The Office of the FAIS Ombuds has received thousands of complaints relating to property syndications between 2009 and 2014.
Between 2019 to 2021, there were several determinations issued against financial institutions regarding property syndications such as Sharemax, Highveld Syndications, Realcor and Blue Zone Investments. In many of these cases, the respondents (financial advisors) applied to the Financial Services Tribunal to have the orders set aside and in the majority of these cases, the Financial Services Tribunal referred the matter back to the FAIS Office for reconsideration. Between the Tribunal’s judgements and High Court orders, this caused uncertainty with the FAIS Office on how these matters should be dealt with. With the appointment of a new permanent FAIS Ombud in November 2022, the FAIS Office took the opportunity to reconsider the Tribunal’s judgments and the Ombud’s approach to property syndication complaints.
In many instances, the Tribunal’s judgments refer to Supreme Court of Appeal and High Court judgments that are applicable and resulted in conflicting decisions. However, what is evident from case law, is that there are several aspects that lead to the failure of these property syndication investments. The Ombud explains that although there are some variations in the facts, product and syndications of each case, the principles that are applicable are the same. In these matters, the Tribunal has consistently found that the evidence provided to substantiate complaints of this nature was insufficient to prove that financial advisors should have foreseen the risk of failure. Even if the Ombud made a finding that the financial advisor did not recommend the correct investment, a further finding must still be provided – that the reasonable financial advisor would have foreseen the risk of the failure of the investment. In short, an investigation of the elements related to legal causations (foreseeing the risk of the failure) is subject to numerous legal arguments and requires expert evidence and a hearing, for which only a court of law is appropriate.
The way forward for aggrieved investors seems to be to approach a court of law, as the Ombud’s Office, after considering various matters, circumstances, and factors regarding the nature of this complaint and similar complaints, has no reasonable prospect of resolving them successfully.