FSPs and compliance: key takeaways from Ombud rules
The introduction of the new Ombud Council Rules marks a crucial advancement in safeguarding consumers and streamlining compliance within South Africa's evolving financial services industry.
On August 14, attendees gathered for a webinar titled “Understanding the New Rules: Insights from the Ombud Council and FAIS Ombud.” Hosted jointly by the Ombud Council and the FAIS Ombud, this webinar provided an in-depth look into the newly implemented Ombud Council Rules for the FAIS Ombud (Rules), their implications, and the steps financial service providers (FSPs) need to take to stay compliant.
The importance of the new rules
The financial advisory and intermediary services industry has long been a cornerstone of the South African economy, providing essential services to individuals and businesses alike. However, as the industry grows and evolves, so too does the need for robust regulatory frameworks that can protect consumers, ensure fair practices, and maintain the integrity of financial services. The introduction of the new Ombud Council Rules represents a significant step in this direction.
These rules are designed to enhance the operational efficiency of the FAIS Ombud, expand its jurisdiction, and provide clearer guidelines for Financial Service Providers (FSPs) on how to remain compliant. The rules also aim to improve the process of resolving disputes between FSPs and their clients, ensuring that consumers have access to fair and timely recourse when things go wrong.
The dual purpose of the rules
Leanne Jackson, the Chief Ombud of the Ombud Council, opened the webinar with an address that underscored the significance of the new rules. Jackson’s extensive experience in regulatory frameworks was evident as she discussed the rationale behind the introduction of these rules. She highlighted that the financial services landscape is increasingly complex, and the regulatory environment must keep pace with these changes to protect consumers effectively.
Jackson explained that the new rules are not merely administrative updates but are a comprehensive overhaul aimed at creating a more transparent, accountable, and consumer-friendly industry. “The new Ombud Council Rules are a response to the evolving needs of our industry. They are designed to protect consumers while also providing clear and practical guidance for FSPs,” she noted. Jackson’s emphasis on the dual purpose of the rules - consumer protection and industry guidance - was a central theme throughout her presentation.
She also discussed the collaborative approach taken in developing these rules, involving consultations with various stakeholders, including industry experts, consumer groups, and regulatory bodies. This inclusive process, she argued, has resulted in a set of rules that are not only effective but also fair and balanced. Jackson reassured the attendees that the Ombud Council is committed to supporting FSPs through this transition, providing the necessary resources and guidance to ensure compliance.
Key changes and their implications for FSPs
Following Jackson's insightful introduction, Advocate John Simpson, the FAIS Ombud, took the stage to delve deeper into the specifics of the new rules. Simpson, known for his pragmatic approach to regulation, provided a detailed analysis of the key changes and their implications for FSPs.
One of the most significant changes, Simpson highlighted, is the expansion of the FAIS Ombud’s jurisdiction. This change means that the FAIS Ombud can now address a broader range of complaints, offering greater protection to consumers. However, with this expanded jurisdiction comes increased responsibility for FSPs to ensure that their practices are in line with the new regulatory expectations. “The big change in the rules was the increase in jurisdiction. So far, we have not seen an influx of claims, and things are under control,” Simpson stated, providing a balanced perspective on the challenges and opportunities that come with the new rules.
Simpson also discussed the importance of preparedness in the face of these regulatory changes. He emphasised that FSPs must be proactive in educating themselves and their teams about the new rules. “For FSPs, arming yourself with knowledge is invaluable,” he advised. Simpson’s comments served as a reminder that staying informed is not just about compliance; it is also about being able to provide better service to clients and avoiding potential disputes.
As an important tip for advisers, Simpson emphasised that they must keep a detailed, comprehensive, written, and signed record of the advice provided. “A missing or incomplete record of advice is a common reason for a finding against an FSP. Annual reviews are also very important and should be carefully documented.”
“When a complaint is first received by the Office, it will be assessed to determine whether the FSP has had an opportunity to resolve the complaint. If not, the FSP will be provided with a 6-week period to resolve it before it is accepted for investigation. This premature complaint’s process is very successful and provides the FSP with an ideal opportunity to resolve complaints before they are escalated,” added Simpson.
Important questions were raised
During the session, several important questions were raised, particularly around the practical application of the rules and how they would affect smaller FSPs with limited resources.
In response, Jackson and Simpson both emphasised that while the rules are comprehensive, they are also designed to be flexible and scalable, taking into account the nature of the dispute and its complexity. They reassured the attendees that the Ombud Council and the FAIS Ombud are committed to providing ongoing support, and dedicated channels for FSPs to seek guidance.
Simpson said the Office serves to improve the financial industry as a whole and provide fair, balanced and well-considered decisions to all the parties.
A call to action
The webinar was more than just an informational session; it was a call to action for all stakeholders in the financial advisory and intermediary services industry. The new rules introduced by the Ombud Council represent a shift towards greater accountability, transparency, and consumer protection. For FSPs, this means a renewed focus on compliance, but also an opportunity to enhance their service offerings and build stronger, trust-based relationships with their clients.
Jackson and Simpson’s messages were clear: while the regulatory landscape is changing, these changes are designed to benefit both consumers and the industry as a whole. By embracing these changes, FSPs can not only avoid potential pitfalls but also position themselves as leaders in a more transparent and consumer-focused market.
Writer’s Thoughts
The new Ombud Council Rules represent a leap forward in refining the regulatory landscape of South Africa's financial services sector. By enhancing the operational efficiency of the FAIS Ombud and expanding its jurisdiction, these rules not only bolster consumer protection but also provide clearer, more practical guidance for FSPs. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me - myra@fanews.co.za
