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Cape Town - Sharemax has been instructed to stop taking investments as they are contravening the Collective Investments Schemes Act (Cisca).
In a statement on Tuesday morning the Financial Services Board (FSB) instructed the Pretoria property group to stop taking investments into existing structures and to stop advertising and marketing their investment scheme.
FSB head of collective investment schemes, Jurgen Boyd says Sharemax is running a property scheme similar to property unit trusts. "Because of that, we advised Sharemax that they are contravening Cisca.
"They chose to convert their scheme to a company-based structure which will fall outside the ambit of Cisca. Pending the conversion, we instructed Sharemax to stop taking investments into existing structures as we cannot condone them continuing to transgress the Act.
Sharemax is also required to stop advertising and marketing their investment scheme "until such time that the scheme is properly incorporated in terms of the Companies Act."
The FSB ruling came shortly after investigative journalist Deon Basson wrote in a report in Finansies & Tegniek, a sister publication of Finance24, that six of Sharemax's trusts invested considerably less in property than the company advertised in marketing brochures.
As an example, Basson referred to the pro forma balance sheet of Centurion Highveld in a marketing brochure. According to this it seems that the full R29,1m touted from investors, would be invested in property.
Now it seems that only R21m has been invested in property, while the other R8m has been written off as goodwill, Basson wrote.
In this case goodwill takes on another meaning, because, according to a note in the accounting policy, it consists of transfer costs, broker fees, promoter fees and general marketing costs.
None of these costs are mentioned in the marketing brochure.
For the six trusts Sharemax collected R120,3m from investors of which R32,7m has been written off as goodwill. That is more than 27% of the entire investment without investors knowing that they had to cough up for the mentioned costs.
Sharemax is involved in another eight property trusts with a cumulative value of R292m.
Basson warns investors in the F&T report to be careful of investing in The Bluff, a new property venture of Sharemax where investors are given the same impression that the full R74,5m touted from them will be invested in property.
