Don’t have misguided trust
The South African financial services industry is presently facing many challenges, which it needs to find solutions to. And fraud looks like it is one of the most pertinent of these challenges. The apparent ease of which certain brokers are able to scam money out of their clients is a bad reflection on the industry and is an affront to credible brokers who make up the majority of the industry and will now be looked at with a certain measure of scepticism.
In the case of David le Roux and Blue Tyre Investments vs Suzette Brickhill and Protea Makelaars we see another example of this and ultimately ask when the Short-Term Ombud will make an example of offending brokers or insurance companies in an attempt to try and stop this from happening.
Giving trust freely
Le Roux owns and operates a transport business outside of Tzaneen, Limpopo. He also the sole member of Blue Tyre Investments, a closed corporation which also operates out of Tzaneen.
Le Roux needed to cover certain assets of his transport business and after advice from a friend; he contacted Brickhill to assist him with this matter. At the time, Brickhill was acting on behalf of Protea Makelaars which is owned by Mathys Marais.
Brickhill was no stranger to le Roux as the pair attended high school together, so there was a certain level of trust given to Brickhill. Between 2008 and 2011, Brickhill handled all of Le Roux’s insurance needs. In 2011, le Roux learned that there were allegations that Brickhill was misappropriating insurance premiums from a number of her clients and that he was one of the clients in question.
Le Roux approached the Ombud and pointed out that on a number of occasions Brickhill asked him to change his premium frequency with Santam from a monthly basis to an annual basis. In November, Le Roux finally relented and after receiving necessary invoices paid an amount of R36555 to Brickhill.
In September 2011, le Roux received e-mail correspondence from Brickhill’s colleague where she requested le Roux to sign a new broker’s appointment with Platorand Makelaars as there were problems with his policies with Santam. After a telephonic conversation with a representative at Platorland, le Roux discovered that Santam was investigating fraud allegations levelled at Brickhill. He also learned that the insurance policy for the vehicle which he insured with Brickhill did not exist.
Le Roux confronted Brickhill about the allegations. She stated that she was instructed to switch the payment schedule from an annual basis back to a monthly basis in December 2010 and that she did refund him his money. She added that documentation proving this payment was lost in a storm which hit Richards Bay.
Le Roux approached the Ombud to recover a full payment of R36555.
Shifting the blame
When approached by the Ombud, instead of explaining her actions, Brickhill attacked le Roux and Marais.
With regards to Marais, Brickhill indicates that she was employed by him in May 2001 and that her income was purely commission based. She had to source her own clients as well as do her own administration. She alleges that she never received any formal training by Marias and never worked under any supervision by him. She also points out that he only visited her twice between 2010 and 2011 spending half an hour with her on each occasion going through two files. Brickhill did try and up-skill herself, but never received the required credits to meet the competency requirements of the Financial Advisory and Intermediary Services (FAIS) Act to offer financial services, a fact that she only discovered at a later stage.
She further alleges that Marais failed to register her as a representative of Protea Makelaars with the Financial Services Board. Because of this, and the above allegations, she feels that she was ignorant of her legislative obligations. When the Ombud asked her to furnish documentation supporting her version of the story, she said that she didn’t have any as she handed them over to Santam when they conducted their investigation.
In his defence, Marais pointed out that when he employed Brickhill, she had eight years’ experience working as a broker at a banking institution and that he did provide her with the necessary in service training. He also points out that he visited her on a monthly basis between 2002 and 2004 and regularly conducted audits on her files. In 2005, he switched to annual audits.
Marais pointed out that he knew nothing about her apparent fraudulent activities and that he did not know that she was sending fraudulent documents on Protea Makelaars’ letterheads. He assured the Ombud that he did have necessary systems and procedures in place, but she still managed to conduct her business fraudulently.
Ombud’s findings
In order to make a proper ruling on the matter, the Ombud had to get necessary documentation from Santam. The insurer pointed out that neither Protea Makelaars nor Brickhill was authorised to collect premiums on their behalf, and that Brickhill furnished clients with her own personal banking details.
Marais was ordered to pay an administrative penalty of R150000 because of the following:
-Failure to maintain a register of representatives and key individuals.
-Failure to appoint a compliance officer to monitor compliance with the FAIS Act by Protea Makelaars or its representatives.
-Failure to act with care and diligence and in the best interests of clients.
-Failure to employ mechanisms which would eliminate risk towards clients.
The Ombud found Brickhill guilty of fraudulent activities. It also ruled that Marais never had sufficient mechanisms in place to indemnify himself from Brickhill’s actions so both parties are to pay the money back to le Roux.
Editor’s Thoughts:
The common
denominator between this determination and others which we have covered is that
the guilty parties did not have sufficient systems and procedures in place to
protect the client against any unnecessary financial loss. This shows the
importance of full compliance with all requirements of the FAIS Act. Please comment
below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
Comments
Another story of how easy it ease to lose your funds entrusted to brokers ( Most of them are Honest ) ( The same applies to our law enforcers . Most of them are honest )
Johannesburg – The office of the ombudsman for financial advisers and intermediaries (Fais) is experiencing an increase in complaints from investors who have lost their money in failed property syndications.
Since 2008 various property syndications have run aground. They include Sharemax, Realcor, Propspec, PickVest, Blue Pointer (Propdotcom) and Blue Zone (which marketed investments in Spitskop).
Most of the hundreds of complaints recently received relate to investments in Sharemax and Blue Zone (Spitskop).
In the 14 rulings that the Fais ombudsman finalised up to May, six were over property syndications and eight over other matters, mostly short-term insurance and investments in unlisted shares.
Last year the ombudsman delivered decisions related to 14 complaints about property syndications.
Ashley Percival, dispute resolution manager at the office of the ombudsman, said most advisers about whom complaints regarding property syndications were received were guilty of negligence, violated Fais provisions and the code of conduct, or their licences did not allow them to sell investments in property syndications.
Many of the decisions were that the advisers and intermediaries had not sufficiently investigated the syndications and had not made their clients aware of the risks attached to such investments.
In certain cases the full amount that clients had received in pension monies had been invested in syndications as they believed they were to receive a good income from them.
There was even one case where a broker had split his client’s entire pension payout between two property syndications (Sharemax and Blue Zone).
The “income” from some syndications started to dry up in 2008.
In all cases of investments in property syndications investigated by the ombudsman, the advisers were ordered to repay their clients the money plus interest.
Percival said decisions by the Fais ombudsman have the same legal force as a court ruling and the advisers are obliged to comply. All decisions by the office are filed at the designated court.
If an adviser disregards the decision, the client can again approach the court for a warrant of execution, said Percival.
Financial advisers or intermediaries against whom decisions have been made can approach the appeals board of the Financial Services Board for leave to appeal.
- You can call the Fais ombudsman with complaints about financial advisers and intermediaries on 0860-324-766 or 012-470-9080/99, send a fax to 012-348-3347, or an email to info@faisombud.co.za.
- Sake24
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The question still unanswered by the regulators? What did Sharemax do with the funds ? Why have investors not been receiving funds since the implementation of a court sanctioned rescue plan. Why were investors not refunded as originally stated that that would happen by Advocate Michael Blacbeard of the SA Reservebank who stopped this scheme ?
“Most of the representatives listed under USSA did not have a licence to render advice or intermediary services in respect of unlisted shares in their own capacity. Hence USSA facilitated this for them under its licence at a monthly contribution. USSA, it turns out, was nothing more than a marketing arm of Sharemax. It was set up for the sole purpose of marketing Sharemax products through a network of brokers. This company did not market any other financial product.
“USSA and Sharemax were not separate entities working at arm’s length; in fact, they were joined at the hip. Equally interesting is that both Sharemax and USSA applied for their respective licences with the FSB at the same time.
“All of USSA’s registered representatives were only allowed to market Sharemax products.”
All the USSA representatives were furnished with a “Sharemax compliance manual” that stated how the product should be sold.
Bam says Sharemax failed to make a full disclosure of the scheme in the prospectus, with the result that investors were misled.
“Predictably, when the syndication was facing collapse, USSA promptly closed its doors and went into liquidation. The directors of Sharemax conveniently faced off investors by saying that the latter were clients of an independent broker, USSA.
“USSA, in turn, told the investors that they were not clients of USSA but were clients of the broker (adviser) or FSP they dealt with. The plan was to frustrate the investors, most of whom were pensioners who found the whole procedure entirely bewildering.
“The brokers (advisers) in turn merely stated that they were not at fault, as the product was supported by Sharemax and enjoyed the approval of the FSB. Report Abuse