FAIS Ombud releases its Annual Report for the financial year 2021/2022
Evolving our services with the future in mind
On Friday 18 November 2022, the Office of the FAIS Ombud will launch its Annual Report for the 2021/2022 Financial Year (1 April 2021 to 31 March 2022). The Annual Report and its contents reflect the period when Adv. Nonku Tshombe was the acting Ombud. Adv. John Simpson was appointed as Ombud from 1 November 2022.
The launch of this year’s annual report will be virtual, utilising this Office’s social media platforms. It will provide information on the performance of the Office of the FAIS Ombud during the financial year and its financial affairs.
“Like the rest of the world, the COVID-19 pandemic has catapulted South African business into various digital platform-based business models, as seen in active and operational fintech’s in the country. Even though the country has not attained an optimal state of readiness for this paradigm shift, reports indicate rising numbers of segments of fintech firms; with payment systems, insuretechs and the use of non-traditional data.”
“The benefits and risks must be identified. For instance, the key benefits are financial inclusion, personalisation, affordability, and an enhanced customer experience. The risks are data, privacy, protection, decision bias, fairness, and transparency.” In addition, “…it is important for financial services providers as well as consumers to note that while the digitised world has made it possible for financial advice and financial products to be provided via any number of platforms, such advice is still subject to regulatory requirements, as has been the case with written and verbal advice involving interaction with a human being.”
The theme for the 2021/2022 Financial Year was ‘Evolving our services with the future in mind,’ in this context, the report states “… that the Office is expected to receive a lot of complaints stemming from advice given via digitised platforms. The absence thereof is perhaps an indication that complainants are not aware that they are receiving advice when regulated financial products and advice are offered on such platforms, and consequently there is a need for compliance with regulation within the financial services’ legislative framework. Where this is not understood, a consumer may not be aware of their rights in terms of the General Code of Conduct for Authorised Financial Services Providers and Representatives. The Ombud Office has thus identified the need to digitise the lodging of complaints. For instance, the complaints portal on the website is already configured to function in a digitised world.”
“The Office has started and surged forward quite visibly and with encouraging results in the digital media space. The intention of this has always been to:
• improve engagement between the Office and its stakeholders,
• keep its stakeholders and the public up to date with the FAIS Ombud’s activities and services,
• enhance the organisation’s reputation by communicating service offerings and achievements,
• impart knowledge, educate, and allow for a more interactive experience with our stakeholders thereby contributing to financial inclusion.”
“At the rate that the audience is reacting, the objectives set out above may be achieved faster than has been the case before all the initiatives were set on course.”
“The financial year under review also culminated in the former Minister of Finance, Mr Tito Mboweni, appointing the first Ombud Council Board and a Chief Ombud for the Council, giving effect to the new financial Ombud system in terms of the Financial Sector Regulation Act No. 9 of 2017 (FSR Act). The Minister also appointed a Chief Ombud for the Ombud Council as a transitional measure, until a full-time Chief Ombud is appointed. The Ombud Council is established in terms of section 175(1) of the FSR Act. The objective of the Ombud Council is to assist in ensuring that financial customers have access to, and can use affordable, effective, independent, and fair alternative dispute resolution processes for complaints about financial institutions in relation to financial products, financial services and services provided by financial infrastructures.”
“The Ombud Council will have oversight powers over both the statutory and industry Ombuds namely:
1. Office of the Pension Fund Adjudicator
2. Office of the Ombud for Financial Services Providers (FAIS Ombud)
3. Office of the Credit Ombud
4. Ombudsman for Long-Term Insurance
5. Ombudsman for Short-Term Insurance
6. Ombudsman for Banking Services
7. Johannesburg Stock Exchange Ombud
This is a step forward with respect to the future of the Financial Ombud System in South Africa.”
“During the financial year the Office of the FAIS Ombud received a total of 11827 new complaints. This is not only higher than the 10 552 complaints received for the corresponding period during the 2020/21 financial year, but the highest number of new complaints received by the Office of the FAIS Ombud for a specific financial year since it was established. This also represents a 10,78% increase in the number of complaints received over the preceding financial year. In addition, an unprecedented 68% of all complaints received fell within the mandate of this Office. This resulted in 8 011 complaints referred to the Case Management department for investigation; the most ever since the inception of this Office and a significant increase over the 6 975 complaints received during the 2021/22 financial year which fell within the Office’s mandate. Therefore, the Office of the FAIS Ombud not only received more complaints overall but more of those complaints represented matters that fell within its mandate. This was seen as a positive development, testifying to the efforts to expand the awareness, and understanding of its existence, as well as the services provided by the FAIS Ombud Office.
In keeping with our legislative mandate to resolve complaints in an expeditious manner, 82.14% of all complaints are resolved within a period of 3 months, 88.60% within a period of 6 months, and 94.23%% closed within 9 months of receipt.
Of the 11 827 complaints received for the 2021/22 financial year, a total of 4 957 complaints were dismissed. A total of 3 791 complaints were referred to alternative fora and 1 269 complaints were settled in favour of the complainant. The number of complaints settled, 1 269, was less than the 1 389 complaints settled during the 2021/22 financial year. Whilst these numbers are still a testament to the efforts made and commitment to the conciliatory resolution of complaints by this Office and FSPs alike to ensure that complainants continue to be treated fairly, the reduction in the number of complaints was because of the nature of the complaints received by the FAIS Ombud Office, which shall be expanded upon below. The number of complaints received during the 2021/22 period that were carried over was 1 810, which was lower than the 2 041 carried over during the previous financial year, despite the significant increase in the number of complaints received. This means that a total of 10 017 complaints were resolved within the financial year, which represents 84,70% of all complaints received. This means that the Office of the FAIS Ombud achieved its strategic outcome to resolve a minimum of 80% of all complaints received within a specific financial year and confirms how efficient this Office was in executing upon its mandate.
Of the 8835 complaints received during the 2019/2020 Financial Year, 2467 were referred to other fora. This represents 27.92% of all complaints received by this Office. The referral of complaints to other fora remains an important aspect of the service provided by the Office of the FAIS Ombud as this demonstrates the continued commitment to promoting access to justice by appropriately assisting any person who submits a complaint to this Office.
Overall, the total number of complaints resolved during the 2021/22 financial year was 12 089; more than ever resolved by the FAIS Ombud Office during a single financial year. The number of complaints settled during 2021/22 was 1 823 (inclusive of determinations) and was an increase on the 1 729 positively resolved in favour of the complainant during the previous financial year. Despite this increase, however, the Office of the FAIS Ombud thus attained a settlement ratio of 22%, lower than the 27,59% achieved during the 2020/21 financial year. A discrepancy that can be attributed to the increased number of complaints that this Office dismissed after initial investigations were conducted, which revealed no basis or merit in respect of the complaint. This is an indication of the economic impact of the post-pandemic environment and the subsequent desperate situation faced by many complainants whose complaints revealed that there was a bigger change in circumstances as opposed to the inappropriateness of the advice provided at inception. The overall settlement value for the 2021/22 financial year was R69 979 324 which is the highest value returned to consumers recorded by the Office of the FAIS Ombud during a financial year. Once again, the positive aspect of this achievement that must be highlighted is that most of the settlement value attained was from informal settlements achieved via conciliation processes between FSPs, consumers and the Office of the FAIS Ombud.
The dismissal of complaints is only considered after significant due diligence has been undertaken during the investigation, and the Ombud Office is required by law to provide detailed reasons for any decision made inclusive of complaints dismissed. Any party that feels aggrieved by decisions taken by this Office can approach the Financial Services Tribunal for the matter to be reconsidered. During the 2021/22 financial year, a total of 158 applications for reconsideration were made to the Financial Services Tribunal and, of the 145 matters decided on as of 31 March 2022, 136 of those applications were dismissed with only nine (9) referred back to this Office for further investigation. This reflects a favourable rate of agreement (94,30%) with the Tribunal. Therefore, whilst the number of complaints dismissed (6 314) during the 2021/22 financial year has increased from the 4 245 dismissed during the 2020/21 financial year, the positive affirmation of this Office’s decisions by the Tribunal confirms this Office’s commitment to the diligent investigation of complaints in accordance with its mandate to provide independent and impartial rulings.
In respect of complaints referred to other fora, a total of 3 947 complaints were referred to other ombud schemes, which was higher than the 2 877 referred during the 2020/21 financial year. This is in accordance with the commitment of the Office of the FAIS Ombud which is to ensure that even where it is unable to be of assistance, the complaint of any person submitted to this Office will be carefully considered and that where possible, the complainant shall be referred to the correct forum to receive the assistance required. All this is part of our continued commitment to service and to enhancing access to justice for all South Africans.
It is important to note that the figures detailed above do not include complaints that this Office still deals with in respect to investments made into property syndications schemes. These complaints, which do not relate to complaints received and/or resolved during the 2021/22 financial year, are maintained separately. During the 2019/20 financial year the office of the FAIS Ombud made a commitment to reduce the original number of 1 300 active property syndication complaints by a minimum of 10% annually.” As of 31 March 2022, it was able to reduce the 1036 active property syndication complaints to 1 004, a reduction of 3,09%.
The Office of the FAIS Ombud would like to acknowledge the contribution made by its staff whose efforts remain crucial to the continued success of the Office, and to the many entities and individuals who assist the Office in achieving its mandate.
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