CR106

Mandate – unauthorised investment – relief
Background

In February 2001, the complainant through an independent broker wished to invest his retirement annuity of R200 000. According to the complainant, he was offered two different guaranteed equity investments, one being an offshore investment based in dollars and the other a local property investment. He decided to make the offshore investment which was offered to him in the first tranche of a specific offshore fund. On or about 19 February 2001, he signed the necessary documentation to transfer the money to the insurer. The complainant was accordingly under the impression that the monies were to be invested in that tranche and in May 2001 he received the policy reflecting the commencement date as 19 February 2001. On reading the contract document he could find no reference to guaranteed values of the investment. He then communicated with the independent broker and was assured that the policy was the correct policy. The broker then sent to the complainant a copy of the initial brochure advertising the investment which had reflected in example form, how the investment would grow over a period of 5 years. The broker allegedly advised the complainant that this document would serve as proof if, at a later date, the guarantees were not available.

In July 2002, the complainant received the annual contract information on the policy and was again concerned about several items with regard to the policy. He allegedly telephoned the broker regarding this query but did not receive the assurances that he required. It transpired that the investment had not been made in the first tranche but in the second tranche of the said fund. The complainant referred the matter to us for assistance.

Discussion

We enquired from the insurer concerning the complaint. The insurer confirmed that the complainant’s money had been invested in the second tranche of the specific offshore fund, which was the tranche investment offered after the first tranche had become fully subscribed. The insurer alleged that the investment had been offered as an alternative, which although offering less guarantees, did offer an early investment bonus of 7%.

The insurer confirmed that the independent broker maintained that he had instructed them to invest the complainant’s money in the first tranche. The insurer denied that it had received such an instruction at application stage and speculated that the independent broker had mistakenly instructed the insurer to invest the complainant’s money in the second tranche. The insurer denied that it had unilaterally invested the complainant’s money in the second tranche. The insurer implied that the independent broker had been kept fully advised of all developments in this matter and that the complainant had given an instruction that all communications should be to the independent broker and not to him.

We made specific enquiries to the insurer and requested it to provide us with copies of the following documents:-

1. written authorisation from the complainant, allowing the independent broker to submit application forms on his behalf;

2. written authorisation from the complainant, allowing the independent broker to receive communications from the insurer on his behalf;

3. letters or communications addressed to either the independent broker or the complainant informing him/them that the first tranche was no longer available.

Although the insurer sent to us a copy of a client authority form duly completed and signed by the complainant, the document did not answer any of the aforementioned three questions.

We sent a further letter to the insurer referring to correspondence which had already passed between us and the complainant and again asked, if the first tranche had been fully subscribed, why neither the complainant nor the independent broker had been advised hereof. We also queried why the investment had been made in the second tranche and not in the first tranche and if it had been done on the instruction of the independent broker, we requested proof thereof.

Result

Without responding to our queries, the insurer advised us that it intended placing the complainant’s investment in the first tranche from the inception date of the contract and that all values and all guarantees would be adjusted accordingly. We duly advised the complainant of the insurer’s decision and he expressed his gratitude for our assistance.

HE
October 2005