Did Sharemax contravene the Banks Act?

Pretoria High Court to be asked to give a declaratory order.

A formal application for a declaratory order on how and when the failed Sharemax investment scheme allegedly contravened the Banks Act will soon be brought before the Pretoria High Court.

This may clarify the role the Reserve Bank’s appointed inspectors played during the tumultuous period between 2007 and 2011, when the Reserve Bank found that several property syndication schemes were in contravention of the Banks Act as they were conducting the business of a bank without being registered as such.

When these findings came to light in the media virtually all schemes, including Sharemax, PIC, Bluezone and Realcor, to name a few, collapsed. This also left thousands of investors who invested their life savings in the various ventures destitute with little prospect of ever being repaid.

Sharemax was the largest of these schemes, into which more than 33 000 mostly elderly people had invested about R5 billion.

This application for the declaratory order will be brought by Cape Town-based Deon Pienaar, a former broker, who during the boom of the property syndication invested money on behalf of clients in various property syndication schemes, including Sharemax.

Pienaar announced this course of action on Tuesday, to around 600 former Sharemax investors in a packed hall in Pretoria. Another meeting will take place in Durban on Wednesday.

Read: NPA asks Hawks to reopen Sharemax investigation

Pienaar said he has been investigating the procedures and conduct applied by the Reserve Bank inspectors surrounding the collapse of the schemes. He said his research shows that the Reserve Bank inspectors failed to present their findings contained in the inspector’s report to the directors of the property syndications as they were obliged to do in terms of the legislation. He added that there were serious administrative discrepancies in the way Reserve Bank inspectors established the “illegality” of the schemes.

Sharemax

Referring to Sharemax, he said the Sarb has never disclosed the actual inspectors’ report that explains when, how and to what extent Sharemax’s operations were in contravention of the act. This report was compiled by the Sarb-appointed inspectors who investigated Sharemax operations.

“The directors of the Sharemax schemes did not receive a copy of this report. This report should explain in detail how the scheme’s operations were allegedly in contravention of the act and it would have allowed the Sharemax group to review the findings of the inspectors in a court of law.”

(Moneyweb has already applied for a copy of this report in terms of the Access to Information Act.)

Pienaar aims to submit the court application before the end of the month.

Realcor

Deonette de Ridder, former head of the failed Realcor scheme and a party to the case Pienaar is fighting in the Western Cape High Court against the Reserve Bank in the Realcor matter, also spoke at the meeting and said that what happened at Sharemax, also happened at Realcor. “The inspectors walked in and we complied with what they wanted. We were only accused much later of contravening the Banks Act by allegedly doing the business of a bank and ordered to repay investors. Despite many requests from ourselves and our legal teams, we never received a formal report that set out exactly how we were in contravention of it and therefore could not take the decision on review. Until today, nine years later, I still do not know what Realcor was guilty of.”

She added: “If you can identify a pattern, then you can say it is as good as an orchestrated hostile company takeover. This was the case for Realcor, Sharemax and other syndications. I cannot understand why investors had to lose all their investments, without the opportunity to address the alleged offenses. It is unconstitutional.”

Moneyweb approached the Sarb for comment on the statements made at the meeting and imminent application for the declaratory order, but the bank did not respond by the time of publication.

Read: Is the Sharemax landmark worth R1.6bn or R616m?

Directors of Nova

The audience was visibly unhappy with the share ownership and salaries of the directors of the Nova Property Group, the rescue vehicle that was set up in terms of the Section 311 Scheme of Arrangement after the Sharemax collapse to “protect” investors’ investments.

Moneyweb recently revealed that the directors received 87% of the company’s shares for free, while around 2 000 Sharemax investors who chose to receive Nova shares, had exchanged debentures to the value of  R95 million for a collective 4.3% equity stake.

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I think the Nick and Michael Georgiou should be sitting behind bars.

Sorry Deon and Deonette you contravened the FAIS Act by selling unregulated non FAIS approved products! You knew the risks and you should have done your home work! Hell i did mine and stayed away from these toxic products and i only have to worry about the toxic legitimate insurance approved toxic products daily!

Misleading heading to the video clip. Apparently the meeting was called by Mr Pienaar for all Realcor, Pic, Bluezone and Sharemax related brokers and investors.

The declaratory order sought only relates to whether Sharemax’s funding model contravened the Banks Act or not. The eventual judgement, whichever way it goes, will therefore only apply to Sharemax. However, the judgement will also valuable to other syndication schemes as their funding models were similar.

Is this looking for excuses or a diversion? It looks like it. This can probably be regarded as a minor vein in and part of a big faulty artery system. it does not change the fact that these operations were conducting irregular and pyramid type business models with investor funds not secured, not conducting safe business as was promised to the investors who were promised these to be safe solid property investments, followed with promises of business rescue with no down the line improvements for investors, and apparently only further enrichment by some and select same, as can be seen with current rescue operations?

You may also wish to investigate a similar story that appeared in Finweek in May(I think) 2011 that Advocate Blackbeard of the SARB was looking skeptically at the Pickvest/ Highveld Syndications schemes when in fact he had found them to be alright. The story in Finweek was essentially wrong! You may wish to investigate how Finweek was fed false information. As the possibility of the Highveld Schemes being declared illegal was what helped frighten investors into accepting the business rescue plan.

Thanks. Will do.

End of comments.

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