Complainant is Mrs Pheladi Patricia Napo, an adult complainant whose details are on file with the FAIS Ombud. Respondent is Silver Seed Capital (Pty) Ltd, a private company duly incorporated in terms of the company laws of South Africa, with registration number 2001/012586/07. The key individual is noted as Sandro Manuel Azevedo Veloza. Respondent’s license was withdrawn by the regulator on 9 September 2014.
On 14 January 2014 and 19 May 2014 complainant had invested R100 000 and R40 000 respectively in a product called “The FixedGRO Option” (FixedGRO), following advice from respondent. The investment, which was made up of shares in UG2 Ltd, was presented to complainant as a product that would provide returns of 30% after 6 months. When the first investment matured during July 2014, complainant reinvested the capital for a further 12 months, again at an interest rate of 30% interest.
Subsequent to the re-investment, complainant began suspecting that something was amiss, as the respondent never sent any record confirming the re-investment. As a result, during September 2014 complainant requested to withdraw her funds, as she was no longer comfortable with the investment. After several e-mail exchanges with empty promises, complainant filed a complaint with the Ombud during November 2014. To date, complainant has not received her capital back.
The Ombud had to decide whether respondent in rendering financial services to complainant had violated the provisions of the FAIS Act and the General Code of Conduct, (the Code). In the event it was found that respondent had violated the provisions of the FAIS Act and the Code, whether such conduct caused the loss now complained of; and the quantum of such loss.
Having received neither the requested response nor the supporting documentation, the matter was determined on the basis of complainant’s version. It is noted that complainant had purchased unlisted shares in UG2 Ltd. It has been confirmed that 2 members of respondent were in fact
directors of UG2 Ltd, and one was even the company secretary of UG2 Platinum Ltd. Respondents were as a result conflicted in this matter and had failed to disclose this to complainant, in violation of section 3 (1) (c) of the Code. Furthermore, respondent never made any disclosures to complainant about the risk involved with the investment, and that she had actually gambled her capital. It was not explained to complainant that she was investing in a high risk venture in which her capital was at risk, which was in violation of the Code.
The funds, which were taken from a flexidowment policy at Old Mutual, were meant for the education of complainant’s children. In violation of section 8 (1) (d) of the Code, there is no record demonstrating that complainant was warned of the material differences between the Old Mutual products and the investment in question. Respondent merely dangled the 30% return as a carrot and steered clear of dealing with the risk involved in the product. Complainant on the other hand was under the impression that she was making a legitimate investment in a safe product. In truth, Silver Seed simply solicited investments from members of the public on the basis of extravagant guaranteed returns. No one knew what happened to their money after paying it into Silver Seed Capital.
The Ombud found that respondent’s conduct flouted section 2 of the Code. In addition, the respondent was also found to have contravened the following sections of the Code: Section 3 (1) (c); section 8 (1) (a) to (c) and section 9.
The complaint was upheld. The Ombud ordered respondent to pay complainant the amount of R140 000.