Secondary

Expediency and the Ombud

“The FAIS Ombud’s role is to resolve disputes between financial services providers and their clients in a procedurally fair, informal, economical and expeditious manner.”

Thus reads the home page of the Ombud’s website, as well as the relevant legislation.

A relatively understated achievement by this office is the number of “settlements” it reaches with financial services providers, as opposed to “determinations”.

Since 2005, a total of exactly 200 “determinations” were made, as reflected in the 2011 – 2012 annual report. This figure is distorted by the 91 determinations in the 2010 – 2011 year alone, which makes up nearly half the total.

In the 2011 – 2012 financial year, alone, the number of “settlements” came to 1 116.

There are possibly two reasons for this:

  • Most FSPs would rather reach a settlement, where they have some control over the outcome, than leave their fate in the hands of the Ombud
  • From the examples quoted in the Ombud’s latest annual report, most of the amounts involved were not of significant proportions.

As settlements result from an admission of guilt, in a sense, it means that the process is a lot less time consuming than instances where the Ombud has to investigate and make a determination on the facts to hand.

A recent determination (Germishuys) was made more than three years after the complaint was first laid at the office of the Ombud. This is not the norm, although it is difficult to gauge what the average duration is from the time the Ombud received the complaint to when the determination is signed.

The late Charles Pillai, a former Ombud, at one stage expressed his frustration with FSPs who employed lawyers to assist them, claiming that it thwarted the objective of a quick and informal resolution of complaints.

In the Geldenhuys case, the complaint was laid on 25 August 2009, and the determination published on 27 November 2012. One of the complainants, who was confined to a wheelchair, lost all his retirement savings in an imploded property syndication. The determination came too late, as he had since passed away, according to a report in Fin24.

Which brings me to the first three elements contained in the quote above: “procedurally fair”, “informal” and “economical”.

The need for the process to be economical, from a client’s perspective, is obvious: As Bob Dylan so graphically put it in Like a rolling stone: “When you got nothing, you got nothing to lose”.

Despite being informal, the office of the FAIS Ombud has the same legal clout as a formal court of law. One apparent chink in this armour, is that there is no further recourse to the Ombud if a respondent does not comply with a determination against him or her.

Moneyweb recently reported on a case where the client was advised to seek legal assistance, as the Ombud could not assist the complainant after not receiving payment from the respondent.

The Ombud ruled in McCarter’s favour on November 4 2010. (Click here to download a copy of the determination). Van der Merwe was ordered to pay McCarter R660 000 with interest of 15.5%, beginning from October 2008.

Van der Merwe failed to comply with the ruling. In fact, Van der Merwe has treated the Ombud and other regulators with contempt. Despite losing his Financial Services Board licence in 2009, Van der Merwe has continued to peddle unlisted shares in worthless companies. See: Garek broker unfazed, unrepentant.

This, of course, defeats the expediency objective, which is surely to recompense the client as soon as possible.

I suspect that the Ombud’s effort to be procedurally fair was the main reason for the three year delay in the Geldenhuys case. Judging by the amount of information supplied by the respondent, he was given every opportunity to state his case, and elaborate when further questions were asked.

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