Unregistered financial adviser from Kempton Park fined R143 million

An unregistered financial adviser was fined R143 million and is prohibited to practise as a financial adviser for 20 years after he used about R496 million – that about 1 000 clients wanted him to invest – for himself.

The Financial Sector Conduct Authority (FSCA) investigated Jacobus Stephanus (Cobus) Geldenhuis from Kempton Park and Classic Financial Services, where he was a director, after receiving a complaint that Geldenhuis was offering to invest in shares on behalf of clients.

Classic Financial Services is not a registered and authorised financial services provider and Geldenhuis is not registered as a representative of an authorised financial services provider.

During the investigation, the FSCA established that Geldenhuis did not invest client funds in shares but was running a Ponzi scheme and used client funds for his own benefit. The investigation covered the period from 1 January 2019 to 12 May 2023.

The FSCA found that Geldenhuis and Classic Financial Services contravened section 7(1) of the Financial Advisory and Intermediary Services Act and conducted the business of a bank in contravention of section 11 of the Banks Act.

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Criminal investigation

The FSCA also brought the matter to the attention of the criminal authorities and consumers who invested with Classic Financial Services are encouraged to contact the police as well as the liquidators of Classic Financial Services.

The bank accounts of Classic Financial Services were frozen in May this year, but only R19 million was left in the accounts. The company was placed into liquidation on 30 May this year.

This was not Geldenhuis’ first brush wit the FSCA. He was prohibited to deal with big life insurers in 2001 after he allegedly forged client signatures, defrauded them and made misrepresentations.

In 2013, the Financial Services and Intermediaries Ombud instructed Geldenhuis, who was then an authorised representative of Fugio Financial Services, an authorised financial services provider, to repay two brothers who were his friends, almost R927 000 because instead of investing their money, he bought them policies that would run for 10 years at an annual premium equal to the once-off investment.

They then had to pay heavy penalties to make the policies paid-up. The Fais ombud found that the did this to earn a large commission and suspended Fugio’s licence.

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