Cape Town financial adviser Bernard Marc Edgcumbe and three companies of which he was “mover and shaker” have been ordered to repay R263 000 to Vinola Bam-Mgugunyeka, whom Edgcumbe advised to invest in two failed property developments.
This is financial advice ombud Noluntu Bam’s second determination against Edgcumbe. In December last year, Bam ordered Edgcumbe to repay R1.18 million to wheelchair-bound pensioner Roelof Germishuys and his wife, who he advised to invest in similar high-risk property developments.
Edgcumbe was the key individual and authorised representative of three financial services entities: UC Private Wealth, trading as Liberty Moon Investments; Mountain Brokers, which used the financial services provider registration number of an entity called Lucre, the Financial Collective; and Mountain Brokers Trust. All these entities have been deregistered.
Edgcumbe used the companies when advising Bam-Mgugunyeka.
He recommended to Bam-Mgugunyeka that she invest in Genesis Property Partners and Cedar Falls Properties, both of which were part of the Genesis Property group of companies (Genesis), which were allegedly developing sites just outside Cape Town and at the V&A Waterfront.
He told Bam-Mgugunyeka that the investment was low risk and that she would get back her initial investment, plus interest of 25 percent, after six months.
In March 2008, Bam-Mgugunyeka invested R120 000 in Genesis Property Partners and R160 000 in Cedar.
When the investment was due, Bam-Mgugunyeka contacted Edgcumbe, who told her that Genesis had been having problems since March of that year in paying interest.
Edgcumbe accused Genesis’s management of theft and mismanagement. Bam-Mgugunyeka contacted Edgcumbe on numerous occasions, only to be told he could not help her.
The now-bankrupt Genesis (formerly the Property Interaction Group) was founded by Marelize Lombard, and it sponsored numerous property developments.
Edgcumbe argued that the investment was not a financial product. He said Bam-Mgugunyeka was well educated and should have understood the product; and he argued that the ombud did not have the authority to deal with the complaint.
Bam dismissed all these arguments. She found that Edgcumbe contravened the Financial Advisory and Intermediary Services Act and its code of conduct by:
* Failing to conduct a proper due diligence of the Genesis investments. That Genesis was offering a “guaranteed” interest rate of 25 percent alone should have been a “red flag”, as should the fact that it was unlicensed and unregulated – factors that usually result in mismanagement and fraud going undetected.
* Not keeping a record of the advice he provided.
* Recommending a product that was not suitable for the level of risk that Bam-Mgugunyeka, who was unemployed at the time, could tolerate.