The Financial Services Board (FSB) has issued a warning to consumers not to conduct financial services business directly with Realcor. This warning comes too late for thousands of investors who lent more than R415m to Realcor to fund its hotel.
The FSB said Realcor is rendering financial services without being allowed to do so. On January 3 2011, the FSB provisionally suspended Realcor's authorisation to conduct financial services. This came after an investigation into its affairs.
Realcor ran into cash- flow problems during the fourth quarter of last year. It was unable to pay interest on debentures held by thousands of its investors. It was later revealed that Realcor's bankers, Absa, had applied for its liquidation. In December, one of Realcor's contractors launched its own liquidation application.
Readers might criticise the FSB for failing to protect investors from toxic property investment schemes like Sharemax, PIC Syndications, Realcor, Bluezone, Kingfin etc. However, their criticism may be misplaced.
The FSB has repeatedly washed its hands of property syndications, noting that they are regulated by the Department of Trade and Industry (DTI). The DTI is vocal about matters as diverse as competition in the paint industry, but it has been astonishingly silent on property syndications.
In early 2007 financial journalist Deon Basson (now deceased) implored the then ministers of finance and trade and industry, Trevor Manuel and Mandisi Mpahlwa to take a closer look at Sharemax. His letter can be read here. Basson received no response.
The FSB advises consumers who wish to conduct financial services business with an institution or person to check beforehand with the FSB on either its toll-free number (0800 110 443) or on its website (www.fsb.co.za) whether or not such institution or person is authorised to render financial services or whether the institution or person is appointed as a representative of an authorised financial services provider.