Deja vu as FAIS Ombud refuses leave to appeal again
Since the beginning of the year, we've reported on two cases brought to the FAIS Ombud to be adjudicated in terms of the FAIS Act. These cases had similar outcomes in that the Ombud awarded in favour of the complainant and ordered the respondent to pay co
In each case, the respondent subsequently applied for leave to appeal the Ombud's ruling. But as consistent as the rulings were in finding for the complainant, so too were the requests for leave to appeal denied.
In Saroja Naidoo versus SA Home Loans (Pty) Ltd the Ombud ruled in favour of Saroja Naidoo on the basis of incomplete disclosure. SA Home Loans' request for leave to appeal was denied. More recently, in the case of Selwyn Comrie versus Ewing Trust Company Limited, the Ombud again withheld leave to appeal. In this case he ruled against Ewing Trust on the basis of inappropriate financial advice leading to the loss of an investor's funds.
FAIS Ombud, Mr Pillai sites a number of reasons for his latest refusal. One of the regulator's major concerns is the fact that most respondents are appealing the rulings handed down to them by default. This effectively delays the payment of compensation to the complainant.
An 'opportunistic' application for leave to appeal
In each of these cases, the Ombud contends that the respondents have failed to provide any additional information which might change the outcome of the case. The FAIS Ombud's press release reveals that the Ewing Trust Company requested an appeal because the "direct cause of the loss suffered by Complainants was the improper issue of an exemption by the Financial Services Board in breach of its statutory duty."
Pillai countered: "It is evident from the various grounds of appeal raised by Respondent that it is blaming everyone else, from Leaderguard Spot Forex to the Financial Services Board, yet fails to give a full and proper account of its own conduct, in particular its enquiries into Leaderguard Spot Forex and its products.
"Indeed, it is clear from this application that the Respondent is being opportunistic," he said.
Overstepping the mark
After each of the above rulings, we asked FAnews Online readers for some of their views on the Ombud's determinations. The consensus was that the Ombud was focussing tightly on the responsibilities of individual brokers and brokerages, while largely ignoring the part that the financial service providers played. End users of the financial services concerned seemed absolved from any accountability.
A financial planner offered an interesting analogy: Why should a salesman (the intermediary) be wholly accountable for a problem if the factory (the financial services provider) made a mistake with a product which was SABS (Financial Service Board) approved? In this case, the SABS should be required to ensure that the product was properly assessed, and the factory that the produce was manufactured to tight specifications. Yet in most rulings, the financial intermediary carries the can for any aberrance in the financial services environment.
Concerns were also expressed about the role of the FSB in issuing licences and subsequently policing the use of said licences. Examples abound of individuals who are not suitably qualified being awarded licences, and indeed of companies contravening the conditions of their FSB licences. Those in contravention of their licenses seem to remain so freely and for lengthy periods before any action is taken against them.
Many readers also expressed concern at the perceived bias of the FAIS Ombud in determining whether or not to allow an appeal. It makes no sense that the judge in the original matter has full say in whether or not the case is heard on appeal. To grant leave to appeal on a case where you have already passed judgement would surely require you to doubt your original decisions. The current process creates opportunity to question whether the FAIS Ombud would ever refer one of its judgements to appeal.
Prevention better than cure
There is little doubt that prevention is better than cure. Where Leaderguard is concerned, the FAIS Ombud is now hearing numerous cases which would never have surfaced had Leaderguard been denied a licence in the first place.
More effective policing of the financial services environment and quicker action against those who misuse their licences will ensure similar situations do not occur. They will also substantially reduce the number of complaints that have to be brought to the Ombud in the first place.
Editor's thoughts:
We have reported extensively on the two cases in which the FAIS Ombud has reached determinations this year. Do you believe the system is loaded against the financial intermediary, or do you feel the system should simply be improved to make other players in the industry more accountable too? Send your comments to [email protected]
