Surprising twist in ombud’s determination against financial advisor

80-year-old woman allegedly suffering from Alzheimer Dementia was advised to make a high-risk investment in Realcor.
The advisor claims the ombud accepted claims that were ‘contradictory and false in many respects’. Image: Shutterstock

*An earlier version of this article stated that Terblanche had invested in the Public Investment Corporation (PIC), when it was in fact PIC Syndications. We apologise for this error.

The determination in which the Office of the Ombud for Financial Services Providers (Fais Ombud) referred a financial advisor to the industry regulator – for “unconscionable conduct” in advising an 80-year-old woman allegedly suffering with Alzheimer Dementia to make a high-risk investment in a failed property syndication scheme – has taken a surprising twist.

The ombud has agreed to reconsider the adverse determination against Jan Labuschagne Makelaars CC and Jan Harm Labuschagne, resulting in the Financial Services Tribunal issuing an order in line with this agreement.

It follows Labuschagne lodging an application for reconsideration of the determination, in which he cast doubt on the accuracy of some of the claims made in the complaint – including the date on which the woman was diagnosed as suffering from Alzheimer Dementia and the authenticity of the medical certificate supplied in support of this diagnosis.

Labuschagne also claimed the ombud had ignored her statutory and common law obligations by effectively failing to investigate the complaint, resulting in the determination being unfair, unlawful and in breach of his constitutional rights.

Read: Fais Ombud recovers almost R50m for consumers in 2020/2021

Fais Ombud Advocate Nonku Tshombe issued the determination on October 13, 2020, in response to a complaint lodged by Linda-Marie Mienie on behalf of her mother, Maria Cecilia Terblanche.

Mienie was appointed executor of Terblanche’s estate after her mother’s death.

Terblanche was 80 years old when Labuschagne advised her to invest R700 000 in Realcor on April 16, 2010, when, Mienie alleged, her mother was already in an advanced state of Alzheimer’s Dementia.

Soon after making the investment, Realcor was placed in liquidation and Terblanche’s funds were lost, with none of her capital ever paid back to her.

Mienie as curator and after finding out about this investment, challenged Labuschagne’s conduct in advising her mother to make a high-risk investment in Realcor.

She was unable to resolve the matter with Labuschagne, resulting in her filing a complaint to the ombud on behalf of her mother.

Complaint’s claims

The complaint, among other things, said that:

  • At the time of making the investment, Terblanche was already in an advanced state of Alzheimer’s Dementia.

  • Two medical reports were submitted to confirm Terblanche’s condition, one by her family doctor, Dr SF van den Heever, on July 1, 2010.

  • Terblanche consulted specialist neurologist Dr M van Niekerk in September 2010, whose diagnosis was that she was suffering from Alzheimer Dementia and filed an affidavit in support of an application to appoint a curator for Terblanche.

  • At about the time the Realcor investment was made, Terblanche had deteriorated to the point where she was incapable of holding a normal conversation with her daughters and could no longer recognise her own daughters’ voices on the telephone.

  • Absa called Mrs Mostert, another of Terblanche’s daughters, to inform her that R700 000 was transferred out of the family trust account where her mother’s funds were held. This was despite a requirement that all three trustees – Terblanche and her three daughters – must sign before any funds could be transferred but not all the trustees signed.

Advisor’s response

Responding to the complaint, Labuschagne, among other things, claimed:

  • The complaint had prescribed.

  • At the time of the transaction, Terblanche was “Compus Mentis” [compos mentis] and he had no knowledge of her condition, she did not display any indication she was suffering from dementia, she was in full control of her financial matters and physically mobile.

  • Terblanche signed all the documentation Labuschagne discussed and explained to her, went on her own and alone to Absa where she withdrew the R700 000 and deposited it into Realcor’s trust account, and then asked Absa to fax the deposit slip to Labuschagne’s office.

  • Terblanche approached him requesting an investment in Realcor and he made full and frank disclosure about the investment to Terblanche, who signed a disclosure document acknowledging she understood the investment.

Tshombe, in her determination, said prescription cannot run against Terblanche as she did not have the mental capacity to administer her own affairs.

In addition, Tshombe said:

  • Labuschagne’s version is improbable, adding that an 80-year-old Alzheimer’s sufferer does not ring up her broker and advise him that she intends to diversify her portfolio.

  • This version is nonsensical because Labuschagne knew Terblanche had invested in Sharemax and PIC Syndications on his advice and also knew, at that time, these syndications had collapsed or were under investigation by the SA Reserve Bank.*

  • Placing more of Terblanche’s money in another property syndication is not diversifying a portfolio of investments.

Tshombe said Labuschagne’s conduct was the cause of Terblance’s loss of her capital and ordered Labuschagne to pay Terblanche’s estate R700 000.

She described Labuschagne’s conduct as “unconscionable”, as having brought the financial services industry into disrepute and added that he is not fit to be a licensed financial services provider.

Tshombe referred her determination to the Financial Advisory and Intermediary Services (Fais) and licencing departments at the Financial Sector Conduct Authority (FSCA) for further attention.

‘Assumptions, speculation’

In a 34-page application to the Financial Services Tribunal for reconsideration of the determination, Labuschagne said the ombud had slavishly accepted the version of the complainants, which was clearly based on “assumptions and speculation, emotional and uninformed, and obviously [is] contradictory and false in many respects”.

Labuschagne, among other things, further stated:

  • That the ombud erred in rejecting the prescription defence.

  • That the ombud blindly accepted Mienie’s say-so that Terblanche suffered from Alzheimer Dementia at the time of making the investment but only provided a letter signed by general practitioner Dr SF van den Heever.

  • That Dr SF van den Heever’s letter is presented as being dated during 2011 when the letter is in fact dated February 16, 2013, almost three years after the investment.

  • That the annexure annexed by Mienie appears to have been altered to reflect the date of August 16, 2011, which was obviously done to bring the diagnosis closer to the investment date to try and create a false perception that full-on dementia must have been present at the date of investment.

  • That no report by neurologist Dr M van Niekerk has been supplied.

  • That Terblanche’s file, which he believed had been destroyed because a period of five years had elapsed, had been located in off-site storage.

  • That the ombud erred in concluding that he had assisted Terblanche to invest in Highveld Syndications and Sharemax in addition to Realcor.

  • That he (Labuschagne) questioned Mienie’s honesty, stating that the version to the ombud about the “trust cheque” has been shown to be false and that no such cheque exists.

  • That the version presented by Mienie regarding the alleged telephone call from Absa is demonstrably false in that the cheque presented is clearly Terblanche’s personal cheque.

  • And denied that his advice was negligent and wrongful, that Terblanche has suffered a loss, and that the loss was caused as a result of alleged negligent advice.

Brief reasons provided by the Fais Ombud to the Financial Services Tribunal for referring, by agreement between the parties, her determination back to her office for reconsideration, included the discovery of Terblanche’s file that was believed lost; the view of her office that the documents in this file are relevant and ought to have been considered in the investigation of the complaint; and Labuschagne placing in issue the mental capacity of Terblanche to contract, which requires further investigation.

Investigation?

The office of the ombud confirmed this month to Moneyweb that the determination was sent to the FSCA on October 13, 2020.

“Although the determination had been sent, our liaison was unable to find a record that such an investigation was undertaken,” it said.

“The determination has now been sent to the FSCA again with a specific request for further investigations to be undertaken, as recorded in the determination.

“The FSCA will conduct its own investigation to determine if Jan Harm Labuschagne Makelaars CC and Jan Harm Labuschagne contravened the applicable provisions of the Code and the Fais Act,” it said.

The ombud said if the contraventions are confirmed, the FSCA might impose an administrative penalty or even withdraw the financial service provider’s licence and debar the financial advisor.

The ombud was also asked if Absa Bank had failed in its duty of care to customers when it allegedly released the R700 000 for the investment in Realcor from a family trust account without the signatures of all the required signatories.

Read:

“The Office of the Fais Ombud investigates complaints based on the jurisdiction we have as an office, and for this particular complaint, we were only required to look at the advice because of the nature of the complaint the complainant lodged,” it said.

Absa’s response

Absa said it was not a respondent to this Fais Ombud case and, given the ongoing proceedings and client confidentiality considerations, is limited in the amount of detail it can provide.

It confirmed examining the details of the case and was satisfied the bank acted in good faith and complied with all the prescripts that governed the handling and processing of cheques.

“In addition, it is important to highlight that a curator was only appointed for Mrs Terblanche three years after the transaction was made,” it said.

“As such, there was no obligation to obtain a curator’s signature at that point – Absa could only act in line with the mandate agreed with the client.”

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The moral of this story is “don’t trust anyone but yourself to make any decisions on your behalf” and the fundamental question I have is …why would a financial advisor put a frail old lady into such a high risk speculative investment unless there is a self gratifying motive? The advisers deserve to be hammered and punished for their lack of integrity and greed. To rely on technicalities rather than the truth to win, is not a win in my opinion. Sadly it’s people like this that give Financial advisors a bad reputation. And I bet they don’t feel a thing!
Lastly the fact that all 3 daughters were Trustees and needed to all sign before any investment decision was made is the technicality that should stand them in good stead, even if the mother signed and wasn’t suffering from dementia.
Disturbing story…one has to wonder!

Sure twists and turns.

But why would anyone put an 80-year-old’s money into a high-risk investment? Shouldn’t have capital preservation been a priority?

End of comments.

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