Secondary

FAIS Act under Threat?

An extremely important court case, which could have severe implications for the FAIS Act, is currently under way in Pretoria. At stake is the FAIS Ombud’s jurisdiction to make determinations about investments in property syndications.

Deeb Risk, who was ordered by the Ombud to repay in excess of R2 million to clients whose funds were placed in Sharemax, took the Ombud to court. They were backed by Santam, with whom they had PI cover.

The case was covered in great detail in Personal Finance on Saturday, and I suggest you take some time to read this article.

The essence of the case is summarised below in an extract from the article.

Risk’s legal team has asked:

* Judge Baqwa to declare that Bam should refer all complaints involving property syndications to the High Court for trial, mainly because Louw claims that the ombud has denied Risk his constitutional right to a fair hearing.
* Failing this, that the judge refer the complaints against Risk back to Bam, ordering her to reconsider her decision not to allow Risk to take his case to the High Court. Bam should be ordered to “adopt a process that is procedurally fair” in reviewing her initial decision. Louw claims her initial decision was based on a whim and not a formal process.
* If the judge fails to agree that Risk’s constitutional rights have been transgressed in terms of current legislation, that the Financial Advisory and Intermediary Services (FAIS) Act, which, among other things, established the office of the ombud, be declared unconstitutional, effectively disbanding the office of the ombud.

The judge, after listening to almost two days of argument in extended court hours and being presented with copious bundles of papers, reserved his judgment on Tuesday afternoon.

Interesting times, indeed, should the FAIS Act be declared unconstitutional.

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