Momentum ordered to repay investor

Johannesburg – Momentum Group and one of its financial advisers have been ordered together with a second financial adviser and the firm he worked for to jointly and severally repay a Pretoria musician and producer the R730 000 he invested in property syndications marketed and promoted by Sharemax Investments.

The Ombud for Financial Services Providers (Fais), Noluntu Bam, ordered CS Makelaars; Emile Storm, a financial adviser and broker at CS Makelaars; Ian Marais, a financial adviser at Momentum Group; and the Momentum Group to repay the investor his investment in Zambezi and The Villa. The Momentum Group merged with Metropolitan Group in 2010 to form MMI Holdings.

Bam said about a year after making the investment, Sharemax stopped making payments of the promised returns on this investment, the complainant had since not received any portion of the invested money and considered the whole amount lost. This led the investor to lodge a complaint with the Fais ombud. Bam said the complainant consulted Marais, his broker at Momentum, about investing the R1 million his 70-year-old mother had available for investment.

Marais introduced the investor to Sharemax but advised him he was not authorised to deal with this product and introduced him to Storm. In November 2009, the complainant deposited R730 000 into the account of Weavind & Weavind attorneys, of which R600 000 was his mother’s money and R130 000 his own funds.

A further R400 000 of his mother’s funds was invested in a no-risk savings with Momentum.

Inappropriate advice

The complainant, among other things, claimed the respondents gave inappropriate advice, the recommended investment was inconsistent with his mother’s and his own financial profile and tolerance for risk and he wanted the return of the lost capital.

Marais denied he introduced and recommended Sharemax to the complainant. Storm agreed that Marais introduced him to the complainant and he was authorised to sell Sharemax investments.

The respondents claimed the investor made an independent and informed choice to invest in Sharemax, neither of them advised him to do so and denied they had advised that the investment was low risk. Marais claimed he did not receive any commission on the Sharemax investment and only received payment of an amount “as a thank you gesture” from Storm.

Momentum said Marais was prohibited from promoting and selling financial products not approved by them and Sharemax was not approved by the group. Momentum also denied any liability for the consequences of their employee’s conduct in the transaction.

Bam said there could be no doubt that Marais and Storm on their own versions collaborated on this investment and Marais went into this “joint call” with Storm so he could share the commission.

She said Storm would have received R43 800 commission on this transaction and he certainly split it with Marais, but refused to disclose how much while Marais “simply lied in his response in this regard”.

Bam found that Storm and Marais had given the complainant inappropriate investment advice.