Money and Markets

Two more advisors have to repay investors they sold on Sharemax schemes

Business Insider SA
Sharemax Villa, Aug 2018. (Photo: Timothy Rangongo/Business Insider SA)
  • In two new rulings, the Ombud for financial services providers says two brokers must repay investors in Sharemax schemes a total of R270,000.
  • Sharemax collapsed more than eight years ago, and several investors have died before they could recover their money.
  • But while Sharemax investors' capital is locked up, the Ombud continues to hold brokers responsible. 

Two brokers must repay their clients a combined R270,000 plus interest, the Ombud for Financial Services Providers says in a new set of rulings published on Tuesday, in the latest of a series of findings holding intermediaries responsible for selling their clients on the failed Sharemax scheme.

The Ombud, better known as the Fais Ombud for the Financial Advisory and Intermediary Services Act that established it, ruled that Krugersdorp-based broker Hendrik Lodewyk Erwee must repay a client R200,000 she invested in Sharemax syndication Zambezi Retail Ltd.

Although Erwee was licensed to advise clients about shares, ombud Naresh Tulsie said, he was not qualified to advise on debentures and securitised debt.

In a separate complaint, Tulsie said that Henneman-based broker Ernest Lehanie (previously known as Ernest Venter), must repay a client R70,000 he had put into The Villa. Like Erwee, Lehanie never held the right licence to advise on debt instruments, Tulsie ruled.

The Villa is the most famous of Sharemax's failed schemes thanks to the prominent nature of the never-completed shopping centre east of Pretoria that investors were told their money go towards.

See also: We visited the decaying remains of a half-built shopping centre on the outskirts of Pretoria

Neither of the brokers responded to the complaints against them.

Many Sharemax investors believed they were buying shares in new shopping centres such as The Villa. In reality, though, the group dealt in somewhat exotic debt instruments well removed from ownership, described as “an unsecured subordinated interest rate acknowledgment of debt linked to a share”.

These were supposed to offer huge returns that, in a manner reminiscent of a Ponzi scheme, were sometimes paid before those shopping centres were actually built, apparently drawing from investments made by other people.

Tulsie's predecessor as Fais ombud, Noluntu Bam, made many similar findings over the years on Sharemax investments, some of which have been heavily contested – at considerable cost.

The repayment rulings against advisors represent some of the precious few victories for Sharemax investors, many of them pensioners who invested all their savings in various syndications. In September the vehicle set up to rescue Sharemax, the  Nova Property Group, cancelled plans to convert debentures into shares and list on the JSE.

See also: Market watchdog to act against Steinhoff suspects within weeks

By one calculation that listing would have seen the individuals who put a collective R4.5 billion into Sharemax own 34.5% of the newly listed company, while its directors would share 43% of the shares free of charge.

Nova directors have been paying themselves well over market rates for their services to the still embattled group, while telling investors their money will be freed up for withdrawal soon, as they have been saying since 2014.

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