Sharemax directors win appeal

Former and present Sharemax directors successful in appeal of Fais Ombud determination.

JOHANNESBURG – Former and present directors of property syndication company Sharemax have successfully appealed against two controversial Financial Advisory and Intermediary Services (Fais) Ombud determinations. The determinations found the directors liable for losses suffered by pensioners who were advised to invest in property syndication companies promoted by Sharemax Investments.

A copy of the judgment can be viewed here.

The complainants were Gerbrecht Siegrist (75) and Jacqueline Bekker (76). Siegrist and Bekker were advised by their respective financial advisers to invest in the Sharemax-promoted Zambezi syndication. Siegrist and Bekker laid complaints against their financial advisers – respectively CJ Botha, and Eddie Carter-Smith – with Fais Ombud Noluntu Bam. The ombud has the power to order errant financial advisers to refund victims of poor advice.

The ombud took it upon herself to “join” four former and present Sharemax directors to the complaints. The directors are: Willie Botha, Dominique Haese, Andre Brand and Gert Goosen. Sharemax itself was also joined. She found each of them liable to refund the losses suffered by Siegrist and Bekker. (See: Fais Ombud finds directors liable for investor’s loss). The determination was issued more than two years ago, in January 2013.

The directors sought leave to appeal the determination. This was denied by Bam. However, the appeal board of the Financial Services Board (FSB) agreed to hear the appeal.

The pending appeal caused Bam to suspend all determinations relating to property syndications. Thus, for the past two years, no property syndication-related complaints have been adjudicated, with justice delayed for many pensioners who were persuaded to invest in syndications promoted by Sharemax, Picvest, and others.

The appeal decision

The appeal board was chaired by Louis Harms, a former judge on the Supreme Court of Appeal. Other panel members were Luckyboy Makhubela and Jay Pema.

The panel noted that its judgment is not concerned with findings of fact contained in the Ombud’s determinations, such as that the directors had deceived the public, or that the Zambezi investment was a Ponzi scheme.

The judgment dealt with two issues, namely 1) whether the ombud had jurisdiction to rule against a party not cited as a “wrongdoer” by the complainant, and 2) whether a sanctioned scheme of arrangement could affect a complaint laid against a financial adviser with the Fais Ombud.

The second issue refers to a scheme of arrangement which saw investors in Sharemax-promoted syndication companies accept shares and/or debentures issued by a new company, Nova Property Group, or its subsidiaries.

The panel found that there is “simply no scope” for the ombud to determine who should be a respondent without reference to the original complaint. Each complaint was made against the respective financial adviser, not the Sharemax directors or Sharemax itself.

The panel also found that the complaints laid by Siegrist and Bekker could not have been compromised by the scheme of arrangement.

Panel criticises ombud

The appeal panel had some criticism for Fais Ombud Noluntu Bam. For example, Bam refused the Sharemax directors leave to appeal the Siegrist matter. But the former chair of the appeal board granted leave to appeal. When the Sharemax directors later sought leave to appeal the Bekker matter they were once again refused by the ombud.

The panel writes: “The explanation given [by Bam] was that the determination in the Bekker matter had brought forth new facts and she refused leave because ‘the facts are different’… There is not a single fact in the Bekker determination that conceivably could have affected the legal issues which were raised in the Siegrist matter….”

Says the panel: “Applications for leave to appeal may be irritating to the decision-maker who believes in the correctness of her or his judgment but they should nevertheless be dealt with dispassionately.”

The panel also noted that even if the ombud could legally have joined the Sharemax directors as respondents, she did not follow the correct procedures when doing so. The panel said notices sent by the ombud did not forewarn the directors of the factual findings the ombud intended to make, “especially those relating to the prospectus, fraud and the Ponzi scheme”.

The panel said that this was a “serious breach of the requirements of fair administrative action and any court would on review have set aside the determinations on this ground alone”.

At the time of writing (midday Monday April 13), the Fais Ombud’s office had not responded to a request for comment emailed on Friday April 10.

The panel set aside the determinations and consequent orders made against the appellants. The two financial advisers, CJ Botha and Eddy Carter-Smith, did not appeal the determinations, and are still liable for their clients’ losses.


You must be signed in and an Insider Gold subscriber to comment.


Not surprised. The ombud’s office has often exceeded its remit. The principle of an ombud is great, but the office cannot operate outside the general law. Crooks take advantage of the long drawn-out proceedings to “do a runner” or even start a new scam knowing they will probably get away with it (again).

End of comments.



Subscribe to our mailing list

* indicates required
Moneyweb newsletters

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.

Follow us:

Search Articles:
Click a Company: