Nedbank smacked again…

The complainant, a farmer from Kwa-Zulu Natal had a large sum of money placed in a Nedbank Money Market Account. He had a long standing relationship with the bank going back some 25 years.

He was advised in November 2004 by a Mr Nivern Maharaj, a representative of Nedbank’s Financial Planning Division to invest this sum in an Old Mutual Money Market Fund, a Unit Trust because the Old Mutual Money Market Fund paid an additional 2% on the investment.

According to the Complainant, however, he had specific financial needs which he advised the Nedbank’s representatives about. Notwithstanding these needs, he was nevertheless persuaded to invest this sum in the unit trust through Old Mutual.

At the time of rendering the financial service the representative, the said Nivern Maharaj failed to disclose charges and commissions which would be levied against the investment placed in the Old Mutual Money Market Fund.

All the Complainant was told was that the investment was the same as the Nedbank Money Market Account except that the Complainant would have to give 72 hours notice to withdraw funds and would have to do so by way of a faxed withdrawal form and not through the internet, as client could do with his Nedbank Money Market Account.

The Complainant was shocked to discover that the Old Mutual Money Market Fund attracted costs of some R13 465,68, something which the Complainant advised that he was never told by the representative who rendered the financial service.

When Complainant addressed this complaint with Nedbank he was told that the charges would not be reversed, because he was advised of the charges in an e-mail that had been sent to him by the representative the next day.

In a detailed examination of the complaint, the FAIS Ombud set out the obligations that Nedbank, through its representative, Nivern Maharaj would have had to follow, in order both not to fall foul of the provisions of the FAIS Act. In particular, the FAIS Ombud found:

1. That the representative had failed to disclose commissions and charges at the time he rendered the financial service to the Complainant. The fact that that charges were e-mailed the day after the service was rendered does not amount to disclosure which is made timeously, so that the Complainant can make an informed decision;

2. That the representative had misrepresented the financial product to the Complainant by maintaining that it was the same as the account that he held with Nedbank in the money market account and that client was not exposed to any risks as Old Mutual owned Nedbank;

3. That the advice given was inappropriate as the bank failed to take into account the needs of the client, which included the fact that he needed the monies at short notice. The representative specifically maintained that he did not conduct a financial needs analysis, as the client had ‘waived’ his right to have one done.

However the Ombud held that any such waiver was null and void as the client could not waive such right and that even if the client said he waived such a right, the representative should not rely on it as such a waiver is null and void in terms of the General Code of Conduct for Financial Services Providers and their Representatives;

4. That the representative had failed to comply with various provisions of the FAIS Act, in particular:

4.1 he selectively compared the two financial products, thereby misleading the client as to the true nature of the product that he purchased. A unit trust exposes the client to risk and is not the same as a bank product, where the client’s money was kept. The representative focused only on the interest and method of withdrawal without pointing out the other risks involved;

4.2 the representative obtained client’s signature on the documents and filled in incorrect information, which the client had not given him;

4.3 the representative had failed to provide the client with information and relevant disclosures as required in the FAIS Act.

5. The Ombud found in the circumstances that the financial product, namely the Old Mutual Money Market Fund was misrepresented to the Complainant; the fees and charges were not disclosed and the advice rendered was inappropriate to the clients needs and circumstances.

6. The Ombud ordered Nedbank to repay the sum of R13 465,68; interest thereon at the rate of 15.5% with effect from 24th November 2004; and costs.