When you walk on the right side of the law, it is often difficult to understand why so many obligations are placed on you to comply, when those, for whom the legislation is actually intended, pays lip service to it.
Two recent FAIS Ombud determinations against financial services providers who blatantly ignored the law in order to get their hands on clients’ funds for selfish gains, is testimony to this.
Beukes vs Jam Financial Planning
A widow, and existing client of an advisor, was coerced to invest R1.2 million of her and her children’s inheritance in a two-year investment offering 18% per annum return. This happened in July 2011, a full 7 years after the FAIS Act, which regulates financial advice, became effective.
Although the widow was aware that the investment was not with the reputable bank where the advisor was employed, she was nevertheless assured that the money would be invested with a “registered licenced financial service provider and licenced credit provider”.
After about a year, during which she received the “interest” as promised, she encountered problems, and was unable to recover her capital.
It appears that her funds were placed with a micro-lender who went belly-up.
In the determination, the Ombud found that the Advisor had “… breached practically every single section of the General Code of Conduct for Authorised Financial Services Providers…”
Deliberately flaunting these obligations, of which he must have been aware of, confirms that personal gain was this advisor’s only objective.
Nolte vs Catsicadellis and Rabie
This is the third determination against these two respondents.
During 2005 and 2006, a 71-year old pensioner was advised to invest a total of R300 000 in schemes run by the two respondents, none of which were authorised as registered financial services providers.
Catsicadellis’s application was rejected by the FSB “…on the grounds that she had failed to demonstrate the requisite honesty and integrity.”
Rabie appears to have been aware of the requirement to be licensed, as he was allocated a temporary FSP number, but failed to submit an application. His business was deregistered on 17 April 2009.
Both respondents were requested to respond to the complaints laid with the Ombud, but failed to do so.
In both instances, the respondents were ordered to refund the investors “…from the date of this order to date of final payment.”
In the case of Beukes, the order was that she be refunded R1 million, which is R200,000 short of the total invested. She did receive “interest” for about a year, but what about the period from January 2013 until the determination on 14 March 2014? And will Willem Johan Abraham, the man behind Jam Financial services, have the R1 million to pay her, or will she be forced to take further, costly, legal action to get her money back?
Nolte only asked for R180 000, which was granted by the Ombud, but again, no provision was made for lost interest from the time of investing, and no guarantee of repayment.
For those who act honourably and in the best interests of their clients, actions such as these cause irreparable damage to the image of the industry, and their own.
The sad truth is, though, that, despite the best laid schemes of mice and men*, those who walk the crooked path will always be with us, and the public, and specifically the vulnerable, needs the protection of the law.
*From the Robert Burns’ poem To a Mouse, 1786. It tells of how he, while ploughing a field, upturned a mouse’s nest. The resulting poem is an apology to the mouse:
But, Mousie, thou art no thy lane [you aren’t alone]
In proving foresight may be vain:
The best laid schemes o’ mice an’ men
Gang aft a-gley,
An’ lea’e us nought but grief an’ pain,
For promised joy.