The new public protector says she will leave the dispute over the state capture report prepared by h.
THE ombudsman for financial services providers has called for financial products to be subject to some form of approval to protect members of the public from being exploited by "market forces motivated by nothing more than greed and irresponsibility".
Charles Pillai said a complaint that came before him regarding the Garek scheme made a compelling case for financial products to beregulated.
Pillai called for "consideration of possible criminal prosecution of directors and officers" of the Garek scheme and financial services providers who helped to market the product.
He recommended that a copy of his ruling be forwarded to the police's commercial crimes unit for consideration of further investigation into alleged fraudulent activities by the promoters and marketers of this scheme.
Pillai's comments are contained in a determination in a matter in which the complainants, Adolf Jacobus Hare, an engineer from Pretoria, and his wife Christina Elizabeth Hare, demanded that André van der Merwe, an authorised financial services provider from Uvongo, KwaZulu-Natal, return R40000 they had given to him to invest on their behalf.
Pillai said there were many people who had invested in the Garek scheme and had lost millions in the process. He said his office had 14 other complaints relating to financial services rendered in the course of recommending investments in the Garek scheme.
The complainants said that in December 2004 they met Van der Merwe, who had been Mrs Hare's mother's financial adviser. The complainants were introduced to Matric, and were provided information by Van der Merwe on the firm and its prospects.
Investors lost millions
They were advised that an imminent listing in three countries was on the cards. Upon listing, shares purchased by the complainants for R2,50 were projected to reach R20.
This return was compounded by the fact that the structure of the investment was such that they automatically received two shares in Garek for every Matric share purchased.
The complainants said the respondent promoted the firm in glowing terms and made much of the fact that he himself had invested in excess of R1million in Matric shares. The assets of the firm were reportedly substantial, amounting to about R5,4billion.
The complainants were shown an article in Time magazine which painted the company in a very positive light, supportive of the respondent's claims as to the soundness of the investment.
No interview was conducted to assess whether the investment was conducive to the complainants' future financial requirements or their present financial position.
The challenges that lay ahead for Matric/Garek and the risks associated with the investment were never mentioned or discussed. The respondent advised complainants that the opportunity to invest apparently expired at the end of December 2004 and the complainants were encouraged to "act expeditiously".
As such, and acting on the advice of the respondent, the investment was made, and the application forms completed and the complainants invested R40000.
After this expiry date, Van der Merwe contacted the complainants and advised that as they were existing shareholders they had the opportunity to purchase additional shares at the same "good" price". They were advised to take up this opportunity because of the excellent returns that could be expected on this investment. The complainants did not take up this additional offer.
The promised listing and several future listing dates never materialised. Various reasons were advanced for the delay, several of which supposedly offered increased shareholder value. In addition various annual financial statements were not issued.
The complainants said they "were misinformed, offered poor advice and the communication was less than adequate".