section 3A of the GCOC: FSPs that have not adopted, maintained and implemented a conflict of interest management policy

9.44

Corporate governance measures are inadequate

8.85

Compliance Practice Visits
During the period under review, the Supervision Department reviewed 33 independent compliance practices. The majority of the compliance practices provided acceptable compliance services to clients.
However, there were some areas that needed improvement, which were identified and addressed with the respective practices. During the review of the risk-based framework, a process of recording of information on compliance practices was developed and is being introduced. It is envisaged that this will enable supervisors to focus proactively on specific concerns relating to external compliance officers.
Specific On-site Visits The Registrar of FSPs ordered an inspection into the affairs of Mr Herman Pretorius, RVAF and Polus Capital (Pty) Ltd. During the inspection, the RVAF scheme collapsed and it was established that 16 authorised FSPs were involved in soliciting clients on behalf of the late Mr Pretorius. On-site visits to probe their participation in assisting clients to place investments in the RVAF and other schemes offered by the late Mr Pretorius were conducted. At the end of the period under review, these investigations were still continuing.
Communication with FSPs
The FAIS Supervision Department implemented a comprehensive communication strategy during the period under review, including newsletters, information circulars, workshops, conferences and telematics broadcasts. Guest speakers at the conference and workshops included speakers from other FSB departments, as well as industry experts.
A joint exercise between FAIS Supervision and FAIS Registration was focused on the funeral industry. A large number of workshops were held to assist this part of the industry to understand the registration (licensing) requirements, as well as the ongoing requirements for maintaining a license. During these workshops, FSPs were specifically assisted to complete compliance reports and financial statements.
Specialisation Areas As part of the Department’s risk-based approach, supervisory staff members are involved in specialisation areas. Seven focus groups, including ones for unconventional FSPs (foreign FSPs, forex investment providers, retailers, motor dealers, estate agents and auditors), banking, medical schemes and compliance officers were tasked with providing guidance in these specific specialisation areas. Research into industry practices and thematic work, as well as focused on-site visits, was conducted. Issues that came to the fore led to the compilation of information circulars on bulk client transfers and the re-signing of client mandates, cash management system accounts, fee disclosure and material irregularity reporting by compliance officers.

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Sharemax director warns against Fais Ombud complaints

24 Sep

Author: Julius Cobbett

Publications: MoneyWeb

Date Published: 24 September 2013

Dominique Haese claims investors might lose their right to investment returns.

JOHANNESBURG – Investors in Nova Group Investments have been cautioned against pursuing complaints with Fais Ombud Noluntu Bam. Investors have been warned that if they pursue their complaints, they may forfeit their rights to investment returns or repayments from the Nova Group

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Bedrieglike beleggings vang jou só

12 Apr

Author: Hanlie Stadler

Publications:  Die Burger

Date Publiched: 12 April 2013

Dis ’n frase wat almal ken: As dit te goed klink om waar te wees, ís dit. En tog verloor duisende mense jaarliks miljarde rande in twyfelagtige en bedrieglike“beleggings”. Hoe keer jy dat jy ’n slagoffer raak?

VERSKILLENDE SOORTE BEDROG Geen swendelaar gaan jou ooit nooi om in sy Ponzi- of piramideskema of ander soort skelmspul te belê nie. Hulle gaan jou intrek met indrukwekkende syfers en woorde wat klink of dit wettige beleggingsinstrumente is.
In die geval van ’n Ponzi-én ’n piramideskema word jou geld egter nooit regtig in ’n werklike onderneming, eiendom of ander beleggingsinstrument belê nie. Die geld wat jy belê, word gebruik om die belegger voor jou se beloofde opbrengs te betaal. Net só word jou “opbrengs”betaal uit die geld wat die volgende belegger belê.

WAT IS DIE ROL VAN ’N FINANSIËLE TUSSENGANGER?
Voordat jy jou geld belê, vra die raad van ’n sogenaamde finansiële tussenganger – hy kan die titel finansiële raadgewer, gesertifiseerde finansiële beplanner (CFP) of makelaar hê. “Ervare raadgewers het al ál die skemas gesien en weet hoe hulle werk,” sê Came.

Uiteraard is daar enkele vrot appels in die bedryf vir finansiële tussengangers. Só was tussengangers by Herman Pretorius se bedrogspul betrokke. Die Fais-ombudsman het pas tussengangers wat beleggers se geld in Sharemax (’n eiendomsindikasie wat in duie gestort het) belê het, skuldig bevind aan ’n verskeidenheid oortredings.

Maar, sê Lubowski, baie min bedrieglike skemas laat hul produkte deur finansiële tussengangers verkoop óf hulle beperk hulle net tot enkele sulke tussengangers, wat dan ook gewoonlik ’n baie nou verhouding het met die“ghoeroe” van die beleggingskema.

Lubowski sê die rol van ’n finansiële beplanner strek baie verder as net die verkoop van versekerings- of beleggingsprodukte. “Hy moet jou éérs help om realisties en voldoende te beplan en dan te kyk na ’n portefeulje produkte. Enige beplanner wat net aan jou produkte wil verkoop voordat ’n behoorlike proses deurloop is, moet vir jou ’n rooi vlag wees.”

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Fais-ombud besleg 9% van klagtes

28 Oct

Author: Nellie Brand-Jonker

Publications:  Sake24

Date Publiched: 28 October 2012

Kaapstad. – Die kantoor van die ombudsman vir finansiële adviseurs- en tussengangerdienste (Fais) het in die boekjaar tot einde Maart 8 821 nuwe klagtes ontvang, 11% meer as in die vorige boekjaar.

Pravin Gordhan, minister van finansies, het gesê die toename toon dat die publiek wel die diens gebruik, maar dit is ook ’n aanduiding dat finansiëledienstemaatskappye nie kliënte se klagtes oplos nie en hulle hulle gevolglik tot die ombudsman moet wend.

Meer as die helfte van die nuwe klagtes handel oor lang- en korttermynversekering. Sowat 20% het met beleggings te doen. Gordhan het gesê onlangse voorvalle van skurkagtige beleggingsadvies wat die ombudsman gehanteer het, toon watter gevare beleggers loop wat finansiële advies nodig het.

Die skuif na ’n nuwe regulatoriese stelsel sal hopelik ’n ….

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Sharemax-adviseur moet geld terugbetaal

28 Oct

Author: Adri van Zyl

Publications:  Sake24

Date Publiched: 28 October 2012 

Johannesburg. – Nóg ’n finansiële adviseur is deur die ombudsman vir finansiële tussengangers en adviesdienste (Fais) gelas om geld terug te betaal aan ’n afgetrede egpaar wat op sy aanbeveling geld in The Villa-ontwikkeling van Sharemax belê het.

Noluntu Bam, die Fais-ombudsman, het gelas dat Christoffel Johannes Nel R320 000 terugbetaal aan ’n egpaar van KwaZulu-Natal.

Dié egpaar, onderskeidelik 71 en 68 jaar oud, het in April 2010 op aanbeveling van Nel in The Villa belê.

Die bedrag verteenwoordig sowat 50% van hul aftreekapitaal en hulle is van die inkomste daarop afhanklik vir hul daaglikse bestaansuitgawes.

Luidens die klagte wat by die ombudsman se kantoor ingedien is, is The Villa aan hulle voorgehou as ’n “belegging met geen risiko nie wat ’n hoër maandelikse inkomste lewer”.

Bam het bevind dat Nel nie ge­lisensieer was om beleggings in die ongenoteerde aandele en skuldbriewe van The Villa te verkoop nie en ook nie die egpaar bewus gemaak het van die risiko’s van die belegging nie.

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FSB News

10 Oct

Two recent artiles on the FSB. In the moneyweb artiles the FSB is struggling to pass candidates  for the  Financial Services Board’s (FSB) FAIS regulatory exam.  The deadline has yet again being postponed for a further six months.

Solidarity has asked for a moratorium on all examinations for financial advisers. Their accusation claims that due to poor management from the FSB, only about 68% of  representatives have passed the exam by the beginning of June.

Read the articles:

Financial reps struggling to pass FSB exams

PRETORIA – Financial representatives are struggling to pass the Financial Services Board’s (FSB) FAIS regulatory exam. Two weeks before the deadline for those who have written at least once, but failed (September 30), the FSB has announced that the deadline will be extended by another six months.

The extension comes after the FSB stated on numerous occasions that it will not ……… (Read More)

Union calls for moratorium on FSB regulatory exams

PRETORIA – Trade Union Solidarity has handed a memorandum to the Financial Services Board (FSB) that calls for a moratorium of at least a year on all regulatory examinations for financial advisers.

The first deadline for financial advisers to write the regulatory exams was the end of June, but various ……… (Read More)

Raadgewers word nou ondersoek

21 Sep

Author: Marelize Barnard

Publications:  Die Burger

Date Publiched: 21 September 2012

KAAPSTAD. – Die optrede van finansiële raadgewers wat duisende beleggers oorgehaal het om in skemas van Herman Pretorius te belê, word ondersoek.

Marc Alves, senior bestuurder in die kantoor van die ombudsman vir finansiële diensteverskaffers, het by navraag bevestig dat dié kantoor klagtes van beleggers ontvang het.

Dié klagtes is ingedien teen talle finansiële raadgewers en handel spesifiek oor die advies wat hulle aan beleggers gegee het.

Die raadgewers word gereguleer ingevolge die Wet op Finansiële Advies- en Tussengangerdienste, ook bekend as die Fais-wet.

Alves het gesê die ombudsman ondersoek nie Pretorius se spesifieke skemas nie.

“Ons kan slegs klagtes ondersoek wat mense indien oor die advies of diens wat ………

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Dokters ‘moet aftrede uitstel’

20 Sep

Author: Marelize Barnard

Publications:  Die Burger

Date Publiched: 20 September 2012

……… Vorster, finansiële raadgewer van Galileo Capital, het gisteroggend in Durbanville met ’n groep beleggers vergader en daarna gesê dit het hom opgeval dat daar mediese dokters rondom 60 jaar oud is wat gedink het hulle het “’n lekker neseier” opgebou met die doel om oor vyf tot sewe jaar af te tree.

Hulle sal dit nou moet uitstel, het hy aan die beleggers wat deur die finansiële raadgewer Simon Morton (direkteur van MyPinnacle- finansiële dienste in Durbanville) na Pretorius verwys is, gesê.

Morton bevind hom glo nou in Nieu-Seeland. Hy het sy kantoor en kliënte agtergelaat nadat dit op die lappe gekom het dat Pretorius se jare lange reëlmatige dividende-uitbetalings van tot 20% al die kenmerke van ’n piramideskema het.

Vorster het gesê die beleggers, onder wie senior  ………

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Makelaars sal moet opdok

9 Sep

Makelaars sal moet opdok

Regter Selby Baqwa het Vrydag beslis dat die ombudsman vir finansiële adviseurs en tussengangerdienste (Fais) wel die mag het om finansiële adviseurs te gelas om geld aan kliënte terug te betaal as hulle die bepalings van die Fais-wet oortree het.

FAIS geen verrassing

Die goeie nuus vir kliënte wat versekerings- en beleggingsprodukte koop, is dat verbruikers nou danksy die Wet op Finansiële Advies- en Tussengangersdienste (FAIS) onder dié tel wat die beste ter wêreld beskerm word.

Ombudsman se sterk rol

Beleggers in wie se guns die ombudsman vir finansiële adviseurs- en tussengangersdienste (FAIS) beslis as hulle klagtes ingedien het teen adviseurs en tussengangers het al ’n ver pad geloop in die oplossing van hul probleem.

FSB Press Release – 10 August 2012

10 Aug

HERMAN PRETORIUS: CLARITY ON THE FINANCIAL SERVICES BOARD’S INVESTIGATION

In the wake of the shooting by Mr Herman Pretorius (“Pretorius”) in Cape Town, with indications of massive losses to investors that invested in his schemes, the Financial Services Board (“FSB”) would like to offer some perspectives on the regulator’s actions and investigations which it could legally have done and did do with respect to the business activities of the late Pretorius.

There have been varying concerns expressed and questions raised from the media and the industry, all of which the FSB understands to be ultimately focused on the likely losses to be suffered by investors arising from the activities of Pretorius and culminating in his death. To the extent that the questions have been raised and the concerns have been expressed in the interests of investors, the socio-economic effects of the losses to investors and the public interest, the FSB takes to heart all the concerns that have been expressed and the questions that have been raised. Accordingly, the FSB finds it necessary to actively engage on this issue to, among other things, explain how, in certain circumstances, investment relationships exclude the regulator’s power. It is emphasized that the FSB’s engagement and extent of disclosure in this regard is, as set out above, motivated by the need to do so in the public interest as envisaged in the provisions of Section 22 (1)(b) (iv) of the Financial Services Board Act of 1990 (“the FSB Act”).

As a starting point, the manner in which members of the public may invest their savings may or may not, depending on the nature and structure of a particular investment vehicle, be subject to FSB regulation. For instance, the following types of investment vehicles would

NOT be subject to FSB regulation:

  • A partnership where individuals invest their monies in a partnership and utilise the capital to produce positive returns.
  • An investment club where persons with a commonality of interest pool their monies to make an investment.
  • A company formed for investment purposes in which investors obtain equity.
  • A trust in which beneficiaries’ monies would be pooled, but which would fall outside the ambit of the Collective Investment Schemes Control Act, due to the nature of the underlying investments or because it is a private arrangement between persons involved in a private business arrangement.

Certain investments may also not involve a “financial product” as contemplated by the Financial Advisory and Intermediary Services Act (FAIS Act). Becoming a member of an investment club or a beneficiary of a trust is not an acquisition of a financial product by the investor, even though the monies invested may be used by the investment vehicle to acquire a financial product, for example a share or derivate instrument (the latter being typically the types of products in which hedge funds invest).

Secondly, apart from having to scrutinise the type of investment vehicles which may be utilised to attract investors, it is also necessary to consider the manner in which investors are attracted. The ambit of the FAIS Act is focused on the rendering of financial services which typically involve three parties, namely a product supplier, an intermediary and a client. Unless a financial product is involved, the FAIS Act does not apply. Whilst product suppliers may be required to be authorised under the FAIS Act when giving advice relating to their products, the selling of such products by a product supplier directly to the public may not amount to an intermediary service, such as a company doing a private placement of equity.

It is against the above background that the activities of Mr Pretorius and the capacity of the regulator to intervene as well as the level of intervention from the regulator should be considered.

During May 2011 it was brought to the attention of the FSB that Pretorius was “selling shares in unlisted companies” and “promoting these ventures” by making representations to the community.

As the selling of unlisted shares may constitute a financial service as contemplated by the FAIS Act, the FSB followed up on the information which it subsequently received in order to establish whether or not Pretorius was acting in contravention of the FAIS Act, given also the fact that he was not licensed in terms of the FAIS Act.

Based on the information supplied in response at the time the FSB was satisfied that:

  • The private equity or venture capital projects embarked upon or supported by Mr Pretorius did not constitute an activity which was subject to FSB regulation.
  • Pretorius’s activities did not require a FAIS licence at the time.
  • The manner in which Pretorius indicated that capital would be raised from investors and the investment vehicle used for the raising of such capital also did not point towards any activity which was subject to FSB regulation or otherwise unlawful, because:
    • Pretorius was acting as the principal (product supplier) and not as an intermediary when interacting with potential investors.
    • The investment vehicle as envisaged at the time, was a company. The FSB does not regulate the offering of shares in a company to the public. When such shares are offered, the company acts as a product supplier and must comply with the Companies Act.
  • The explanations provided to the FSB concerning the nature of the trusts as investment vehicles were such that it could not be established with certainty that their activities were subject to FSB regulation. Some of the ventures were designed for individuals who could properly be considered to be involved in a private domestic affair.

Following further complaints received by the FSB in May/June 2012 against Mr Pretorius it was decided that a formal inspection should be conducted on his affairs of Pretorius and the various investment vehicles utilised in order to establish whether or not the activities of the investment vehicles were subject to FSB regulation. The inspection was underway at the time when Pretorius allegedly committed suicide.

Questions have been raised about the speed at which the FSB reacted to these allegations and complaints, with some suggesting that the regulator should have acted sooner. There are media reports indicating that concerns were raised with the FSB more than 8 years ago regarding Pretorius’ involvement in hedge funds. In this regard, the FSB wishes to clarify that at that time that these concerns were raised the regulator could not establish any evidence of Pretorius’ activities in hedge funds or any irregularities with regard to the issues that were raised at the time. Further, the FSB wishes to categorically state that, as detailed above, appropriate action was taken from the time that the allegations first surfaced, and that the investigation into this matter is on-going.

Concerns have also been raised about how the FSB “allowed what amounts to a gigantic Ponzi scheme to continue under its nose.” Once again, it must be remembered that schemes that are operated outside of and actively in secret from the regulator cannot be said to be operating under the regulator’s nose. Accordingly, to the extent that there was a Ponzi scheme in Pretorius’ activities, such a scheme would have been operated in strict secrecy from the FSB.

The FSB is of the view that if there was any non-compliance by Pretorius, it was well-designed not to be subject to regulatory scrutiny. To the extent that investors were lured into any of his projects, such investors carried the risk and obligation to enquire into the merits before parting with their money, especially where above-average returns were being offered. The loss of so much money to so many investors is a sad state of affairs but one for which the regulator is not accountable.

It has in the meantime come to the FSB’s attention that the RVAF Trust was placed under provisional sequestration on 2 August 2012 by the Western Cape High Court. The Regulator supports this action and encourages investors to take the necessary legal action to attempt to recover their monies, especially to the extent that the investments were made via schemes falling outside of the regulatory net. As the investigation into this matter unfolds the FSB will, in so far as matters fall under its jurisdiction and mandate, urgently take appropriate action.

-ENDS-

Release: Immediate

Enquiries: Ms Tembisa Marele

FSB: Communications Specialist

Email address: Tembisa.Marele@fsb.co.zaq

Telephone: 012 428 8025

083 754 2052

Pretoria 10 August 2012