Picture: 123RF/Katarzyna Białasiewicz
Picture: 123RF/Katarzyna Białasiewicz

The Financial Sector Conduct Authority (FSCA) will investigate the role of all key individuals, including the compliance officer, after a Johannesburg financial adviser was arrested last week on fraud charges related to unregulated investments in which his clients may have lost as much as R100m.

The adviser, Thomas Stringfellow, CEO of the Stringfellow Group, will appear in the Roodepoort magistrate’s court on Monday morning, according to Troy Laas, one of the SA Police Service investigators.

About 90 clients, mostly pensioners, have formed a WhatsApp group and met the police and the FSCA’s head of investigations, Gerhard van Deventer, in Northriding on Thursday.  

Van Deventer told Business Day Money that more than R100m is at risk and the chance of recovering it does not look good, although forensic investigations of all accounts are under way.

An investor who attended the meeting on Thursday, but does not want to be named, said Stringfellow was advising clients to invest in loan agreements to fund the SA franchise of the Australian sportswear brand Lorna Jane.

In the loan agreement he entered into a year ago Stringfellow guaranteed the capital amounts invested as well as 14% a year in dividends, but advised that the dividends could be as high as 20%.

Stringfellow had been the MD of Lorna Jane SA since 2011 and his wife, Leigh, was a director of both the Lorna Jane franchise and Stringfellow Investment Specialists, their LinkIn profiles state. The stores appear to have closed and the investor says he understands that liquidation proceedings will follow.

Stringfellow ran two unit trust funds on the Boutique Collective Investments (BCI) collective investment scheme licence.

Boutique Collective Investments CEO Robert Walton said last week that Boutique Collective Investments took over the management of the Stringfellow Stable Fund of Funds and the Stringfellow Flexible Fund of Funds.

About R130m invested in the two funds of funds is safe as unit trust fund assets are held in trust and the funds invested into the funds’ assets managers such as Investec, Prudential and Coronation.

But Walton said investors had withdrawn about R100m from the unit trust funds recently.

Investors were apparently encouraged to move out of the unit trust funds as market returns have been poor and invest in the loan agreements and other unregulated funds that Stringfellow ran. The Stringfellow website says the group had R800m under management.

The investor said he invested the R1m proceeds of the sale of his franchise business, but other investors were pensioners who invested substantial amounts of their retirement capital up to R14m.

He received no updates on the performance of his year-long investment although he did receive dividends. It was due to mature in November 2018 and he has been asking Stringfellow for his capital back since May 2019 without success.

Van Deventer said the FSCA is investigating possible misconduct by Stringfellow as a licensed financial services provider and it is likely that there will be consequences. Financial advisers are required in terms of the Financial Advisory and Intermediary Services Act to give appropriate advice that is suitable to investors’ circumstances.