Applying the Principle of Fairness

When you hear Liverpool fans sing “You’ll never walk alone”, rest assured that you can join in when it comes to applying the principle of fairness in the financial services industry.

The judgment in the recent high court application involving Deeb Risk and the FAIS Ombud referred specifically to the applicant’s failure to first exhaust the internal remedies available to him. Risk went directly to the High Court, rather than apply for permission to appeal against the FAIS Ombud’s determination.

As you will see below, the appeal procedure does allow for a fair amount of leniency to ensure justice is done. In the High Court case, this was seen as lacking by the applicants.

The independence of the FSB’s Appeal Board is an important element in the process of ensuring that you get a fair, second shot, at proving your innocence. The Appeal Board is an independent tribunal, comprising of members who are neither employees of the FSB, nor active participants in the financial services industry.

The Appeal Board first came into existence in 1990 by virtue of the FSB Act. The Financial Services Laws General Amendment Act, No 22 of 2008, introduced some important changes, including amendments to the appeal proceedings. The sections in italics below are copied from the relevant page on the FSB website.

Composition of the Appeal Board

The Appeal Board consists of as many members, appointed by the Minister of Finance (the Minister), as the Minister considers necessary. The Chairperson of the Appeal Board (the Chairperson) must be an advocate or attorney with at least 10 years experience or a retired judge. Other members must include persons with wide experience and expert knowledge of the financial services industry.

Who may appeal to the Appeal Board?

The following persons may appeal:

  • Any person aggrieved by a decision of the Executive Officer of the FSB. The Executive Officer of the FSB is also the collective of the different Registrars established by various statutory enactments contained in legislation dealing with the regulation and supervision of financial institutions (other than banks). It follows that an aggrieved person may appeal against a decision by the Registrar.
  • Any person aggrieved by a determination of the Ombud for Financial Services Providers (FAIS Ombud) made in terms of section 28 of the FAIS Act, including a determination by the FAIS Ombud in the capacity as the Statutory Ombud referred to in the Financial Services Ombud Schemes Act, No 37 of 2004.
  • Any person aggrieved by a decision of an exchange, central securities depository and claims officer as contemplated by the Securities Services Act, No 36 of 2004.
  • Any other person aggrieved by a decision made under a law which provides for an appeal against that decision to the Appeal Board.

In other words, if a determination was made against you by the FSB, whichever department of the regulator, or the FAIS Ombud, you may appeal to the FSB Appeal Board. If a determination was made against you by another tribunal, a different set of rules apply.

The latter applies to rulings by the various other industry Ombuds, and mostly affects product providers. We will discuss these in more detail next week. It is important, as your clients may very well be involved and may require your assistance.

How is an appeal Lodged?

Any person aggrieved by a determination of the FAIS Ombud or the Statutory Ombud must first obtain leave to appeal from either those Ombuds respectively or, if leave has been refused, from the Chairperson. Once leave to appeal has been granted, a person may lodge a notice of appeal with the Secretary.

The procedure for lodging those appeals is set out in rule 12 of the Rules on Proceedings of the Office of the Ombud for Financial Services Providers, 2003 and the regulations promulgated in terms of section 26B(19) of the FSB Act.

A notice of appeal must be lodged with the Secretary within thirty days of the person becoming aware of, or ought to have become aware of, the decision. The full procedure for lodging an appeal is set out in the regulations promulgated in terms of section 26B (19) of the FSB Act which must be read with the Guidelines on Proceedings of the Appeal Board.

Proceedings at the hearing of an appeal

The procedure at the hearing of an appeal is determined by the Chairperson of the panel hearing the appeal. Generally, the Appeal Board is restricted to information which was available to the decision-maker at the time of making the determination or decision. However, any person who wishes to submit oral or written evidence or factual information or documentation other than what was available to the decision-maker, must apply in writing for leave to do so to the chairperson of the panel designated to hear the appeal.
Parties are usually represented by legal representatives, although legal representation is not obligatory.

Appeal Board’s decision

The decision of the Appeal Board is final. A party who is dissatisfied with the Appeal Board’s decision has a right of review to the High Court if there are grounds for reviewing the decision.

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