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Debarment Overturned

Justice for All?

Was justice fully served in the Oosthuyzen case before the High Court in Bloemfontein last month?

From the perspective of the plaintiff, possibly yes, albeit it 7 years later. Delayed, but at least not denied.

What about the advisor? Was he lulled into a false sense of security, being a representative of the Unlisted Securities South Africa FSP Network (Pty) Ltd (t/a USSA) in order to render financial services regarding unlisted securities under an exemption granted by the FSB? He regarded speaking to his Sharemax consultant as sufficient confirmation that all was in order. What else he did he expect to hear?

The USSA network was specifically formed to sidestep legal obligations. Why did no authority question a nation-wide network with thousands of representatives, and only one key individual and one compliance officer?

The judge ruled that the decision by his PI cover provider to reject the claim was wrong. The insurer, though, intends appealing the finding.

What about the promotors? Apart from the failed attempt by the FAIS Ombud to pierce the corporate veil, they have gone along their merry way, sailing the high seas without a care in the world.

The recent admission that some properties, and particularly the Villa, were grossly overvalued, is nothing new. This was the essence of the late Deon Basson’ criticism as early as May 2004, and is perhaps an indication of the increasing impunity that marked later syndications, and not only contributed to their downfall, but also to even bigger losses for investors. It is reminiscent to what we see in the current state capture debacle, where audacity grows as a result of the lack of regulatory intervention.

Can the regulators wash their hands in innocence, claiming that the structure of syndications schemes did not resort under their jurisdiction? Did the fact that all those representatives of USSA were also registered with the FSB not imply at least a wary eye on their conduct with regard to selling unlisted shares which, after all, does fall under the auspices of the FSB?

In the preamble to this judgment is a quote from the ground-breaking Durr case, where the Appeal Judge said: “Hindsight is not vouchsafed the common man as he picks his course through life. This must be kept constantly in mind in a case like this one, where all is so obvious now.”

Agreed, but why does it take so long for hindsight to lead to action?

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