The Ombudsman for Financial Services Providers (Fias) has ordered a Cape Town business that solicited investments from the public with promises of extravagant guaranteed returns from a risky unlisted platinum mining venture, to repay two of the investors.
The ombud also referred the two cases against Silver Seed Capital and its representatives to the regulator, the Financial Services Sector Conduct Authority and encouraged the investors to lay criminal charges.
The regulator withdrew Silver Seed Capital’s licence in 2014.
The investors, Johannes van Zyl and Lionel White, have never recovered the R100,000 and R35,000 they invested, respectively, and nobody knows what happened to their money, according to Fais ombud Naresh Tulsie.
Tulsie found that Silver Seed Capital and its director, Sandro Manuel Azevedo Veloza, flouted various provisions of the Fais Act and its general code of conduct when he and his advisers recommended the investors put their money in mining venture UG2 Platinum.
Veloza was also conflicted because he had a substantial interest in UG2, where he was a director and company secretary.
A CIPC search by the ombud revealed that Veloza was involved with at least 19 companies from 2001 and 2014, all which have been deregistered.
The code dictates that before a financial services provider (FSP) gives you advice, it must seek information about your financial situation and your objectives as well as your experience with financial products, so that it can provide you with appropriate advice.
The FSP must also analyse your situation and identify the financial product or products that would be appropriate for your financial needs and the risks you can bear, Tulsie says.
Van Zyl, a self-employed viticulturist, invested R100,000 in a product called “The FixedGRO Option” on the advice of Dion Chinnaiah of Bellville, an adviser of Silver Seed Capital.
Van Zyl was told that his money would be invested for five years at an annual interest rate of 9.5% and was provided with confirmation that he had purchased UG2 shares.
After five years, in September 2017, he asked for his capital back and received no response from Silver Seed and its representatives.
Van Zyl was under the impression that he was making a legitimate investment into a safe product and was not told that he was investing into a high-risk, unlisted venture in which he could lose all his capital. Had the true nature of the investment, as well as the associated risks been explained, he would not have proceeded, says Tulsie.
The ombud said there was no proof that the adviser considered Van Zyl’s financial position, and why the investments were appropriate for his means and circumstances, and there was no record of what happened to the money.
Chinnaiah knew that Van Zyl had very limited knowledge of investments and was going to rely on his advice. Yet, the adviser failed to ensure that Van Zyl understood the advice and failed to treat him fairly, Tulsie adds.
Silver Seed, Veloza and Chinnaiah were ordered jointly and severally to repay Van Zyl his R100,000.
White was also advised by representatives of Silver Seed Capital to invest in UG2 Platinum, which he was told was a safe investment. He invested in May 2005 and again in July and October of 2007, investing a total of R35,000.
White never received any returns on his investments and decided to withdraw his money during 2016. Various attempts to recover his capital proved futile.
Tulsie says there is enough information to suggest that Silver Seed and Veloza had not been honest about the nature of the investments or his involvement in them. “The only conclusion to be made is that the complainant’s money had been misappropriated.”
Tuslie ordered that Silver Seed and Veloza jointly and severally also repay White his R35,000...