The Financial Services Board has issued a warning to consumers and investors not to do business with Realcor, but the warning comes far too late to prevent thousands of investors losing money having given the company an estimated R415-million for a new hotel.

The FSB says that Realcor is rendering “financial services illegally”. In January this year the FSB provisionally suspended Realcor’s authorisation to conduct financial services after it had investigated the company’s affairs.

Apparently Realcor encountered various cash flow problems in the final quarter of last year and it was unable to pay interest on debentures held by thousands of its investors. It was revealed, soon after, that Absa had applied for the liquidation of the company.

In a separate development, PIC Invest, a property syndication company has announced that it has slashed its interest payments to investors from 12% to just 6,5% with immediate effect and has also put a moratorium on any investor withdrawing funds from the scheme for at least five years.

The move by PIC Invest has left thousands of pensioners – many of whom had invested their life savings with the property syndication company – reeling because the income that they were living off has effectively been slashed.

The reasons for the changes is that PIC Invest was found to be conducting the business of a bank by accepting deposits and the FSB had outlawed its business model.

According to MoneyTalk broadcast on Monday, brokers were being paid commissions of up to six percent on the investments made with PIC Invest, considerably more than the average of between 1% and 2%.

The FSB has warned consumers wanting to conduct financial services business with any institution or group to first check the credentials of the company by logging onto the FSB website at www.fsb.co.za. The website contains details of those companies authorised to provide financial services.

Readers' Comments Have a comment about this article? Email us now. 

With regard to the brokers selling these projects they should be held accountable.Having been approached by Sharemax,Fundstrust,Supreme bonds and more recently Realcor for the project in  Blouberg I have not seen the way clear to do business where the commission is notably excessive.I would guess that most of the brokers involved did not have property syndication in their licence categories.This type of business is what has brought about the over regulation of our industry and leading to the latest examinations to test our knowledge of the various acts that govern our business. If only brokers/Financial Advisors would look further than what they can earn then the industry could look forward to projecting a more professional image. - Reg