Julius Cobbett
1 minute read
24 Aug 2013
8:00 am

Broker ordered to repay mother-in-law R600 000

Julius Cobbett

Financial adviser Jamey Randall has fallen foul of Fais Ombud Noluntu Bam after advising his father-in-law to buy debentures issued by Edwafin, a failed investment scheme.

Randall is a member and key individual of Randsure Brokers, an entity that remains licenced with the Financial Services Board (FSB). Its licence number is 18857.

In February 2008 Randall advised his father-in-law, Mr Smith, to invest retirement money of R600 000 in Edwafin. Randall also advised his wife to invest funds in Edwafin. For this advice he would have earned commission of approximately 6%.

Smith passed away on 13 May 2008. Soon Randall’s mother-in-law and sister-in-law, who inherited debentures from her late father’s estate, were knocking on the Ombud’s door.

Randall was ordered to pay the complainants R100 000 each.

Edwafin’s debentures offered a return of 20%. The company had virtually no trading history, but was enthusiastic about its prospects. In her determination, Bam says there is a duty on the financial services provider to carefully examine any extravagant claims made on the probably success of the product. She highlighted the high risk nature of Edwafin’s debentures, noting that they were unlisted, and that the company had no trading track record to speak of.

Justifying his advice, Randall told Bam’s office that he had perused Edwafin’s audited financial statements, and that they reflected a good financial position and a substantial profit. But Bam responded that no such profit had ever been reported.

Bam found that Randall had failed to conduct a proper due diligence. Furthermore, he breached the Fais Act by selling debentures when he was not licensed to do so.