Changes for financial complaints in South Africa
The Ombud Council has published new rules that apply to the Ombud for Financial Services Providers (FAIS Ombud), which handles complaints against financial advisors in South Africa.
The rule changes broadly relate to advice-related complaints, which may impact banks and insurers where these advisors are employed.
One of the biggest changes is an increase in the amount of compensation the FAIS Ombud may award for financial prejudice or damage.
This has changed from a maximum of R800,000 to R3.5 million.
“The increase is necessary to ensure that the compensation the FAIS Ombud… recognises changes in the value of money and market realities since the compensation limit was first set… [and is somewhat] more consistent with the compensation levels available from other financial sector ombud schemes,” said the Ombud Council.
Another key change is that the office will no longer receive complaints against unregistered Financial Services Providers, which will rather be referred to the Financial Services Conduct Authority as the regulator with the appropriate enforcement powers.
“Consumers are constantly encouraged to verify whether they are transacting with registered financial services providers, as the Office’s services will not be available if the complaint relates to unlawful unregistered entities,” said the Office of the FAIS Ombud.
The revised rules, including updated descriptions for processes, “do not change the practical, fair and efficient approach the Office follows in resolving complaints,” said the Office of the FAIS Ombud.
“Generally, the new Ombud Council Rules serve the same purpose, although they update outdated terminology, refine aspects of the FAIS Ombud’s jurisdiction, and effect process improvements based on practical experience,” said the Ombud Council.
One of the key rules that remains is that for a complaint to be justiciable by the Office of the FAIS Ombud, this Office must be satisfied that the complainant has endeavored to resolve the complaint with the respondent and that the respondent failed to address the complaint satisfactorily within six weeks of its receipt.
After which, the complainant has six (6) months within which to submit a complaint to the FAIS Ombud.
The new rules, however, revoke and replace previous rules on proceedings of the FAIS Ombud made in 2003, which covered practical procedural matters regarding the operation of the FAIS Ombud’s office.
Looking at the revised rules, these now include:
- Barring complaints against unauthorised FAIS entities, mandating that complaints about unauthorised entities go to the FSCA;
- Establishing penalties for not cooperating with the Ombud;
- Obligating the reporting of violations to the FSCA; and
- Allowing the Ombud to make decisions with the facts at hand, even if cooperation is incomplete.
Categorised very broadly, the new rules include:
- Fundamental principles: The Ombud acts independently and objectively, requiring cooperation from all parties. Services focus on investigating and resolving complaints, not providing legal advice.
- Category of persons qualifying as complainants: Includes successors or beneficiaries of relevant financial products.
- Type of complaint justiciable by Ombud: Complaints must fall within legal parameters, involve authorised financial services providers, and adhere to specific procedural criteria.
- Rights of complainants in connection with complaints: The Ombud accepts complaints that fall within its jurisdiction, ensuring they are comprehensible and supported by necessary documentation.
- Rights and duties of respondent: The respondent must acknowledge and attempt to resolve complaints professionally and cooperatively, providing relevant information to the Ombud.
- Dismissal of complaints: The Ombud may dismiss complaints that lack merit or are pursued frivolously, ensuring reasons for dismissal are communicated.
- Time limits: The Ombud sets and enforces time limits for complaint proceedings, with the discretion to proceed based on available information if parties fail to comply.
- Costs and interest: Awards for costs and interest are made based on complaint resolution outcomes, considering various factors.
- Liaison between Ombud and Authority: The Ombud reports breaches or non-cooperation to the Authority, referring complaints involving unauthorised financial services providers for appropriate action.
- Administrative and procedural matters: The Ombud manages complaints confidentially, may decline to investigate if litigation is intended, and educates the public on complaint procedures.
- Rules revoked: The new rules replace previous ones under the Financial Sector Regulation Act.
The full list of rules can be found below:
Update: The article has been updated to better reflect who the rules apply to.
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