April 17, 2010
By Neesa Moodley-isaacs
Unlisted shares are a high-risk investment at the best of times, and you should treat with caution any offers to invest in unlisted companies that promise high returns, Noluntu Bam, the new Ombud for Financial Services Providers, says.
Bam this week issued her first three determinations, all of them against Andre van der Merwe, a former KwaZulu-Natal broker, for advice related to the Garek investment scheme, which was supposed to list on stock exchanges in several countries.
Bam's rulings bring to four the number of Garek-related rulings against Van der Merwe.
Charles Pillai, the previous ombud, made the first ruling against Van der Merwe at the end of February this year, ordering him to repay a Pretoria couple, Adolf and Christina Hare, R40 000 plus interest.
Bam ordered Van der Merwe to pay Renier Meyer of Kyalami, Jacobus Meyer of Mpumalanga and Catherine de Boer of Umtentweni in KwaZulu-Natal a total of R140 000 plus interest of 15.5 percent, calculated from the dates on which they invested in Garek to the date of payment.
In all three cases, Bam found that Van der Merwe had not:
Conducted a financial needs analysis to determine if the investment suited the clients' risk profiles and financial needs;
Disclosed the risks inherent in the investment; and
Disclosed the high commission he earned from Garek. Van der Merwe earned more than R4.5 million in commission from the scheme over several years.
Jacobus Meyer and Renier Meyer were referred to Van der Merwe by his existing clients, Bam's ruling found.
In the case of all three complainants, Bam found that Van der Merwe had punted the merits of Garek, which was reportedly to list on several stock exchanges, and he advised them to invest in Garek as quickly as possible.
Van der Merwe told the complainants that the unlisted shares, for which they paid R2.50, were projected to reach R20 once the company had listed, Bam says. However, the promised listing never materialised.
Jacobus Meyer invested R7 500 on December 13, 2004 and a further R7 500 on December 31, 2004.
Renier Meyer invested R25 000 on November 12, 2004, a further R25 000 on January 24, 2005 and a further R25 000 on April 22, 2005.
De Boer invested R50 000 in Garek on May 20, 2005. In her complaint, De Boer says she specifically told Van der Merwe that the investment was intended to pay for her youngest daughter's university tuition.
In her ruling, Bam says she has no doubt that Van der Merwe's many violations of the general code of conduct for financial services providers were deliberate and that he knowingly placed his clients at risk by inducing them to invest in Garek.
Investment scheme had no substantial assets
The companies related to Garek included Resourcefin Strategies International (RSI), Mwamko Africa Trade Resource Industrial and Commerce Corporation (Matric), Holistic Resources Limited and Appropriate Structures in Emerging Markets (ASEM).
An investigation by the Department of Trade and Industry (DTI) revealed that of the R74 million investors put into Garek, and of the further R76 million from inter-company deposits between the related companies, R24 million was paid to directors and R62 million was paid to other individuals and companies.
According to the DTI's investigation, Garek had no assets of any substance.
If you were misled into investing in the Garek scheme, you can complain to Noluntu Bam, the Ombud for Financial Services Providers. Her contact details are: Sharecall: 0860 324 766 Telephone: 012 470 9080 Fax: 012 348 3447 Post: PO Box 74751, Lynnwoodridge, 0040 Email: info@faisombud.co.za Website: www.faisombud.co.za
  
 
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