The judgement can be regarded as a ground-breaking ruling regarding the powers of the Ombud as an alternative resolution platform.
The main point concerned the right of a respondent, against whom a complaint is laid, to demand that the Ombud decline to hear the case and refer it to the High Court. A second application asked that the decision by the Ombud, to decline the request for the case to be heard by the High Court, be regarded as unconstitutional. A third concern was raised that the right given to the Ombud by Section 27 (5) (a) is unconstitutional, and would grant the Ombud with “unfettered discretion” not to allow hearings, legal representation and trial. The final application asked that the determinations already made by the Ombud be set aside and declared invalid.
Space does not allow for all the facts to be discussed here, but I recommend that readers download the transcript of the case and read it. If you regard yourself as a bit of an amateur Petrocelli, this will be a very educational read. Even if you are not, it will provide you with a lot of insight into what your options are in the hopefully unlikely event that you find yourself at the wrong end of an Ombud determination.
The final outcome is that the application, on all counts, was rejected with costs.
Readers may remember that Risk was supported in the matter by an affiliate of Santam with whom Risk had his Professional Indemnity cover. The compensation payable to investors amounted to more than R3 million. Add to this the cost of this court case, and the amount becomes even more substantial.
This has further implications for other complainants, and their PI cover providers.
An important point raised in the judgement concerns the fact that Risk and their legal team did not exhaust the internal remedies available, i.e. the Appeal Board of the FSB.
The FSB website indicates the following regarding the 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.
The Appeal Board is an independent tribunal comprising members who are neither employees of the FSB, nor active participants in the financial services industry.
From this, it is apparent that recourse to independent legal review is available prior to reverting to the High Court, and at substantially reduced cost, too.
In so many of the cases where the determination went against the financial advisor, the main shortfall in his or her defence was the lack of evidence due to poor record keeping. As much of a burden as it is, you never know when you will need it, so make sure you comply with the requirements, every time.
Please click here to download the full judgement.