Could investors be caught again?
● The failure to protect consumers from losing billions of rands in poorly regulated property syndications is often attributed to the fact that these structures are regulated by different entities.
Professor Tanya Woker of the University of KwaZulu-Natal, a member of the National Consumer Tribunal, said a single regulator was required.
Property syndications should be registered as collective investments and syndication checked to ensure it is a viable operation, she said.
Only by introducing a single regulator could these people be stopped “from ducking between regulatory regimes or ignoring them altogether”.
Caroline da Silva, the divisional executive for regulatory policy at the Financial Sector Conduct Authority (FSCA), said the regulator’s frustration was that jurisdiction over property syndicates fell under a different government department, and the FSCA was only responsible for advice on property syndications.
She said the Financial Sector Regulation Act passed last year changed this because its definition of a “financial service” included offering, promoting, marketing, distributing, operating or managing a financial product and instrument.
The act requires that any person who provides a financial service or a financial product or set up a financial market has to be licensed.
However, this section of the act has not yet come into effect. In the interim, the FSCA is considering developing a regulatory framework that will apply to property syndications, Da Silva said.
The ombud system for the financial services sector is also under review.
Woker said the financial services providers ombud and the pension funds adjudicator, which are created by statute, were by nature adversarial and their rulings were subject to many legal challenges.
The Financial Advisory and Intermediary Services ombud (FAIS), Naresh Tulsie, said he was actively engaging with brokers, their professional indemnity insurers and the regulator to ensure that rulings were not challenged.