The complainant, Mr Remo Ehlers lodged a complaint against Abe Gouws Makelaars CC, and its key individual Mr Abraham Jacobus Gouws. Abe Gouws Makelaars CC, now trading as Advice at Platfin CC, is an Authorised Financial Services Provider, (FSP) with license number 11991.
The complaint arises from failed investments made by complainant in the public property syndication schemes known as Sharemax The Villa Retail Park Holdings Ltd (The Villa), following advice received from the respondent. The complainant had invested R95 000, R25 000 and R300 000 respectively into the scheme promoted by Sharemax Investments (Pty) Ltd totalling R420 0000. The purpose in concluding these transactions was to generate a monthly income, however from September 2010, the complainant’s income from the investment ceased and he was informed by respondent in April 2012 that his investments would be paid to him only after 10 years. Complainant had been looking for an investment that would yield a higher monthly income while his capital was kept intact.
Respondent recommended that complainant invest in Sharemax, The Villa because it was, according to him, a safe investment. The agreement was subsequently concluded on 16 July 2009 for a period of five years, after which complainant’s capital would be repaid. The agreement was that complainant would receive interest calculated on the capital sum at the rate of 12.5% per annum for the pre-occupation period, after which interest would decrease to 11% from date of occupation. In terms of the agreement, complainant would receive capital growth of 4% per annum and was set to increase to 9% for the remaining two years.
Complainant confirmed that respondent provided him with a prospectus and relevant documentation to sign; however, at no time was the content of the documents or the prospectus explained to him. Complainant was of the view that he had lost his capital. He lodged a complaint with the FAIS Ombud and requested that respondent be ordered to repay his capital.
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:
- – 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.
- – 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 section 2 of 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 the following sections of the Code: Section 3 (1) (a) (vii); section 7 (1) (a); section 8 (1) (a) and (c) and section 8 (2).