Misselling—instructions misunderstood?

Background

The complainant, a divorcee aged 65, had all her pension money invested in the money market. The investment yielded a sufficient amount per month for her upkeep but she became concerned about the lack of capital growth. Because she was totally unskilled in financial matters, she turned to a firm of brokers for advice on how to invest her money. She insisted on a minimum monthly income equal to that which she got from her investment in the money market. The broker recommended an investment overseas. The plan was based on the assumption that the investment would produce a satisfactory yearly return and furthermore that the Rand would continue its downward trend. The complainant alleged that she instructed the broker that her capital should not be exposed to any risk. She, however, signed a mandate in which it was made clear that no guarantees were provided. She admitted to her signature but explained that she signed the document without reading it. The investment performed satisfactorily in dollar terms but as a result of the strengthening of the Rand, the capital deteriorated sharply. The complainant claimed compensation for the loss of her capital on the ground that her broker did not adhere to her instruction that her capital may not be exposed to any risk.

Assessment

We could not determine on the papers whether in fact there was a mutual understanding that the complainant’s money should not be exposed to any risk. It was furthermore not possible to decide whether the complainant took an informed decision. A hearing was arranged during the course of which the parties came to a practical settlement. The firm of brokers undertook to pay a sum towards compensation on the basis that there might have been some misunderstanding about the actual terms of the mandate.

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