In the matter between Talita Hough and Fanie Du Preez Makelaars CC t/a The Meadow Group and Stephanus (Fanie) Johannes Du Preez.

Mrs Talita Hough, an adult female teacher, lodged a complaint against Fanie Du Preez Makelaars CC t/a The Meadow Group (registration number 1995/039060/23), and its key individual and representative Stephanus (Fanie) Johannes Du Preez. The Meadow Group is an Authorised Financial Services Provider (FSP), with license number 15422.
The complaint arose from a failed investment made on behalf of the complainant in 2010, on the advice of the second respondent, into a public property syndication scheme, namely, The Villa Ltd, promoted by Sharemax Investments (Pty) Ltd (hereinafter referred to as “Sharemax”). The funds invested, R10 000 in total, were the proceeds of complainant’s annual performance bonus.

Complainant, who describes herself as an inexperienced investor, had sought advice with regards to investing an amount of R10 000. Complainant claims to have advised respondent that she required a regular monthly income and that her capital be guaranteed. Respondent, in the presence of the complainant’s father, had recommended that complainant invest into The Villa Ltd. Subsequent to this meeting and as a result of respondent’s recommendation, complainant invested R10 000 into The Villa Ltd on 31 March 2010. During July 2010, complainant received the last income instalment after which it suddenly stopped. Complainant charges that not only was she assured that her capital would be guaranteed, but that respondent failed to advise her of the high risks involved in the Sharemax investment, and that she could lose her capital.

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

  • Respondent’s failure to identify that the prospectuses violated Notice 459 of Government Gazette 28690. This Notice was sanctioned by the Minister of Trade and Industry to prevent unfair business practices in property syndication schemes. He was therefore unable to advise his client.
  • Despite overwhelming evidence provided by this Office, which included a summary of the relevant prospectus pointing to the provisions that conveyed the directors’ disregard for the law and their intentions to pay investor funds well before transfer (all of which made a compelling case against recommending this product), the respondent still believes that the standard documents he submitted (including the prospectus) assist his case in stating that he disclosed the risk to his client.
  • It is important to note that even in his response to the recommendation, respondent still failed to provide adequate records in compliance with the General Code of Conduct. It must be appreciated that neither the respondent’s record of advice, nor the standard documents, deal with the violations of Notice 459, including the implications of such violations for investor security.
  • The only inference that can be drawn from respondent’s insistence that the product was appropriate even in the absence of proof to show that it was, is that the respondent had no appreciation of the risks inherent in the investments.
  • Respondent was therefore never in a position to adequately consider the appropriateness of the product owing to the above; however, this did not deter him from advising complainant to invest in the syndication.
  • It stands to reason then, that respondent could not, and did not, properly advise complainant.
  • The risks in the investment were not disclosed, in violation of the General Code of Conduct that calls upon providers to provide “a reasonable and appropriate general explanation of the nature and material terms of the relevant contract or transaction to a client, and generally make full and frank disclosure of any information that would reasonably be expected to enable the client to make an informed decision.”
  • There is no doubt that had the complainant been made aware of the risks involved in the investment, he would not have invested in the scheme.
  • The respondent failed to appropriately advise complainant.

The Ombud found that respondent’s conduct flouted the very contract he had with the complainant, and as a consequence, respondent’s failure to appropriately advice complainant caused the loss.

The Ombud ordered respondent to pay the complainant an amount of R10 000.

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