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.
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.
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.
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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