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Failure to respond to complaint lodged against FSP

12 May 2016 Raynold Tlhavani, Norton Rose Fulbright
Raynold Tlhavani from Norton Rose Fulbright.

Raynold Tlhavani from Norton Rose Fulbright.

The January 2016 determination of the Ombud for Financial Service Providers in Johannes William van Breda v Alesio Mogentale & Another is a good reminder of the powers of the Ombud where an FSP fails to respond to a complaint made against it.

The complaint arose from a failed investment into a product known as Bondcare, where the complainant had invested his life savings following advice from the intermediary.

The basis of the complaint was the intermediary’s failure to render financial services in line with the FAIS Act and the General Code, which included the failure to appropriately advise the complainant and disclose the risks involved in the investment.

The FSP failed to furnish a response to the complaint despite being invited to do so on several occasions. As a result, the Ombud based the determination on the complainant’s version and supporting documents.

“ A duty is imposed on an FSP to co-operate with the office of the Ombud in a professional and reasonable manner.”

The Ombud was scathing regarding the conduct of the intermediary in providing advice to the complainant, finding that Bondcare was not an investment but a ‘cesspit’. The intermediary was found to have failed to comply with the Code and ordered to pay, jointly and severally with the other respondent, the amount of R455 000, being the complainant’s investment, and interest at the rate of 9% from 14 August 2012 (the date of demand) to date of final payment.

A duty is imposed on an FSP by the Rules of Proceedings of the Office of the Ombud to co-operate in a professional and reasonable manner to ensure the efficient resolution of a complaint. An intermediary who ignores an invitation to respond to a complaint runs the risk of a determination being made without its input, to its own detriment.

First published by Financial Institutions Legal Snapshot.

 

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