In March 2019, the FAIS Ombud ordered Sophia Coetzer to pay a complainant (“TB”) R750 000, plus interest, after finding there was little to no likelihood that TB would recover the money she invested in two mining companies, Unimin African Resources (R600 000) and Platfields (R150 000).
In TB’s complaint to the ombud, which was lodged in November 2013, she alleged that Coetzer contacted her in February 2011 and advised her to sell her Netcare shares and buy unlisted shares, which she could later sell for a profit.
According to TB, Coetzer helped her to buy shares in Unimin, for which she charged “a high commission” to which TB claimed she had not agreed. TB alleged that in response to her complaint about the commission, Coetzer gave her shares in Platfields worth R150 000 as a “payback”.
In 2012, when TB asked Coetzer to help her sell her Unimin and Platfields shares, she discovered that the Unimin shares had been changed to ordinary shares, which could not be sold at the time, and the Platfields shares were worth only R3 000. Furthermore, TB said she could not access her funds.
Coetzer denied that she provided financial advice, saying she helped TB to receive her shares in Netcare after she had identified that the shares had gone unclaimed. Coetzer worked as a tracing agent, tracing unclaimed dividends and securities.
The ombud, Advocate Nonku Tshombe, decided that Coetzer had rendered financial advice in respect of selling the Netcare shares and purchasing the Unimin shares. The ombud found that Coetzer had not complied with section 7(1) of the FAIS Act and section 8(1)(d) of the General Code of Conduct.
Grounds for reconsideration
In January 2020, the Financial Services Tribunal (FST) granted Coetzer’s application for the ombud to reconsider her determination.
The FST remitted the determination because it was not convinced that the ombud had sufficiently considered all the information placed before her when deciding on the amount of compensation.
“We find that the ombud’s reasoning appears inconclusive in that the explanations proffered by the applicant [Coetzer] regarding the quantum aspect were not addressed,” it said.
In 2016, the High Court in Pretoria had ordered Unimin to repay all the subscriptions to its shareholders.
The FST said although the ombud was aware of the High Court’s decision before the determination was issued, she did not seem to have established whether TB had pursued a claim in accordance with the court’s order.
The tribunal found that the ombud failed to address Coetzer’s contentions that, before making any award, the ombud must first set off the current value of the Platfields and the Unimin shares against the investments made by TB.
Ombud stands by her Unimin decision
In her “revised” determination, Tshombe stood firm in her contention that Coetzer’s actions resulted in TB suffering financial damage in respect of the Unimin investment.
Addressing the issue of TB recovering her money from Unimin, the ombud said:
“Even in the absence of the complainant advising that she was unable to pursue the claim against Unimin because of financial constraints, the order of the High Court did not automatically divest the complainant of her right to seek redress for the losses suffered as a result of the advice she received from the respondent.
“The order of the High Court does not mean that the complainant has not lost the capital used to purchase the Unimin shares and, quite importantly, did not guarantee shareholders that they would receive the money paid for the subscriptions. This has been dependent on the availability of funds and the complainant’s ability to recover their subscriptions,” the ombud said.
Tshombe said her office does not have jurisdiction only where a complainant “has” suffered financial prejudice or damage but also where they are “likely to suffer” financial prejudice or damage and where the provider or representative has acted in a way “which is likely to result in such prejudice or damage” (ombud’s emphasis).
When the (first) determination was issued, it had been two-and-a-half years since the High Court had issued its judgment confirming the rule nisi, and even by the date of her reconsidered determination in September 2022, Unimin had made no attempt to repay TB’s subscription, Tshombe said.
Platfields award rescinded
The ombud did change her mind when it came to compensation for the investment in Platfields, although she found that it was unlikely TB would be able to recover her investment.
According to information her office obtained from the JSE, Platfields’s listing was suspended on 1 July 2013, when it was trading at 2 cents. Platfields was delisted on 21 August 2017. To date, there were no indications that shareholders will be able to recover their investments, she said.
Tshombe said the JSE advised her office that, on 11 February 2011, Platfields’s share price closed at 24c, which meant that on 11 February 2011, only nine days after Coetzer agreed to transfer the shares from her share portfolio to TB, the shares were valued at R36 000. Articles published during January 2011 show that share price began declining shortly after listing on the JSE. “[The] respondent must have been aware of this,” the ombud said.
However, she said it was common cause that TB agreed to pay to Coetzer 20% of the value of the Unimin transaction. If Coetzer had not offered TB shares in Platfields as a “discount”, TB would still have still parted with the commission as agreed.
The revised order
The ombud ordered Coetzer to pay TB R600 000 in respect of the Unimin investment, plus interest of 7.25% a year, from 4 April 2019 to the date of final payment.
She also ordered TB to undertake, in writing, to transfer to Coetzer any amount received from Unimin as a result of the High Court’s order.
Note: Coetzer is not referred to as an FSP in this article because neither the ombud nor the FST referred to her as such. According to the FSCA’s website, her licence lapsed in October 2019.
