Mr Trevor Hattingh a semi-retired adult male whose details are on file in this Office, lodged a complaint against Advice At Platfin CC (registration number 1993/017920/23), and its key individual and representative Mr Abraham Jacobus Gouws. Advice At Platfin CC, is an Authorised Financial Services Provider (FSP), with license number 11991. At the time the advice was provided, the entity traded as Abe Gouws Makelaars.
The complaint arose from failed investments made by complainant, on respondent’s advice, into two public property syndication schemes, namely, The Villa Retail Park Holdings Limited (‘The Villa Ltd”), promoted by Sharemax Investment (Pty) Ltd (“Sharemax”) and Highveld Syndication 21 (HS 21) promoted by PIC Syndications (Pty) Limited “PIC” or Pickvest). The funds invested, R1 000 000 in total, had been held in a fixed deposit with ABSA, and were earmarked for complainant’s retirement.
Complainant had initially suggested an investment into Allan Gray as he believed it to be a reputable company. Respondent subsequently provided complainant with quotations for both Allan Gray and Sharemax (The Villa), and explained that the Sharemax investment was a ‘better’ option with a higher return. Complainant was however hesitant to place, in his words, ‘…all my eggs in one basket…’ which is when respondent introduced complainant to PIC. Both investments had incepted on 2 July 2009 for R500 000 each, and complainant was assured of receiving an income of 12.5% over 5 years from both syndications. On 30 August 2010 no interest was received from The Villa Ltd and all income from the investment ceased. This was followed by a reduction in the income from PIC to 6%, which despite assurances from respondent never returned to 12%.
The gist of the Ombud’s findings against respondent is that respondent failed to appropriately advise complainant. This is supported by:
- Respondent’s advice was fundamentally flawed in that the prospectuses of both schemes guaranteed neither the investor’s capital nor the income payable. If anything, the prospectuses made it plain that the investments were far too risky and in that case unsuitable to complainant’s needs.
- 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 appropriately.
- Respondent does not deny that complainant had instructed him that he could not afford to lose his capital; yet respondent recommended the investments in both PIC and Sharemax with the full understanding that his client had no capacity to absorb risk.
- Respondent had advised complainant that both the Sharemax and PIC products were compatible with complainant’s circumstances and risk profile.
- The risks in the investments 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 complainant been made aware of the risks involved in the investments, he would not have invested in the schemes.
- Respondent failed to appropriately advise complainant.
The Ombud found that respondent’s conduct flouted the very contract he had with complainant, and as a consequence, respondent’s failure to appropriately advice complainant caused the loss.
The Ombud ordered respondent to pay complainant an amount of R1 000 000.