The latest Enforcement Committee (EC) ruling is quite an interesting one.
There is often a fine line between what constitutes a financial service and what not.
Defensive Legal Protection CC, trading as Legal Exec, provided legal advice and assistance to members of the public.
In essence its services provide members with the payment of legal expenses in cases of criminal prosecution, or if its clients are involved in a legal dispute. In addition clients are also entitled to telephonic legal advice.
Generally the so-called legal advice plan is offered at a monthly premium payment of R35.00 and the legal assistance plan at R85.00.
In the view of the Registrar, the agreement between the Respondent and its clients amounts to an insurance policy: The benefits received by the clients amount to policy benefits, the monthly payments made by the clients amount to premiums, and as such Legal Exec was carrying on short-term insurance business in contravention of section 7(1) of the Short-term Insurance Act from February 2011 to 4 December 2014.
On 4 December 2014, after interaction with the Financial Services Board, the Respondent arranged for its clients to be underwritten by Genric Insurance Company Limited (“Genric”), and for the Respondent to become a juristic representative of Genric.
In mitigation it is mentioned that the Respondent believed it was not contravening the law based on advice it had received at the time. When the Respondent realised that it was in fact contravening the Short-term Insurance Act, it regularised its business by arranging for all the clients to be underwritten by a registered insurance company.
The parties agreed to a penalty of R100 000, inclusive of costs incurred by the Applicant in investigating and settling this matter.
The Enforcement order is published on the FSB website.