Moonstone Monitor: Board of Appeal Disagrees with FAIS Ombud

The findings of the Board of Appeal which found in favour of the broker, Marius Naudé in the Mackrory/Naude case have been published on the FSB website.

A number of interesting facts emerge from this document, which you can read in full by clicking here.

Readers may remember that Naudé requested permission to appeal, but this was turned down by the Ombud. He then approached the Registrar at the FSB and was allowed to refer the matter to the Board of Appeal.

The original complaint was laid on 24 June 2005, and the determination by the Ombud was made on 31 May 2006. The final decision by the Board of Appeal was signed on 6 August 2008, almost three years after the original complaint.

From the findings it appears as if a number of mistakes were made by the office of the Ombud.

The first was to request “…any documentation in your possession which may assist in this case.” Naudé responded by saying that he did not have any documentation in his possession as everything was done by Venter, who was employed by Leaderguard at the time. He heard nothing more from the Ombud until he received the final determination in which he was ordered to refund the client’s R60 000 plus interest and pay the case fee of R1 000.

In the Ombud’s determination he states: “…the respondent was asked for his version of events…” This differs markedly from the actual request for “documentation” and the Board of Appeal found that the Ombud had not complied with the requirements of the Act in this regard.

In essence this meant that Naudé’s version of events was never heard in the original hearing.

Another oversight was to not obtain Venter, the Leaderguard representative’s version of events. This should have been obtained as the complainant cited him as one of the people against whom he was complaining.

While new evidence may not be presented in an appeal case, the Board of Appeal did allow Naudé to put his case, given the facts mentioned above.

A crucial finding from this was the fact that Naudé made it abundantly clear at all times to explain to the client that he did not have sufficient knowledge, hence the introduction to Venter. The claim that he “highly recommended” the investment was therefore not accurate.

A further point made is that the original investment was made before the FAIS Act came into being, and can therefore not be seen to be part of the problem. Naudé was not even present when the second investment was made, this time after FAIS was enacted. The Board found no causal link between the two events.

A final point for discussion concerns the different versions of the two parties regarding whether Naudé “recommended” the investment to the client. The Ombud’s determination contained a number of referrals to Naudé’s version of events which, as we saw above, was not in the possession of the Ombud at the time the determination was made.

In hindsight it appears that there were indeed very good grounds for an appeal by Naudé, and we should all be grateful that he stuck to his guns.