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.
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.
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.
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.
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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