Silver Seed Capital ordered to pay back money and face possible criminal charges
In yet another ombud ruling, it is clear the Cape Town-based company exists to con investors and benefit director's hidden interests
In yet another ruling against Silver Seed Capital, the ombud for financial services providers (Fais ombud) Naresh Tulsie ordered that the Cape Town business and its director Sandro Manuel Azevedo Veloza pay back the full amount invested by Dr Molehi Walter Kgaile.
This is not the first time Silver Seed has been on the receiving end of an ombud ruling, with previous investigations showing that the company was used to lure unsuspecting investors with promises of extravagant, guaranteed returns from a risky, unlisted platinum mining venture. The ombud found that Veloza was also conflicted in that he was both a director and company secretary for UG2 Platinum, which he advised clients to invest in for great returns.
More than a decade later, Kgaile hasn’t seen his money nor heard from Veloza. In his ruling, Tulsie ordered Silver Seed to return the full amount invested in four tranches, of which a smaller first tranche went to unlisted Lazaron Biotechnologies.
The ombud is also referring the case for further investigation and potential action to the Financial Services Conduct Authority (FSCA), which had already investigated Silver Seed when it was still the Financial Services Board (FSB). Tulsie further recommended that Kgaile report Veloza and Silver Seed to the police’s commercial crimes unit.
The FSCA withdrew Silver Seed’s licence in 2014.
In its rulings in March this year, Tulsie ordered the company to reimburse Johannes van Zyl and Lionel White R100,000 and R35,000 they invested in 2012 and 2005/2007, respectively.
The most recent case flouts various sections of the Financial Advisory and Intermediary Services (Fais) Act. In his determination, Tulsie says: “The respondent has a calculated modus operandi of targeting selected investors under the auspice of extravagant returns, with no evidence as to how these returns would be paid.”
On how Veloza broke the law, Tulsie writes: “Advice in terms of Section 1 of the Act includes any recommendation, guidance or proposal of a financial nature furnished to a client. The advice has to meet the standard prescribed in the general code of conduct for authorised financial services providers (FSPs) and representatives.”
Veloza and Silver Seed have been unable — or unwilling — to provide any proof of efforts to understand the personal circumstances and risk appetite of Kgaile, other than to lure him into putting money into a company that benefited Veloza. That conflict of interest also flouts the law.
Even beyond that, the determination also says that a financial adviser must always act with due skill and diligence and make sure the investor is aware of the risk to their investment. Again, Veloza failed to do this.
To add insult to injury, Veloza and Silver Seed have not responded to the ombud, and even in the preamble to the determination, the ombud writes of a “last known address” for Veloza.
When Kgaile made this investment, says Tulsie, he based it solely on the representations made by Veloza. Because of Veloza’s breach of various sections of the code and Fais Act, Kgaile lost all his money. As a result, the order is for the full reimbursement of the investment of R21,630, in addition to the referral to the FSCA and his recommendation to follow up with a criminal complaint at the commercial crimes unit.
Steps for avoiding being duped out of your heard-earned money
- Always remember to check that any entity or person you wish to enter into a financial agreement with has been authorised and certified to carry out that financial service. This information is available on the FSCA website.
- Be sceptical about outrageous or too-good-to-be-true claims. If it seems to good to be true, it just may be.
- Always ensure your financial adviser does a thorough analysis of your personal circumstances and needs and provides you with options suitable to you.
- Make sure your adviser does a thorough due diligence of the company or investments they are proposing: know how the promised returns will be generated; understand the risk involved.
- Always opt for a carefully planned, long-term investment portfolio with the right mix of investment types. A reputable and authorised financial planner will advise you on how to structure your investments.