Three new Appeals against Ombud findings

The latest hearings schedule of the FSB Appeal board contains details of three appeals against decisions made by the FAIS Ombud in 2016 which are to be heard in June 2017.

The Wallace determination 24 June 2016

A representative of Momentum referred a client to a broker who invested the client’s funds in a Sharemax scheme.

The Ombud found that, the representative’s advice to invest in Sharemax was not in itself authorised by Momentum and it does amount to a deviation from his contract of employment. However this does not absolve Momentum from liability as the representative’s conduct was reasonably incidental to his work with Momentum.

The Ombud held Momentum, the representative and the broker jointly and severally liable to pay back the complainant’s capital in the amount of R730 000.

The following is excerpted from the actual Ombud determination:

“Momentum refer(sic) to a written contract between itself and Marais (the representative) and point(sic) out that Marais was prohibited from promoting and selling financial products not approved by themselves. Sharemax was not approved by Momentum. Momentum deny(sic) any liability for the consequences of their employee’s conduct in this transaction.”

Momentum, in its response to the complaint, stated that their advisor was not licensed to give advice on the Sharemax product and therefore the Ombus should rule that he could not give any advice in respect of Sharemax. The duty to disclose risk and to keep a record of advice resided with Storm (the broker) and not with Momentum or its representative. Momentum also submitted that their representative did not act outside the ambit of the Act and Code.

Click here to read the full determination.

Phoshera determination

The complaint was dismissed, but the client, an advocate, appealed to the Board against the Ombud’s finding.

A claim was rejected because the vehicle, which was written off in an accident, was not roadworthy. The tyres were worn and this was “material to the cause of the loss”.

The complainant was aggrieved as it appears that MUA changed the insurer from Compass to Auto and General without notice to him. He states that he specifically did not want to have anything to do with Auto and General due to the latter’s “bad record for repudiating claims”. He states in no uncertain terms that if he was informed about the change of insurer, he would not have agreed to contract with Auto and General and would have chosen a different insurer to undertake the risk.

The respondents pointed out that, although the insurer was changed, the terms and conditions of complainant’s contract remained the same.

The Ombud was also of the opinion that no other insurer would have paid the claim, given the fact that the vehicle was not roadworthy.

Click here to download the full determination.

Prigge determination

This complaint involved an investment in Picvest.

“The basis of complainant’s claim against respondent is the latter’s failure to render financial services in line with the FAIS Act and the General Code of Conduct (the Code), which includes respondent’s failure to appropriately advise complainant and disclose the risk involved in the HS 22 investment.”

The respondent, in turn, provided a vast amount of evidence that it had, in fact, complied with all legal requirements.

The Ombud found that, in advising the complainant to invest in HS 22, the respondent contravened sections 2, 7 (1) and (2) and 8 (1) and (2) of the Code, and ordered him to refund the client’s investment of R500 000 plus interest from seven days after the determination.

Click here to read the full determination.

The outcomes of these appeals will be very interesting. We will keep readers informed when it is published.

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