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Deon Basson full correspondence with Gerry Anderson

Annexure 6: The FSB letters

 

Mr Gerry Anderson 
Deputy Chief Executive Officer 
Financial Services Board 
by email gerrya@fsb.co.za

2 March 2007

RE: Sharemax Investments (Pty) Ltd

Dear Mr Anderson

A newsletter of Sharemax Investments (Pty) Ltd dated 8 February 2007 contains the following paragraph:

“Sharemax’s compliance awareness week that ran from 1 to 7 February 2007 was a big success. The closing speech was by Mr. Gerry Anderson, deputy chief executive of the Financial Services Board and responsible for the implementation of FAIS, at Sharemax House. It was a privilege to be able to listen to him and he was pleased with Sharemax’s role in compliance.” 

A copy of the newsletter is attached hereto – Newsletter 8 February 2007

A few questions arise from the quoted paragraph: 

1. Is the quoted paragraph a true reflection of what really happened?

2. Did you prepare a written speech and is the speech available for public consumption? Is it possible to get a copy of the speech?

3. What are the guidelines and procedures to be followed by senior officials of the FSB before accepting invitations by companies such as Sharemax?

4. Have you taken independent advice on and applied your mind to the so-called “Prakke report” (attached hereto) before you accepted the Sharemax invitation? For further background my article “Who regulates unlisted public offers?” are attached hereto.

5. Did you apply your mind to the two reports of the Nel Commission and relate it to the present situation viz-a-viz property syndications?

It is public knowledge that I am involved in litigation with Sharemax.   I understand fully that you cannot get involved in a private legal dispute. Nevertheless, I believe that does not relieve the FSB from its duty to act in public interest. The court papers (case number 3208/2006) are a matter of public record.

I am looking forward to your response to my questions.

Yours sincerely 

Deon Basson

c.c Mr Rob Barrow, Chief Executive of FSB

 

Dear Mr Basson,

1.         The statement that I gave a presentation to independent brokers at Sharemax’s recent compliance week is correct. My presentation focused on the FAIS Act and the Fit and Proper Determination (aspects of honesty and integrity, minimum qualification and experience requirements for all intermediaries and advisors) as well as aspects of the FAIS General Code of Conduct-specifically that intermediaries and advisors are required at all times to act in the best interests of their clients.

2.         I don’t believe it is for public consumption yet it was written and is attached for your information. 

3.         My responsibility is the administration of the FAIS Act and compliance therewith and on this basis I accepted this invitation and have accepted others.

4.         I was and am aware of the “Prakke” report.

5.         I am also aware of the two reports of the Nel Commission.

I take issue of the fact that you appear to suggest that my actions are not in a public interest at all times.  I trust that the foregoing and attachment places the issues raised in the correct context.

Yours sincerely,

E Anderson
DEPUTY REGISTRAR : FINANCIAL SERVICES PROVIDERS                  


Mr Gerry Anderson 
Deputy Chief Executive Officer 
Financial Services Board 
by email gerrya@fsb.co.za

2 March 2007

RE: Sharemax Investments (Pty) Ltd

Dear Mr Anderson

Thank you for your prompt reply of today. 

However, you have not fully responded to my first question. To rephrase it – Sharemax published a newsletter which is in public or at least quasi-public domain implicating that you were pleased with their role in compliance. Did you say anything to that effect? 

You have also not responded fully to questions 3, 4 and 5. To be aware of something and to (seriously) apply your mind to it are two different things. Have you indeed applied your mind to the two documents and have you taken independent advice on the Prakke report?

The Prakke report has been in public domain for five months now. (It has been served on the FSB)

I wish to point you to various newsletters by Sharemax in recent times attached hereto. I further wish to point you to the following matters raised in the newsletters:

1.  The quick competition announced in the newsletter of 5 February 2007.

2. The following statement in the newsletter of 8 February 2007: “There is no need to be concerned at this time over the progress of the process regarding the sale of the nine buildings to S A Retail. Everything is on track and S A Retail is just waiting for final approval from the Competition Commission and the JSE Securities Exchange. You will be kept updated as and when information is available and when it is necessary for you to deal with.” 

No mention is made here of a crucial condition precedent namely that the transaction is subject to approval by SA Retail shareholders. 

3.  The following announcement in the newsletter of 18 January 2007:

“COMPETITION … COMPETITION … COMPETITION … COMPETITION

The competition for FA’s, which runs from 1 November 2006 until 31 May 2007, is progressing well. Once next week’s postponed Special General Meetings for the abovementioned nine building companies have been held, the buildings can be transferred to S A Retail and this process should be completed by the end of April 2007. The money that will thus be made available to shareholders is a wonderful pool of investments which the financial advisors can reinvest in Sharemax products, which in turn will make a major contribution to the performance levels of the financial advisors to qualify for the prizes awarded in the competition.

(Further comment on the sales to SA Retail reserved until publication of a circular by SA Retail. Investors should in the meantime exercise caution when they are approached to reinvest their money. Selling properties at a premium to syndication value is not necessarily a major feat. Wait for further analysis of circular. In the meantime also read “Sharemax fails relative test” )

Remember that each FA who delivers production of R6,0 million during the abovementioned period wins a boat cruise for two persons in the Singapore and Thailand region during the period from 7 to 14 July 2007. In addition, the FA will receive a bonus of R2 000 for every R1,0 million produced in excess of the R6,0 million. FA’s producing between R4,0 million and R6,0 million, who thus do not qualify for the foreign cruise, will qualify for a prize for two persons to visit Inhaca Island in Mozambique, probably over the weekend from 20 to 22 July.”

Add to all this the new Sharemax Premium product and a general picture of high pressure sales unfolds. In fact, questions should be raised whether Sharemax Premium is not involved in deposit-taking activities (further comment about this is reserved).

Further add to this the Prakke report and keep the Nel Commission report at the back of your mind. (See “Sharemax subsidies rings a bell“). Then apply simple logic. There is no reason why South African regulators should not act immediately.  Time for real action has arrived, fancy presentations (likely to be misconstrued as “support” for Sharemax) will no longer do the trick.

Yours sincerely

Deon Basson 


Dear Mr Basson,

I did not, as I indicated to you this morning, in my presentation to independent financial services providers (all licenced FSPs), make any direct reference to Sharemax whatsoever. As far as Mr Prakke is concerned, this Office has interacted with him on several occasions, to the best of my knowledge, has had much correspondence over a long period of time with him and has considered his report, in line with the objectives of the FSB. As you are aware, the FSB does not regulate property syndication promoters, but this falls under the Department of Trade and Industry.

(See “Who regulates unlisted public offers?” )

The proper application of the FAIS Act is our only concern in this area. If you have evidence that any company is involved in deposit taking activities, please liaise directly with the Registrar of Banks. I regard this correspondence as closed.

Yours sincerely,

G.E.Anderson
Deputy Registrar: Financial Services Providers


Dear Mr Anderson

1. The letter hereunder replaces the second one I sent to you yesterday. The new version doesn’t differ in substance from the old one. I have merely corrected a few typing and other errors.

2. Mr Andre Prakke doesn’t recall any communication about Sharemax with you. He only recalls communication about Leaderguard and other matters. He says he warned you in advance about Leaderguard. The rest is history.

Kind regards

Deon Basson  


Dear Mr Basson,

I acknowledge receipt of your  e-mail hereunder with thanks.

Yours sincerely,

G.E. Anderson

 

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