The Ombud for Financial Services Providers has criticised the so-called Leaderguard Recovery Unit, and says attorneys involved with the unit have an obvious conflict of interest.
In his ruling this week against Wilma Willemse, a broker who placed pensioners in Leaderguard, Charles Pillai questioned the legality of the Recovery Unit and the role of the law firm Sim Attorneys. On the one hand, Sim Attorneys had represented two brokers who advised clients to invest in Leaderguard in complaints before Pillai, and on the other hand, the firm was offering to help recover money for investors who had lost money in the Leaderguard saga.
Pillai said he noted with alarm and a great deal of discomfort that the Leaderguard Recovery Unit is approaching already short-changed investors, calling upon them to contribute towards costs in order to put investors in control of Leaderguard.
He referred to an undated letter signed by Andre Matthews, who refers to himself as the chairman of the Leaderguard Recovery Unit. He is also chairman of a firm called Avocado Investment Managers, a registered financial services provider.
The letter, apparently directed at investors in Leaderguard, warns that investors risk losing their investment should they not pay the unit.
Pillai said the Leaderguard Recovery Unit should be asked:
- What legal status it has and under what legal framework is it operating?
- On what legal basis does it call for contributions from investors, considering that there are people who are legally authorised to do so, such as the liquidator or the trustees of an insolvent entity?
- What fidelity guarantee can investors look forward to should they make contributions to the unit?
- On what basis of fact or law does the Leaderguard Recovery Unit claim that investors might lose their investments permanently should they not contribute to the fund?
- How does the Leaderguard Recovery Unit explain its involvement in the process in assuming duties predominately associated with liquidators, and how does the unit relate to the liquidators?
Pillai said even more alarming is the fact that a letter to investors, apparently written and signed by Sean Sim of Sim Attorneys, accompanies the letter from the Leaderguard Recovery Unit.
Pillai said this firm of attorneys, which represented both Marius Naude and Wilma Willemse, the two brokers against whom Pillai has made rulings for placing pensioners' investments in Leaderguard, appears to be acting for potential claimants in the Leaderguard scheme.
It is also evident that the same firm of attorneys represents other brokers against whom complaints have been levelled, he said.
What comes to the fore is an obvious conflict of interest. Whilst I do not have jurisdiction over the conduct of Sim Attorneys, and the conduct of Avocado Investment Managers does not constitute a complaint in terms of the Financial Advisory and Intermediary Services (FAIS) Act, I believe I am duty-bound to refer this aspect of the matter to the relevant authorities for investigation, Pillai said.