Oct 09, 2012:
A financial adviser has been punished for advising a recently bereaved widow to invest R800 000 in a Sharemax syndication. This week Fais Ombud Noluntu Bam ordered Martiens Ras of Perfecsure Lewens Makelaars* to buy back shares he sold to widow Iona Cowan for R800 000.
This is the latest in a series of Sharemax-related determinations issued by Bam. The vast majority of complainants have been described by the Ombud as retirees.
It was allegedly the executor of Cowan’s late husband’s estate who informed Ras that she wished to make an investment to supplement her income. On May 24 2009, Ras told Cowan she could earn 11.5% interest per year by investing in the The Villa. He gave Cowan a copy of a Villa prospectus.
At the time of writing, Ras could not be reached for comment.
The Ombud’s determination describes Cowan as “a widow of limited resources within which to see her through retirement”. The R800 000 investment in The Villa, one of Sharemax’s most toxic syndications, amounted to almost half of Cowan’s investable funds.
The determination also revealed that days before advising Cowan to place funds with Sharemax, Ras admitted that he had no experience in shares or debentures. The Villa was sold to investors as a combination of shares and debentures.
Ras’s admission above was made in an application form to Unlisted Securities South Africa (USSA), an FSB-licensed entity that helped Sharemax brokers to comply with the Fais Act. Sharemax’s director of compliance, Gert Goosen, was previously a key individual of USSA.
Bam describes the relationship between USSA and Sharemax brokers as “nothing short of the hiring out of a licence for a small monthly fee”.
In any event, Cowan was always under the impression that Ras was operating under Perfecsure, which was not licensed to sell shares or debentures. Furthermore, her application form reflected the adviser as Marthinus Ras of Perfecsure and made no mention of USSA. Perfecsure’s licence with the FSB has since lapsed.
Cowan laid a complaint with the Fais Ombud shortly after The Villa’s collapse, in September 2010. Ras did not respond to the complaint. However, the Ombud did receive correspondence from Goosen, which included Ras’s version of events. Ras mentioned that he had given Cowan time to go through the prospectus.
Bam wrote: “Just what this achieved is a mystery. [Ras] like [Cowan], has no experience in this field and the prospectus itself is both lengthy and highly technical. In short without someone sufficiently skilled to interpret and convey the essence thereof in a simple and meaningful manner to complainant, the prospectus on its own is meaningless.”
Bam said there is “no evidence whatsoever of any disclosure in respect of fees, commissions, method of termination or applicable penalties.”
*Not to be confused with other entities with similar names.