Secondary

Ombud

Appeal Board Comments on Ombud

In the recent “Prigge” decision, the FSB Appeal Board commented on the FAIS Ombud’s powers and duties in a fairly forthright manner. The information below is taken directly from the Appeal Board decision.

Appeal Denied

A determination is only appealable to the Board of Appeal with leave of the Ombud after taking into consideration the complexity of the matter or the reasonable likelihood that this Board may reach a different conclusion. If the Ombud refuses leave, the chairperson of the Board of Appeal may, on the same grounds, grant leave to appeal.

In this case the Ombud refused leave to appeal on the ground that there was no reasonable likelihood that the appeal would be upheld but she did not consider the other leg of the enquiry namely whether the matter is complex. Both issues have to be considered. Leave was eventually granted by the deputy chair of this Board.

We are not aware of any cases where appellants were granted leave to appeal by the Ombud.

The Objective of the Ombud

8. It is in view of the argument, which is often presented, necessary to have regard to the provisions of the Act that relate to the objective of the Ombud and the procedure which has to be followed during an investigation.

9. In terms of section 20(3), the objective of the Ombud is to consider and dispose of complaints in a procedurally fair, informal, economical and expeditious manner and by reference to what is equitable in all the circumstances, with due regard to the contractual arrangement or other legal relationship between the complainant and the other party to the complaint and the provisions of the Act.

10. We would first like to refer to the requirement of expedition. The complainant laid his complaint on 30 August 2011. The Ombud sent the prescribed rule 6(b) notice to the appellants on 5 September 2011. The appellants responded within five weeks with a statement and annexes of more than 40 pages.

11. A new notice was sent about three years later in which the Ombud informed the appellants that the provisions of section 27 (4) apply and required a statement from them, notifying them that should they fail to respond the matter will be investigated and determined without their version. The appellants answered immediately by referring back to the previous answer.

12. One can only deduce from this that letters are sent by the office of the Ombud without reference to what is contained in the file. And one can question why it took three years for any action whatsoever. This is not an example of an expeditious determination of the dispute between the parties and is unfortunately not atypical of matters that reach the Deputy Chair or the Appeal Board. It may be added that it took another year for the determination to be made and yet another before the appeal could be heard.

13. It is not known why the Ombud is unable to deal with matters expeditiously but one can gather from the file that much time and effort is spent on side issues and one knows from experience that the determinations are not concise and to the point.

In fairness one has to note that all syndication complaints were held in abeyance subject to the appeal by the Sharemax directors at the time.

14. The response to the application for leave to appeal was not dealt with dispassionately but defensively and with an ad hominem attack on the legal representative. That is, for a public functionary, inappropriate and in any event unnecessary even if the application for leave is in part provocative as it was in this case.

15. The response to such an application need not deal with anything but new matter that was not clearly dealt with in the determination. It is not necessary to argue or reargue the case. If the original reasons do not pass muster the new ones will seldom make up for any lacunae.

16. The problem, as happened in this case, is that the response may be completely off-beam. (In a previous appeal findings in the response were in direct conflict with some in the determination.) The complainant by way of example mentioned in his initial complaint that he received his shares in the scheme about six months after the investment. The appellants in their answer pointed out that the complainant received the prospectus at the time when the advice was given and that he acknowledged in writing that he had received the prospectus.

17. In response to the appellant’s statement the complainant informed the Ombud that he had only received the prospectus at the time he received the shares. He said nothing more. This version was not put to the appellants. And in the determination the Ombud did not make any finding in this regard.

18. However in the Ombud’s response to the application for leave to appeal it was said that the acknowledgement that the complainant received the prospectus “conveniently” appears a number of times and that the complainant merely signed these documents on instructions of the appellants. This is far-fetched. The complainant never made the allegation that that he had signed the documents on the instruction of the appellants. The Ombud could not make a finding on the probabilities that the complainant’s version as to when he received the prospectus was to be accepted considering that he is an educated person who knowingly admitted receipt of the prospectus at the time.

19. It is contrary to fairness and natural justice to make a factual finding on an allegation that was never put to the appellants.

Perceived bias

20. Matters like this (there are other instances) add fuel to the allegation that the Ombud is biased against financial service providers and sees her role as champion of disappointed clients.

21. The Act requires her to deal with complaints impartially (section 20(4)) and whether or not she does so depends on the facts of each case.

22. Incorrect factual findings are not in themselves proof of bias but may be proof of inexperience, lack of attention or of human error.

23. This Board dealt with the functions of the Ombud and found that she misunderstood the functions of the office in Sharemax Investments (Pty) Ltd and Others / Gerbrecht Elizabeth J Siegrist & Jacqueline Bekker (10 April 2015). The Ombud was dissatisfied with this decision, wrote letters to complainants (including the present complainant) about her dissatisfaction, and sought to review it, unsuccessfully. She has, unfortunately, to live with this decision unless and until it is set aside by an appropriate forum.

24. In the recent judgment of this Board, JSE Limited and 4 Africa Exchange (Pty) Ltd v Registrar of Security Services and ZAR X (Pty) Ltd, the powers of the Board were discussed with reference to the judgment in Registrar of Pension Funds v Howie NO and Others [2015] ZASCA 203; [2016] 1 All SA 694 (SCA). It was also held that this Board is not a court with powers of review:

“The Appeal Board is not a review ‘court’ as defined in the Promotion of Administrative Justice Act 3 of 2000 (‘PAJA’). Reviews are concerned with process; appeals with result. But that does not necessarily mean that review grounds may not overlap with appeal grounds. This is especially the position where a flawed process impacts on the result, for example, where the Registrar omitted to have regard to a jurisdictional fact.”

25. Bias that does not impact on the result is not such an overlapping ground. We are accordingly bound to consider whether the decision was right or wrong and – to restate the obvious – not whether the reasons were correct or incorrect: a decision may be correct for the wrong reasons and vice versa.

Click here to download the Prigge decision by the Appeal Board.

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