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In the matter between Hassan Ally Fakhroodin Tyebally & Hassan Ally Rabiah Bibi and Anesh Maharaj & Mak Investments and Assurance t/a Nu Era Insurance Brokers CC

Complainants, Mr Hassan Ally Fakhroodin Tyebally and Mrs Hassan Ally Rabiah Bibi a married couple whose details are on file with this Office, lodged a complaint against Mak Investments and Assurance Brokers CC, and its key individual Mr Anesh Maharaj. Mak Investments and Assurance Brokers CC which trades as Nu Era Insurance Brokers, is an Authorised Financial Services Provider, (FSP) with license number 10036.

The complaint arises from failed investments made by complainants in the public property syndication schemes known as Sharemax The Villa Retail Park Holdings Ltd (The Villa), following advice received from the respondent. The complainants had each invested R300 000 respectively into the scheme promoted by Sharemax Investments (Pty) Ltd totalling R600 000. The purpose of the investments, which stemmed from the complainants combined savings and pensions, was to achieve capital growth and to generate a monthly income. Complainants claim that they established that something was wrong with the advice when their income from the Sharemax investments suddenly stopped during August 2010. They complained to respondents in September 2010. Their complaint was not resolved between the parties and so complainants filed their complaint with this Office on 30 May 2012.

Having established the risk profile of the complainants to have been that of a moderate investor, the respondent had nevertheless recommended that complainants invest in Sharemax, The Villa because it was, according to him, not a high risk investment. The agreement was subsequently concluded for a period of five years. The agreement was that complainant would receive interest calculated on the capital sum at the rate of 12.5% paid monthly. The interest was said to be guaranteed until March 2011. The rate would then drop to 11% and was guaranteed until February 2012. The income thereafter would be based on the rentals collected from the property and was meant to escalate accordingly. Capital growth was estimated at 17.5% after five years, which the respondent estimated to be R105 000.

Complainants claim that the respondents failed to appropriately advise them, in that even though they sought an investment with a certain yield, they had informed the respondent that they required a product that secured their capital. They had informed the respondents that the retirement savings was all they had to look after themselves throughout retirement, and had believed at all times that their capital and income from the investments were guaranteed.

The gist of the Ombud’s findings against respondent can be summarised as that the respondent failed to appropriately advise complainant. This is supported by:

  • –  The respondent failed to appropriately advise complainants. Respondent did not dispute that complainants had expressed the need for a product that will guarantee their capital.
  • –  In spite of this expressed need and respondent’s duty to provide advice that is suitable to his

    clients’ circumstances and risk profile (section 8 (1) (a) to (c) of the Code), respondent

    recommended the Sharemax products which guaranteed neither the capital nor the income.

  • –  Respondent’s failure to identify, process and advise his client of the implications of the violations of the law. In this regard, the prospectus literally proposed to violate Notice 459 of Government Gazette 28690. Notice 459 was sanctioned by the Minister of Trade and

    Industry to prevent unfair business practices in property syndication schemes.

  • –  Respondent, in the face of the proposed violation of the law, advised the complainant that the Sharemax product was not high risk and was compatible with complainant’s

    circumstances.

  • –  Notwithstanding the evidence pointing to the high risk involved in the Sharemax products,

    respondent still argues that the products were not high risk

  • –  Respondent could not appreciate the implications of the obvious poor governance practices

    in Sharemax. Given the lack of proper independent oversight and the fact that the directors of Sharemax were accountable only to themselves, respondent still recommended that complainant invest in Sharemax.

  • –  Respondent knew that Sharemax offered no guarantees but advised complainant (who was looking for a safe investment) to invest in the Sharemax syndications.

    The Ombud found that respondent’s conduct flouted the very contract he had with the complainants and the Code. The Ombud considered, amongst others, that The Villa prospectus did not comply with Notice 459. In addition, the respondent was also found to have contravened

sections 2, 3 (1) (a) (vii), 7, and 8 of the Code. Complainants’ loss was as a consequence of respondent’s failure to appropriately advise complainants.

The Ombud ordered respondents to, jointly and severally, pay the complainants an amount of R300 000 each.

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