“Father Christmas will pay the money back.”
That is the response of a still-registered financial adviser, Johan Leodolf Swanepoel of Durbanville, to Personal Finance, when asked about an order by the Financial Advice Ombud, Noluntu Bam, that he along with two others repay a pensioner in KwaZulu-Natal more than R1 million, including interest, for advising her to invest it in yet another failed property syndication scheme, which had projected returns of 30 percent a year.
Swanepoel initially advised Mrs MJC in 2006 to invest in two Liberty Life investment products, earning him R54 000 in commission, but two years later he advised her to switch her investment to a property syndication, which earned him another R44 820 in commission.
The switch of investments also cost Mrs MJC almost R45 000 in early surrender penalties.
Gerry Anderson, the deputy chief executive of the Financial Services Board (FSB) in charge of marketing, says the Financial Advisory and Intermediary Services (FAIS) compliance department is considering the determination by the ombud, and will take “any requisite regulatory action, including withdrawal of the Financial Service Provider’s (FSP) licence”.
Bam has ordered Swanepoel and the property syndication directors, Daniel Lourens Erasmus and Johannes Gerhardus Erasmus, to jointly or severally repay Mrs MJC her money.
Interviewed after the determination was issued this week, Swanepoel, who still operates as an FSP from Durbanville in the Western Cape, repeatedly declined to answer questions about the determination and why he sold the product to Mrs MJC. When asked whether he would be repaying the money, he said he was in contact with the property syndication company.
When it was pointed out that the company was unlikely to repay the money as it no longer exists, Swanepoel replied that “Father Christmas will repay the money”.
Daniel Erasmus of Visvanger Avenue, Featherstone Estate, Gauteng, and Gerhardus Erasmus of Stewart Crescent, Waverly, Bloemfontein, were directors and key individuals of Property Spec (Pty) Ltd, which sponsored the syndication Pacific Coast Investment 97, commonly known as Propspec.
Propspec Investments, the marketing arm of the company, held a licence as an FSP. Swanepoel was also apparently registered as a representative of Propspec Investments, which at some stage claimed to be entitled to sell shares and debentures. This despite the fact that on Swanepoel’s own licence he was not authorised to sell either.
When Bam checked with the FSB, however, she found that Swanepoel was not registered as a Propspec representative. She was then told he was registered with an associated company, Seesa, as a representative, but the registration was only recorded two months after he advised Mrs MJC to invest in the syndication.
Bam also found that the Propspec syndication was not an authorised FSP, and Swanepoel was not authorised to sell the syndication product at the time. Both, she says, were in contravention of the FAIS Act.
In February 2008, Swanepoel advised Mrs MJC to invest R747 000 in the syndication – at that stage an undeveloped property. Later that year she invested a further R23 110 and R75 000.
Bam says the funds were derived from two linked Liberty policies – a Multi-Access Investment Plan and an Investment Builder Plan.
Bam says that Swanepoel failed to comprehend the risks of the property syndication investment and did not properly advise Mrs MJC of the risks and costs involved.
In her ruling, the ombud said inescapable conclusion was that the advice provided by Swanepoel was “commission-related”.
The two Erasmuses are also named in the determination because, as key individuals in terms of the FSP licence issued in terms of FAIS, they were responsible for ensuring that Swanepoel was properly registered and skilled as well as checking on the advice he provided – all of which they failed to do.
Bam ordered that all the money invested in the scheme plus the Liberty surrender penalties plus interest at 15.5 percent a year be paid jointly and severally by Swanepoel and the Erasmuses.
CONTACT
You can contact the office of the Ombud for Financial Services Providers, Noluntu Bam, on 012 470 9080, fax to 012 348 3447, or email [email protected]
Website: www.faisombud.co.za