Ombud Council publishes its new rules
5 Jul, 2024

 

Lize de la Harpe, Senior Legal Advisor, Sanlam Corporate

 

The Ombud Council, under section the Financial Sector Regulation Act, 2017, published new Ombud Council Rules for the Ombud for Financial Services Providers on 1 July 2024.

 

Background

 

Before the introduction of the FAIS, there was no statutory body or voluntary organisation to which the public could turn to complain about unsuitable advice or bad intermediary service given or rendered by financial advisers. And as we all know, the cost of access to the courts is often out of the reach of the ordinary person. The Office of the FAIS Ombud was accordingly established by section 20 of the Financial Advisory and Intermediary Services Act, 2002 (“FAIS Act”’) and started operating in 2004.

 

To date, Board Notice 81 of 2003 titled “Rules on proceedings of the Office of the Ombud for Financial Services Providers” (which came into effect in 2004) set out the rules of the proceedings of the FAIS Ombud (read in conjunction with the provisions of FAIS).

 

The new Rules replace Board Notice 81 with effect from 1 July 2024.

 

Complaints

 

The complaint must relate directly or indirectly to a financial service rendered by a person authorised as a financial services provider or by a person acting on behalf of such a person.

 

A “complainant” includes the complainant’s lawful successor in title or the nominated beneficiary of the financial product which is the subject of the relevant complaint.

 

A complainant may seek any relief relating to the subject matter of the complaint, but a complaint constituting a claim for a monetary award, must relate to the redress of financial prejudice or damage suffered or likely to be suffered by the complainant.

 

The Ombud must be satisfied that the complainant endeavoured to resolve the complaint with the respondent and that the respondent failed to address the complaint satisfactorily within six weeks of its receipt. As such, before submitting a complaint, the complainant must first try to resolve the complaint with the respondent. The respondent has six weeks within which to resolve the complaint, failing which the complaint may be lodged with the Ombud. The complaint must be brought within 6 months of the final response from the respondent or, if no response was given, within 6 months after the response was due.

 

Limitations

 

The Ombud‘s jurisdiction is limited to claims not exceeding R3 500 000 (previously R800 000.00), unless the responding party has agreed in writing to this limitation being exceeded or the complainant is prepared to abandon the amount in excess of this limit.

 

The complaint must not relate to the investment performance of a financial product unless such performance was guaranteed expressly or implicitly or such performance appears to the Ombud to be so poor that it raises a prima facie presumption of misrepresentation, negligence or maladministration by the person (or his or her representative) against whom the complaint is brought.

 

Take note – the Ombud may summarily dismiss a complaint without consideration if on the facts provided by the complainant it appears that:

 

  • the complaint does not have any reasonable prospect of success,
  • the respondent has made an offer which is fair and reasonable and which is still open for acceptance by the complainant; or
  • the matter has previously been considered by the Ombud;
  • the essential subject of the complaint has been decided in court proceedings;
  • the subject of the complaint is pending in court proceedings; or
  • the complaint or relief sought is of the nature that the Ombud can be of no assistance to the complainant.

 

Lastly, the Ombud must refer any complaint relating to a financial service rendered by a person not authorised as a financial services provider or representative, including any relevant supporting information, to the FSCA to enable the FSCA to consider appropriate action.

 

Conclusion

 

The revised Rules are largely aligned to the old rules in both principle and process. The most significant change is the increase in the jurisdictional limit from R800 000 to R3 500 000 – a welcome change, especially considering inflation over the past 20 years.

 

The Rules (which must be read together with applicable provisions of the Financial Sector Regulation Act, 2017) are available on the Ombud Council’s website, www.ombudcouncil.org.za, and came into effect on 1 July 2024.

 

ENDS

Author

@Lize de la Harpe, Sanlam
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