The FSB Appeal Board recently published its decision at a hearing held on 27 February 2018.
The appeal was dismissed, but not before the Board expressed some very concerning comments on the office of the Ombud’s handling of the case.
What is its mandate?
Under the heading “Risk management”, the latest FAIS Ombud annual report notes:
“The FAIS Ombud reports to the Board of the Financial Services Board. In discharging its oversight responsibility… the Board adopts a combined assurance approach with the over-riding purpose of assuring its stakeholders about the effectiveness of governance systems and instilling confidence in the delivery of business value.
The FAIS Ombud’s strategic goals are prioritised in the following manner:
- to resolve complaints in a fair, expeditious, and economical manner;
- to achieve operational excellence; and
- to engage with stakeholders.
These goals are monitored and progress reported quarterly to performance information consolidation structures…
The Audenberg case
In the light of the above it is interesting to note the views of the FSB Appeal Board on some of the decisions made by the FAIS Ombud in this case.
- “This is not the first instance where the Appeal Board had to point to the failure of natural justice in the office of the Ombud and about the unjustifiable delays in processing matters. Failure of the office of the Ombud to comply with its statutory duties may in an appropriate case lead to the setting aside of a determination to the detriment of complainants.”
- “It is unfortunate that this Board has to revisit this issue but the facts of the case require it.”
- “In this matter the Ombud failed to deal with the matter expeditiously or in a procedurally fair manner.”
- “As to expedition, the complaint was lodged on 28 April 2010. In response, the appellants addressed the issues raised on 29 July 2010. They followed this up with further letters, the last being of 5 May 2011. The first action by the Ombud was on 8 January 2014…”
- “The first problem with the letter is that the issues in the Sharemax matter had nothing to do with the issues in this case. The excuse was accordingly not a valid excuse.”
- “The second problem is that the Ombud did not inform the appellants that the matter was still pending and the appellant had good reason to assume that the matter had died a natural death.”
- “The same happened with the next letter from the Ombud of 19 May 2015. Once again, the appellants were kept in the dark.”
- “The first intimation the appellants had that the matter was alive was after a silence of four years — on 24 June 2015, when the Ombud wrote to the appellants. The appellants provided the facts requested on 6 July 2015 and on 15 September 2016 the determination was made.”
- “To add insult to injury, it took the Ombud ten months to deal with the application for leave to appeal.”
- “That brings us to the question of procedural fairness. It is apparent that the Ombud must have been in telephonic or other contact with the complainant shortly before the determination. The new allegations of the complainant were not put to the appellants and do in any event not appear from the record. This amounts to a basic denial of justice. Some of the information unilaterally obtained found its way into the determination.”
- “In respect of the appellants’ suggestion’ (it was in fact an allegation) that City Capital was back on track, the Ombud said that this was not supported by documentation and that the allegation was irresponsible. The Ombud relied on the fact that the company had been liquidated during 2009. The problem with the Ombud’s findings in this respect (para 67) is that the Ombud failed to have regard to the fact that the company was for a while under provisional liquidation and has long since been trading. The Ombud simply failed to follow up or test the information that came from the appellants, creating the impression that whatever a complainant says must be true and what the FSP says must be untrue.”
A similar comment was made as far back as October 2015 when the retired judge who chairs the Appeal Board said: “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. The Act requires her to deal with complaints impartially…”
What should be of concern to those accountable for the office of the Ombud operating within its mandate is that very few of the Ombud’s decisions are taken on appeal. Who knows how many other cases, not appealed, suffered a fate similar to what is outlined above, and in previous scathing comments by the Appeal Board. By far the majority of complaints are resolved by means of settlements, and very few are reported on.
Some of the comments above were made as far back as October 2015, and one has to ask whether this was addressed by those who monitor the actions of the Ombud.
The fact that this office, as a dispute resolution mechanism, operates in a less formal manner, requires more stringent supervision, not less.
Click here to download the Audenberg case.