About 400 clients who put money into investment scheme Money Skills are still waiting for their money or for word on how they will be repaid after the South African Reserve Bank (SARB) recently issued a directive to the company to refund all investors.
According to the Money Skills website, you could become a shareholder in the company by investing a minimum of R100 000 in the Money Skills Linked Units. Investors were then issued with a share and debenture. The linked units promised a pre-agreed rate of return at a minimum of two percent for the minimum investment period of five years.
This means Money Skills is now liable for the repayment of R40 million to linked units investors.
Reserve Bank investigation
The company was placed under investigation by the SARB in May 2005 for carrying out the business of a bank without a banking licence by issuing debentures to investors and was found guilty in terms of section 83 of the Banks Act.
On February 28, 2007 a hold was placed on all outgoing payments from the Money Skills bank accounts at Standard Bank and Absa, following a request from the Registrar of Banks at the SARB. However, deposits can still be made into the company accounts.
Last week, the company presented a repayment plan, which the SARB rejected on the grounds that it was not feasible.
Advocate Jabu Khuzwayo of the SARB says the company had first proposed to pay back the monies to investors in five years' time, and then changed it to one year.
"We simply don't believe the company has the resources to meet the repayment plan they proposed," she says.
Although details of the repayment plan will not be publicly available until it has been finalised and accepted by the Registrar of Banks, sources have told Personal Finance that Money Skills had proposed to use money from property investments to refund the linked units investors.
Besides its investment division, Money Skills also has a bridging finance division, a property syndication arm and the beginnings of a micro-lending division. Money Skills Property targets consumers interested in buying a second or third home for rental income.
The nature of the property transactions involves clients obtaining bonds on their names but actually buying into property developments sourced by Money Skills at a lower price than the bonds for which they qualify.
Once the developments are completed and the property transfer has gone through, the difference between the value of the property and the bond amount is paid back to Money Skills by the developer.
The company has apparently proposed to use this money to pay back the linked unit investors.
100 percent surety
If you invest in the property syndication division of the company, you are expected to sign a 100 percent surety for a bond. But the property is registered in the name of a trust of which Money Skills has 60 percent ownership and you have 40 percent ownership.
Clients who did sign 100 percent surety for properties could well expect calls from the banks soon because all outgoing payments from the Money Skills bank accounts have been stopped.
A source, who did not want to be named, told Personal Finance he knew people who had signed surety for several properties through Money Skills and who were now "extremely worried" about how they would meet the bond repayments on the properties.
Jaco Spies of Jaco Spies Accounting Services, who with Susanne Oosthuizen was appointed by the SARB as manager of the case, says that after rejecting the company's repayment plan, the registrar had emphasised that the directive for the company to repay money to Money Skills Linked Units investors still stood.
Although Money Skills had previously told Spies that it had stopped issuing debentures, it is planning to pursue court action. An "information update" on the Money Skills website indicates that the aim of the court action is to have the SARB directives reviewed. The first will be to review the directive that the company had contravened the Banks Act by carrying on the business of a bank without a licence and the second will be to review the "fairness of the method of repayment".
Information update
According to the information update, the "directive should never have been issued because the company did not contravene the Banks Act." There is no explanation to substantiate why the company's actions should not be considered a contravention of the Banks Act.
The decision of the registrar is also perceived as being unfair with regard to the method of repayment in that the funds had been invested in such a manner that the investments would mature only in the medium to long term. The company is therefore not in a position to repay investors immediately and should it do so, "a large number of investors would suffer losses", according to the statement.
No explanation has been given to either the SARB or to clients as to where the money is invested.
The information update on the Money Skills website goes on to ask investors to indicate their support for the repayment plan, of which no details are given other than that it would "ensure that investors would be repaid their capital".
Investors are also asked to fill in their names and PINs before they sign the support form, granting the company a mandate to proceed with court proceedings for the review of the decisions made by the SARB. The cut-off date to send the support form through to the company was Monday, March 19.
It is unclear what the purpose of the PINs is or if the company is asking for permission to use client funds for the court proceedings. Although there is a signature at the end of the information update, there is no name beneath it except "Money Skills Limited".
A switchboard operator at the company last week told Personal Finance that the "men in charge" of the company were chairman Francois Buys and director Andries Britz. However, Personal Finance has learnt that Buys has changed his title to non-executive chairman while the former financial director and one of the drivers of the company, CW Venter, resigned in December last year.
Britz has not been available for comment and all attempts to obtain comment from the company have been referred to Spies.