Under the proposed Financial Services Laws General Amendment Bill, the Financial Services board will be protected from legal liability for their bona fide actions, even if these are negligent.
According to a report in Business Day, Treasury deputy director-general for tax and financial sector policy, Ismail Momoniat, conceded in a briefing to Parliament’s standing committee on finance on 14 November 2012 that the Treasury had “gone overboard” — particularly in the first draft of the clause on the board’s limitation of liability that would give it immunity even if it acted in bad faith.”
Mr Momoniat said it was “a mistake” to propose the deletion of the words “bona fide, but not grossly negligent” from the act. In terms of the latest version only the words “but not grossly negligent” would be deleted. This would mean that no person could be liable for any loss sustained by or damage caused as a result of anything done or omitted by them in the exercise of their powers, duties or functions under the act.
Mr Momoniat said it was necessary for liability to be limited to ensure effective rather than “light touch” regulation. Without this protection, regulators would be afraid to act for fear of being held liable.
“Regulators make enemies every time they act against those exploiting the financial system or policyholders,” Mr Momoniat told MPs. There was enormous scope in the current system for accused persons to conduct campaigns to discredit regulators and abuse the legal system to delay their trials.
This was in fact the topic of a recent, rather unusual communiqué by the FSB to its stakeholders:
Board members of the Financial Services Board (“the FSB” and “the Board”) have noted with dismay the escalating attacks published in various media on its officials and employees. It did not escape the attention of the board that those individuals orchestrating these attacks have either been implicated in inspections carried out by the inspectors of the FSB, are facing criminal charges or are otherwise engaged in litigation with the FSB.
My dictionary defines “omnipotence” as all-powerfulness.
The mere thought that such powers can even be considered by Treasury, never mind recommended, scares the living daylights out of me.
Remember, the FSB is funded by the industry via various levies, not government.
Secondly, such powers can give credence to the old saying about absolute power corrupting absolutely. The FSB consists of mere mortals, not descendants of the inhabitants of Valhalla. The police service, for example, operates under vastly more dangerous conditions, yet have to abide by a strict set of rules, and are taken to task if they transgress.
Thirdly, the bona fides of the whole industry appears to be disregarded as the focus shifts to potential fraudsters, and preventing them from achieving their nefarious goals. The many must suffer for the few who may swindle clients.
Fourthly, it seems to indicate a lack of insight into the reality of the industry, with a jaundiced leaning towards unbalanced regulation.
There is a far greater need for the Regulator’s preventative powers to be extended. We have seen enough examples of how suspected perpetrators delay justice for years on end, while their victims suffer abjectly.
This proposal could make a mockery of the “innocence before the law until proven guilty”, and needs to be reconsidered before implementation.