Transgressions Never Retire

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A retired financial advisor received quite a shock when he was ordered to refund a client to the tune of R460 000, as well as interest at 15.5% dating back from 2005.

We copy below extracts from the actual determination. Those who would like to read the whole determination can click here.

This case is interesting from a number of perspectives:

  1. One of the investments were made prior to the FAIS Act becoming effective on 30 September 2004.
  2. It can open several cans of worms flowing from the Gardener-Ross collapse, years ago.
  3. Transgressions made by an advisor in the past do not go on retirement, even if the advisor does.

These facts are copied from the determination:

1st Complainant is a pensioner for whom the funds in Imuniti and Jansk/Gardener Ross represented a substantial portion of his retirement savings. These were funds that 1st complainant was in no position to gamble with. Respondent was well aware of this, having been 1st complainant’s financial adviser as far back as 1993. Whilst no less excusable, 2nd complainant is still at a comparatively early stage in his working career, and thus in a better position to recover from losses.

Respondent does not dispute complainant’s allegations that respondent advised them to invest in either Imuniti or Acc-Ross, but primarily attempts to justify this with the bald allegation that 1st and 2nd complainants were provided with the prospectus and necessary information as required by the FAIS Act, thereby enabling them to make an informed decision.

However despite being afforded ample opportunity to do so, respondent has failed to provide any documentary evidence of any compliance with the FAIS Act and General Code in respect of either of the investments. In particular documentation required in terms of sections 8 of the General Code which speaks to the appropriateness of the product in terms of his clients’ risk profile and financial needs; a record whereof is required in terms of section 9 is absent. There is not even so much as a disclosure of the charges or commission as required by section 3 of the General Code.

Given what is now clear about respondent, the non-disclosure of commission earned, lack of record keeping and non-compliance with the FAIS Act there is every likelihood that respondent intentionally misled 1st complainant. The contraventions of the FAIS Act are however so egregious that it is not even necessary for me to make a finding on whether 1st complainant was intentionally misled.

Respondent fails to understand his role as provider, namely that of ensuring appropriate advice. It was his advice that led directly to the investments made by 1st and 2nd complainants. That this advice was both questionable and contrary to every provision of the FAIS Act is irrefutable.

In fact it should come as no surprise to learn that respondent was never authorised in terms of section 7 (1) of the FAIS Act to sell shares in the first place.

In the premises I make the following order:

1.

 The complaint is upheld;

2.

 Respondent is order to pay complainants as follows;

2.1

 1st Complainant in the sum of R360 000,00 plus interest thereon at the rate of 15.5% from the 28th November 2005 to date of final payment;

2.2

 2nd Complainant in the sum of R100 000.00 plus interest thereon at the rate of 15.5% from the 30thNovember 2004 to date of final payment;

3.

 Respondent is to pay a case fee of R1000,00 to this office within 30 days of the date of this order.

Upon compliance with the order, the share certificates are to be tendered to respondents according to payment.