Ombud lambasts broker who tries to fleece friend after payout

Durban investment broker Soobramoney Perimal advertised himself as qualified to provide “fit and proper” financial advice – but the FAIS Ombud has found otherwise.

The Ombud for Financial Services Providers Charles Pillai (pictured) this week found Perimal’s attempt to claim exorbitant fees from a longstanding friend without prior disclosure was anything but “fit and proper” and his conduct has been reported to the Registrar of Financial Services Providers which issues licences.

The Ombud found that after offering to assist Dhevdass Naidoo of Chatsworth, Durban to lodge an insurance claim, Perimal had attempted to “fleece” him after the claim was paid out. Perimal demanded he be paid R31 666.92 for his services.

When Naidoo refused to pay Perimal, the latter issued summons. Naidoo then lodged a complaint with the Office of the FAIS Ombud.

In his complaint, Naidoo said that Perimal, trading as Mannies Financial Planning of Doone House, Smith Street, Durban, was a family friend who had previously assisted him and his wife with their medical aid, life policy and tax matters.

On 23 June 2006, the Complainant was the victim of a robbery at his house. Perimal offered to assist with lodging the insurance claim as the Complainant’s broker was on holiday at the time.

The Complainant’s usual broker’s secretary faxed the claim forms to Perimal who then assisted complainant in completing the forms. Perimal assured the Complainant that he would “hand deliver” the forms to the insurer, Mutual & Federal (M&F), as his office was “next-door”.

The Complainant alleged that all the quotations in support of the claim were obtained by him – and not Perimal.

The Complainant further alleged that Perimal informed him that M&F required a letter of consent signed by the complainant granting Perimal permission to “act temporarily as their broker until their broker returned from holiday”. This letter was drafted by Perimal and signed by the Complainant.

The Complainant said he wrote to M&F requesting that a part of his claim be settled in cash which M&F agreed to do. The other items were replaced.

Perimal, however, informed complainant that “…he was arranging for the [the] money to be deposited cash into [Complainant’s] account and that his contact inside M&F would then require 15% of the amount but [that] he had scaled him down to 10%”.

Naidoo said he was shocked and told Perimal that there was no need for this as M&F had agreed to pay him directly.

This allegedly angered Perimal who started telephoning the complainant to find out if he had been paid by M&F.

According to the Complainant, Perimal demanded “his 10%” which was allegedly for his “contact”. The Complainant alleged that Perimal sent “insulting sms’s” to him and his wife’s cell phones. The Complainant, therefore, decided to henceforth deal directly with M&F.

When the Complainant asked Perimal to return a file which he had, Perimal returned the file with a letter demanding R31 666.92 “for having used my professional services in finalising your claim”.

Perimal’s statement of account reflects the fees as follows:

Inclusive fees for consultation (all consultations were done at you (sic) house and very long hours were spent at your place during my consultation with you in connection with the claim), taking down instructions and completing the claim forms; personal deliveries; correspondence attendances (emails, photocopies, printing, faxes etc); telephone calls (land lines and cell phone calls and sms); consultation with Insurance Consultants from Mutual & Federal (petrol and traveling expenses to and from Durban central to M & F offices); etc, etc.

Limited to R27 778.00

Add vat 14% 3888.92

R31 666.92

Perimal also attached a list of telephone calls and visits allegedly made to the complainant’s home and M&F.

The Complainant alleged that when he contacted Perimal to query the account, Perimal “rudely cut me off” saying that there was “nothing to discuss”.

On 31 January 2007, the Complainant received summons from Perimal demanding payment of R31 666, 92.

The FAIS Ombud sent Naidoo’s complaint to Perimal on 16 November 2007 requesting him to resolve the matter with the Complainant within six weeks, alternatively to revert to the Office of the FAIS Ombud with his response.

Perimal failed to file a response to the complaint. When he was contacted by the Office of the FAIS Ombud on several occasions, each time he undertook to send a response immediately but failed to do so.

On 17 January 2008, Perimal’s attorneys wrote to the FAIS Ombud’s Office requesting confirmation that the matter had been resolved by it.

On 15 February 2008, a notice in terms of section 27(4) of the FAIS Act was issued. This too was sent through several means. The notice was sent by fax to both Perimal and his attorney. It was also sent by registered post to Perimal and to his attorney. However, despite the request for a response and a copy of his complete file of papers, Perimal failed to provide any information.

The FAIS Ombud then proceeded to issue a determination in which he disallowed Perimal’s claim for fees from the Complainant on the basis that Perimal had not abided by his duty as a broker to disclose fees upfront and he was not entitled to the fees claimed by him against the Complainant.

“Whilst we have on record the letter from the broker dated 17 January 2007 demanding fees, there is no evidence that these fees were disclosed prior to this letter.

“The robbery which led to the claim against M&F, which Perimal assisted the Complainant with, occurred on 23 June 2006.

“This was almost six months prior to the letter demanding fees. The letter, in fact makes no reference to any earlier disclosure of the fees payable or any method of calculation thereof.

“Even more pertinently, in a telephonic discussion on 26 March 2008 with a case manager of this Office, Perimal admitted that the question of fees was not discussed upfront,” the Ombud said in his ruling.

The Ombud also ruled that Perimal did not explain in his account the basis for stating his alleged fee.

“I have examined the schedule of telephone calls and visits allegedly made. In my view, it does not assist the Respondent at all.

“Firstly, I cannot imagine that fees to assist in completing claim forms, alleged visits to the Complainant and M&F and the making of phone calls, faxes and sending e-mails could justify the fees the Respondent is attempting to recover.

“In fact, I may go so far as to say that the bulk of the work of processing the claim must have been done by the insurer.

“According to the annexure to his account styled “Visited clients at his/her home – M&F Claim” he spent just under 63 hours visiting the Complainant and his wife in connection with the claim!

“In addition he is supposed to have made some 68 phone calls (including 51 to the Complainant and his wife) with regard to the claim.

“This is in spite of the fact that the Complainant at a certain point took it upon himself to deal with M&F directly, much to the chagrin of Perimal.

“In my view, the attempt to claim the exorbitant amount of fees is nothing more than an attempt to fleece the Complainant after his claim has been paid.

“This type of conduct impacts on a financial services provider’s fit and proper” status,” the Ombud ruled, adding copies of the determination will be sent to the Registrar of Financial Services Providers and placed in the relevant file of the court from which summons was issued by the Respondent against the Complainant.

Click here to read the full determination (PDF file 54kb)