The findings of a hearing by the FSCA Tribunal in the Van Zyl case heard on 25 June 2019 should result in serious introspection by the office of the FAIS Ombud.
Whilst not directly addressing some of the grounds for appeal aired by counsel for the appellant, the findings appear to indicate that, in certain respects, the office of the Ombud may have operated beyond its stated objective, which requires it to “…consider and dispose of complaints in a procedurally fair, informal, economical and expeditious manner, and by reference to what is equitable in all circumstances.” (My underlining).
Whilst the Ombud determination of 6 August 2018 is essentially a repeat of so many other syndication findings, the response by the Tribunal is certainly not.
ln conclusion, we find that the Respondents were aware of the high risk nature of the investments they took and were informed of same for the reasons that:
- they attended meetings in respect of the investments,
- they acknowledged receipt of documents including prospectus of each investment,
- they elected to seek better rate of return as their needs and
- elected to cancel the need to conduct financial analysis as part of the mandate to the Applicant.
Further, we find that the needs of the Respondents, being higher rate of return or earnings, were met as they repeatedly made more investments in Sharemax scheme to get better returns. We further find that the Respondents voluntarily accepted risk as they, amongst other things, invested more than five (5) times over a period of more than 12 months, collectively on Sharemax investments in the face of information available to them.
We therefore conclude that the Applicant’s version is probable and therefore he did not conduct himself negligently in proving the financial advice.
The tribunal also points out that one of the investors was, at the time, a registered financial services provider, and should have been aware of what the FAIS Act required. To claim ignorance afterwards did not do their case much good. It also reflected on the office of the Ombud in that it should have taken this into account when it made its determination.
The Tribunal ordered that the determination of the Ombud dated 6 August 2018 be set aside and the matter remitted to the Ombud for further reconsideration in terms of section 23a(1)(a) of the FSR Act.
The complaints were lodged on 19 February 2011, and seven years and six months elapsed before the determination was made. Despite explanations as to why syndication cases were held back, this is simply no longer valid. The appeal by the directors of Sharemax was upheld in April 2015 already.
The allowance for the Ombud to operate in a less formal manner does not obviate its responsibility to act in a fair manner. Some of the grounds for appeal cited include views that the Ombud did not act in an impartial manner, ignored documentary evidence which contradicted the version of the Respondents, took into account information not put to or made available to the Applicant and fleshed out or expanded on behalf of the Respondents, advanced issues on behalf of the complainants which they did not raise, thereby creating a perception of bias.
Although these issues were not specifically addressed by the Tribunal, the final conclusions outlined above appear to suggest a semblance of legitimacy to it.
The Ombud was cited as Third Respondent in this matter, but did not make appearance and was not represented during the reconsideration hearing.
The office of the FAIS Ombud is, in essence, the financial services industry’s Public Protector, and needs to be held in the same high regard.
The office of the Ombud is, in fact, the forum where the practical application of the law is fleshed out. We have been very encouraged of late by steps taken by the new incumbent to open lines of communication. This will hopefully address the perception of bias, which was also noted by the Tribunal’s predecessor, the FSB Appeal Board.
In an industry, regarded by many as over-regulated, such practical guidelines are indispensable, and we certainly look forward to greater cooperation between all role players, rather than confrontation.
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