Ombud orders dilly-dallying investment company to repay R300 000

An unregistered investment company which promised to repay an investor his capital outlay of R300 000 but failed to do so for more than 14 months has been ordered by the Ombud for Financial Services to pay back the full amount with interest.

Simon Madlazi Mashiloane of KwaNdebele complained that Tshukudu Investment Group (Pty) Ltd, the first respondent, and Sello Edward Matsepe, the second respondent, had not returned his capital and interest.

This week FAIS Ombud Charles Pillai ruled that the respondents repay Mashiloane R300 000 with interest of 15,5 percent per annum.

Pillai found the respondents had transgressed the Code of Conduct for financial services providers which states: “A provider must at all times render a financial service honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry.”

Mr Mashiloane invested R300000 with the first respondent during February 2006. He was to receive interest at the rate of R9 000 per month. The banking account details of the first respondent were provided to the complainant on a letterhead from Tshukudu Investment Group.

The amount was paid into that account by the complainant. All dealings with the first respondent took place through the second respondent, who was its active and only director since 24 October 2005 according to the Companies and Intellectual Property Registration Office (CIPRO).

At the end of April 2007 complainant requested that he be refunded the capital and the

balance of the interest due. Complainant said he received the R9000 monthly interest for nine months only.

When he enquired why no further interest payments were being made, he received a further R1900 in April 2007 and R2 000 in May 2007 - as a gesture of goodwill, according to the

second respondent, for the inconvenience caused to the complainant for the delay in refunding his capital and outstanding interest.

The second respondent apparently made numerous promises to repay the complainant but failed to do so over a protracted period of more than 14 months.

An investigation by the FAIS Ombud found that both respondents were not licensed in terms of the FAIS Act and, therefore, were not authorised to render financial services.

The Ombud also found that if, as alleged by complainant, that the second respondent had informed him that the monies were to be invested on the JSE, then clearly neither of the respondents was authorised to do so.

The second respondent’s response to the Office of the FAIS Ombud showed that the documentation required in terms of the FAIS Act, i.e. financial needs analysis, client advice record and risk analysis was not duly prepared as required by the Code of Conduct for Financial Services Providers and that there was no record thereof.

There was virtually no information available from the respondents about the financial service rendered.

In view of the above, Pillai ruled that the respondents did not comply with the requirements of the FAIS Act when they advised the complainant to invest the amount of R 300000 through Tshukudu Investment Group.

Both respondents were found liable to the complainant for the amount of his loss and were ordered, jointly and severally, to pay complainant the sum of R300000 together with interest at the rate of 15.5 per cent per annum from 1 May 2007.