FAIS Ombud performs admirably during a tough year for the industry
The financial services industry plays an important role in the country. It offers necessary cover for assets which the South African population feel need to be covered in order for their families to maintain their quality of life should unforeseen circumstances occur. Because of the complex nature of the industry, guidance is needed. The role of the broker is important in this instance, but what happens when the trust between broker and client is broken? The office of the FAIS Ombud (Ombud) offers a necessary platform for recourse, even during these current tough operating conditions.
The financial services industry is one of the industries which falls prey to this quite frequently. We have recently highlighted two determinations made by the Ombud whereby unsuspecting members of the public were scammed out of money by unscrupulous brokers. But what is the true state of the industry?
On the rise
According to the latest annual FAIS Ombud report, which was released on November 1 2013, the number of new complaints for the 2012/13 year was 9949. This is an increase of 1128 complaints from those which were recorded in the 2011/12 year. Of these complaints, 2577 complaints were dismissed, 4366 complaints were referred, 955 complaints were settled while 2051 cases will be carried over to be dealt with in the 2013/14 year.
Predictably, the short-term industry is the industry which received the most complaints (27.38%) while the long-term industry was second with 25.35% and the investment industry third with 23.14% of the complaints. The medical scheme and retirement industries fared the best with 1.59% of complaints and 4.18% of complaints respectively.
An area of concern is the fact that the Ombud had to handle 33 determinations during the period under review, which is an increase from the 25 determinations which was handled in 2011/2012. In fact, 2012/2013 was the second highest period since 2009/10 where 91 determinations were recorded.
Achieving objectives
Settling 7938 cases during the period under review is no mean feat, and suggests that the Ombud was busy and has identified the fact that the effective resolution of these cases would be a priority.
The chairperson of the Financial Services Board, Abel Sithole, points out that the office of the FAIS Ombud has set itself a target to close cases for adjudication within nine months of receiving them. While this represents a significant milestone, it does not provide a holistic picture of the offices' achievements. He adds that these achievements can be appreciated by looking at the nature and effect of the adjudicators in terms of the way they approach and resolve cases.
Finance Minister Pravin Gordhan adds his weight behind the FAIS Ombud by pointing out that financial protection, such as that offered by the Ombud, is a vital component in the country, realising the ambitions set out by the National Development Plan.
"In addition to providing assistance to members of the public through an expeditious dispute resolution process, the FAIS Ombud also assists those consumers who have fallen victim to financial schemes perpetuated by unscrupulous financial service providers. Complaints relating to commercial crime fraud are increasing and the Ombud has become inundated with complaints arising from collapsed, fraudulent investment schemes, chief amongst which have been property syndication schemes,” says Gordhan.
Of concern though, is the fact that there are complaints being directed towards the Ombud regarding its independence and its impartiality. This was highlighted during the case between Deeb Risk and Others vs the Office of the Ombud and Others.
The accusations levelled against the Ombud were based on the grounds that the Ombud:
- is neither independent nor impartial;
- the adjudicator from the Ombud is appointed by the FSB and the Ombud serves at the pleasure of the FSB;
- the Ombud does not have the independence of a High Court Judge or even a Magistrate, and;
- the Ombud has a close relationship with the FSB.
However, it is important to remember that the FSB is the industry regulator, so the Ombud will naturally be governed by the FSB. There will also be a natural close relationship between the Ombud and the FSB because the Ombud will turn to the FSB for guidance on finer points of the FAIS act in order to make proper adjudications on determinations.
This is also not to say that the Ombud goes about its business irresponsibly. In the determinations which we profiled, the Ombud gave both parties ample opportunities to present their cases. On both occasions, it was the brokers - or their representatives - who gave incomplete information to the Ombud. This was clearly pointed out in the Ombud's findings and one can't blame them for ruling against the brokers in these cases.
Editor's Thoughts:
Strategic planning is an important function of any business as it gives clarity on its objectives for the year ahead. Chief among these for the Ombud will be to resolve as many cases as possible in the year ahead, but the Ombud also hope that it will hear fewer determinations in the coming year. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
Comments
18 Oct 2010
Sharemax’s attorneys, Weavind & Weavind have apparently been charged with fraud by Pierre Hough, managing director of Chase International who laid the charges at the Brooklyn Police Station on behalf of one of his clients.
According to station commander, Brigadier Andre Wiese, a case of fraud had been opened but this matter had been transferred to the commercial crimes unit in Pretoria.
Hough says Weavind & Weavind failed to respond to a demand for repayment of a R200k deposit originally paid to the attorneys by one of Chase International’s clients. He has apparently lodged a claim with the fidelity fund of the Law Society of the Northern Provinces in an effort to get the client’s money back.
Hough has accused Weavind & Weavind of theft amid allegations of fraudulent non-disclosure and misrepresentation in the prospectus published for the Zambezi Retail Park.
Hough has also accused the attorneys of transferring money out of their trust account prior to the property being transferred to the syndication vehicle. The Department of Trade and Industry specifically prohibits the withdrawal of funds from a trust account prior to the properties being transferred.
Apparently Zambezi Retail Park and The Villa – other properties in the Sharemax portfolio – have not yet been transferred to the syndication company.
Report Abuse
Bam links Sharemax to Botha through FSP Network, which traded under the name Unlisted Securities South Africa (USSA).
USSA provided many financial advisers with the necessary Financial Services Board (FSB) licence necessary to sell Sharemax products. The business was described by Bam in a previous determination as “nothing short of the hiring out of a licence for a small monthly fee.”
For more on USSA, see: the following articles: Broker offers widow costly Sharemax advice, FSB linked to Sharemax “licence for hire” scheme, and FSB official’s husband pays 13% return.
At its peak, USSA had 1376 representative brokers, all of whom sold Sharemax products. Bam notes that all of USSA’s registered brokers were only allowed to market Sharemax products.
What’s more, Sharemax director Gert Goosen was also USSA’s sole director and key individual.
Bam writes that Sharemax and USSA were “joined at the hip.”
“What Sharemax attempted to do was to create a buffer between itself and the brokers and the investors,” notes Bam. “This was a futile exercise as in law, Sharemax and its directors will, ultimately, be responsible for the conduct of their section 13 representatives.”
Bam says that Sharemax director Dominique Haese “gives no explanation as to why Sharemax stood by and took money from investors, via their ‘supervised’ broker network, who were clearly investing in a product that was not suitable for them.
Bam says that Haese must have known that the majority of the investors brought in by the representatives were pensioners.
Bam ordered all seven respondents, jointly and severally, the one paying the other to be absolved, to pay Siegrist the amount of R580 000. If the respondents comply with the order, they are entitled to Siegrist’s share certificate.
Report Abuse