The fact that property syndication company BlueZone was licensed as a financial services provider (FSP) by the Financial Services Board (FSB) means that its now allegedly illegal property syndications were not inherently risky investments, a financial adviser has claimed.
This was the argument put forward by adviser Edward Hanekom and his employer, Roelof Nel, trading as R&M Advisers, of Riversdale in the Western Cape, in a response to a complaint to the financial advice ombud, Noluntu Bam, by Ester Pienaar, of Stilbaai.
Pienaar, who is 68, does not receive a pension, and her only source of income is the money she invested in three BlueZone property syndication schemes.
Hanekom advised Pienaar to invest in the schemes, including the notorious Spitskop Village, which was nothing but an over-valued mealie field.
Bam ordered R&M Advisers jointly and severally to pay Pienaar the R283 308 she invested in the schemes.
In her determination, Bam found that:
* R&M Advisers, and therefore Hanekom, as well as a representative of the licensed adviser R&M, were not licensed to provide advice on shares and debentures issued in property syndication investments.
* Hanekom had provided the advice in terms of the FSP licence that the FSB had issued to R&M Advisers. Bam rejected Hanekom’s argument that he had provided the advice in terms of the licence issued to BlueZone that, unlike the R&M Advisers licence, entitled the licence-holder to provide advice on shares and debentures. Hanekom argued that the mere fact that BlueZone had been licensed by the FSB showed that the BlueZone syndications were not inherently risky.
* Hanekom failed to identify alternative financial products that were appropriate to Pienaar’s risk profile and financial needs. The BlueZone investments were unsuitable for her.
* Hanekom failed to act with due skill, care and diligence and in Pienaar’s interests, because he recommended investments that were not commensurate with her risk profile.
* Hanekom failed to disclose to Pienaar how much commission he was paid.
* Hanekom fabricated figures on the performance of two of the syndications.
* Both Hanekom and R&M Advisers have brought the financial services industry into disrepute.