Ombud orders repayment of investment in bad Sharemax deal

A FINANCIAL adviser on whose advice a female pensioner invested R530 000 into two property syndication schemes promoted and marketed by Sharemax has been ordered to repay the woman the money she invested.

Wimpie Barnard, an authorised representative under licence of FSP Network, was ordered by the Ombud for financial advisory and intermediary services (Fais) Noluntu Bam to repay Elizabeth Fourie the money she invested in Sharemax Zambezi Retail Park and Theresapark Retirement Village.

Fourie invested R450 000 on Barnard’s advice in Zambezi Retail Park syndication in August 2008, with a further R80 000 invested into the Theresapark Retirement Village syndication in September 2008.

Bam said the money invested was inherited from Fourie’s late husband and she was assured by Barnard that the investment was 100 percent safe after she specifically inquired about the safety of the investment.

Fourie initially received the monthly agreed amount on her investment, but the last monthly payment was received on July 31, 2010.

Bam said when no payment followed in August 2010, Fourie realised there was a problem with her investment.

Fourie complained that Barnard failed to send her any written correspondence to explain the problems in processing payment and she had still not received her capital despite the investment reaching maturity after five years.

She requested the Fais Ombud to order the repayment of the R530 000 she invested because of Barnard’s failure to render financial services in line with the Fais Act and the general code of conduct.

In denial

Barnard claimed the matter had prescribed, questioned the jurisdiction of the Fais Ombud to consider the complaint, denied providing bad advice to Fourie, claimed Fourie was aware of and understood the risk and still persisted with the investment and considered the Sharemax syndication as legitimate.

He said it was not his duty to act as a policeman for an investor and refuse to assist when a “fully informed” client had made up her mind.

Barnard also claimed the non compliance with the Fais code of conduct could only lead to liability if the non compliance was the direct consequence or cause of the alleged loss.

Bam said a High Court judgment had determined that her office had jurisdiction to make determinations of such complaints and the complaint had not prescribed because it fell within the three-year period after Fourie became aware there was a problem.

She said Barnard’s record of advice did not demonstrate the material information he relied on or what other products were considered, contained no reasons to justify why the high risk Sharemax investment was appropriate for Fourie.

Bam said Barnard failed to comply with the Fais Act in that he failed to undertake a risk analysis to determine whether the product being considered would be suitable for the circumstances of the client. She said it was disingenuous for Barnard to simply claim Fourie accepted the risk because of her signature on the forms, because he knew he had not carried out a due diligence and had failed to disclose the risk.

Bam said on a balance of probabilities, had Fourie been fully aware of the risks inherent to this investment, she would not have proceeded and without Barnard’s advice, there would not have been any investment in Sharemax.

She said when Barnard recommended the investment in Sharemax he could not have been acting in Fourie’s interest because he had not even read the prospectus.