Re­port un­der­lines om­bud’s valu­able role


Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

his week, the Fi­nan­cial Ad­vi­sory and In­ter­me­di­ary Ser­vices (FAIS) Om­bud, Nol­untu Bam, (as she is known in the in­dus­try) re­leased her an­nual re­port for 2012/13.

It un­der­scores the good work that she and her of­fice are do­ing in curb­ing the ex­cesses (to be po­lite) of the broader fi­nan­cial ser­vices in­dus­try.

It is worth quot­ing what fi­nance min­is­ter Pravin Gord­han has to say in the fore­word to the re­port:

“Ac­cess to fi­nan­cial ser­vices plays a vi­tal role in the on­go­ing trans­for­ma­tion and de­vel­op­ment of our so­ci­ety, and our de­sire to im­prove the lives of our peo­ple. The abil­ity to in­crease or pre­serve one’s wealth through in­vest­ment, for ex­am­ple, can go a long way in fa­cil­i­tat­ing a bet­ter life for all South Africans as well as in­creas­ing the coun­try’s pool of sav­ings.

“Mil­lions of South Africans buy in­vest­ment prod­ucts each year, and the ma­jor­ity of th­ese trans­ac­tions are con­cluded via in­ter­me­di­aries. While most trans­ac­tions are con­cluded with­out com­pli­ca­tions, there are times when things go wrong. And this is where the in­ter­ven­tion of the FAIS Om­bud be­comes crit­i­cal.”

He goes on to men­tion the com­plex struc­tures that are used to con­fuse in­vestors and how the om­bud is now in­un­dated with com­plaints about prop­erty syn­di­ca­tions.

Gord­han ends off by say­ing that in­tegrity within the fi­nan­cial ser­vices in­dus­try is in­te­gral to en­sur­ing in­vestor con­fi­dence and a more in­clu­sive sav­ings cul­ture, and he ap­plauds the role that Bam is play­ing in achiev­ing this by call­ing mis­cre­ants to or­der.

What I find amaz­ing is that this of­fice has now been op­er­a­tional for 10 years, and yet there are still so many who be­lieve that they can get away with bad be­hav­iour – from sell­ing scam prod­ucts to sell­ing sim­ply bad prod­ucts, par­tic­u­larly those of life as­sur­ance com­pa­nies, who should know far bet­ter.

Bam her­self says that the 10th an­niver­sary is not worth cel­e­brat­ing “when con­sumers, es­pe­cially those who no longer have ac­cess to their cap­i­tal, con­tinue to lose money, not­with­stand­ing all the pro­tec­tion that the leg­is­la­ture has put in place”.

TAnd to make mat­ters worse, too many chal­lenge the au­thor­ity of the var­i­ous statu­tory fi­nan­cial sec­tor com­plaint res­o­lu­tion struc­tures to in­ter­vene, not only in the in­ter­ests of way­laid in­di­vid­u­als but also in the in­ter­est of a much­needed good name for the in­dus­try.


Bam points out in her re­port that with­out her of­fice, many peo­ple would sim­ply not be able to get jus­tice, be­cause they can­not af­ford to go to the High Court.

She says this is why she has op­posed ev­ery move by peo­ple and com­pa­nies who have at­tempted to force her to re­fer mat­ters to the High Court.

One fi­nan­cial ad­viser who had been flog­ging prop­erty syn­di­ca­tion in­vest­ments to the el­derly, Deeb Risk, went so far as to take the is­sue, very un­suc­cess­fully, to the High Court him­self.

But she says that de­spite her vic­tory against Risk, there have been many cases where re­spon­dents have, with­out good cause, tried to frus­trate the com­plaints pro­ce­dure by ar­gu­ing that the cases must be re­ferred to the High Court rather than be­ing de­ter­mined by her of­fice, which, in­ci­den­tally, has the same stand­ing as the High Court.

The rea­son she will con­tinue to re­ject th­ese ar­gu­ments, she says, is that they are “mis­chievous and aimed at deny­ing ac­cess to jus­tice”.

Bam says that other re­spon­dents ar­gue that she can­not hear the com­plaints be­cause the prod­ucts they sold are not sub­ject to her au­thor­ity.

She could have added another prob­lem re­lat­ing to prop­erty syn­di­ca­tions: the at­tempted in­tim­i­da­tion of com­plainants by Do­minique Haese, the for­mer man­ag­ing and fi­nan­cial di­rec­tor of Share­max, who now heads two com­pa­nies, Nova Prop­erty Group and Fron­tier As­set Man­age­ment & In­vest­ments, which took over the prob­lem­atic The fol­low­ing sta­tis­tics were recorded in the fi­nan­cial ad­vice om­bud’s an­nual re­port for 2012/13:

◆ R51 055 518 was re­cov­ered for in­vestors for the 12 months ended March 2013 – al­most 16 per­cent up on the pre­vi­ous year.

◆ Of the 9 949 com­plaints re­ceived, 7 898 were re­solved in the pe­riod.

◆ In­clud­ing com­plaints car­ried over, 9 033 com­plaints were re­solved dur­ing the pe­riod.

◆ Of the 9 949 new com­plaints, 4 288 qual­i­fied for at­ten­tion from the om­bud. The re­port states that 2 577 com­plaints were dis­missed, 4 366 were re­ferred to fi­nan­cial ser­vices providers or to other ad­ju­di­ca­tors, 955 were set­tled, and 2 051 were car­ried over to the cur­rent year.

◆ The most com­plaints came from Gaut­eng (34.33 per­cent) , fol­lowed by KwaZulu-Natal (13.4 per­cent).

◆ The largest num­ber of com­plaints (27.38 per­cent) are about short- term insurance prod­ucts, fol­lowed by life as­sur­ance prod­ucts (25.25 per­cent) – see graph, left. Share­max prop­erty port­fo­lio in terms of a re­struc­tur­ing sanc­tioned by the High Court in Jan­uary last year.

Haese threat­ened some of the 34 000 peo­ple who in­vested more than R4.4 bil­lion in the im­ploded Share­max prop­erty syn­di­ca­tion schemes that they could lose any rights if they went ahead with their com­plaints.

There have al­ready been a num­ber of Bam de­ter­mi­na­tions against Haese and her fel­low Share­max di­rec­tors, which have now been taken on ap­peal to the Fi­nan­cial Ser­vices Ap­peal Board.

The prob­lem of­ten with Ap­peal Board hear­ings is that the orig­i­nal com­plainants sim­ply do not have the time, money or ex­per­tise to state their case, and the FAIS Om­bud has no au­to­matic right to state the full rea­sons for her de­ter­mi­na­tions or an­swer new ar­gu­ments brought by the ap­pel­lants.

The Ap­peal Board has, how­ever, acted prop­erly in this case. It has in­vited Bam to take part and, on top of this, it has ap­pointed an in­de­pen­dent le­gal ex­pert as a “friend” of the Ap­peal Board to as­sist in the de­lib­er­a­tions.

If the Ap­peal Board up­holds Bam’s de­ter­mi­na­tions, Haese and her fel­low di­rec­tors and thou­sands of fi­nan­cial ad­vis­ers who flogged th­ese high-risk in­vest­ments will find them­selves se­ri­ously out of pocket. This is par­tic­u­larly so since Nova sig­nalled that half the R4.4 bil­lion in­vested through Share­max could evap­o­rate. And one must also in­clude the many other prop­erty syn­di­ca­tions that have gone belly up.

Another prob­lem Bam says she of­ten faces is that the com­pa­nies and struc­tures in­volved in ne­far­i­ous schemes are sim­ply closed down, frus­trat­ing proper in­ves­ti­ga­tion.


Bam’s an­nual re­port con­tains many of her more im­por­tant de­ter­mi­na­tions, which have been pub­lished by Per­sonal Fi­nance. It also, for the first time, in­cludes re­ports about com­plaints that were set­tled be­fore a de­ter­mi­na­tion was made. In the past, set­tle­ments have not been pub­lished.

Bam’s now- de­ceased pre­de­ces­sor, Charles Pil­lai, used to com­plain that com­pa­nies would of­ten set­tle at the last minute to avoid the bad pub­lic­ity of a de­ter­mi­na­tion go­ing against them. He said that while a set­tle­ment was good news for the com­plainant, the mis­be­hav­ing com­pany es­caped the bad pub­lic­ity it de­served, and con­sumers were not ed­u­cated about a mat­ter that might af­fect them.

Bam has re­ported on im­por­tant set­tle­ments but with­out men­tion­ing the names of the par­ties that set­tled. The big­gest set­tle­ment was for R597 100 (see “Cases where re­spon­dents have set­tled be­fore de­ter­mi­na­tion stage”, be­low).

Al­though Bam seems de­spon­dent about the in­creas­ing num­ber of com­plaints aris­ing from on­go­ing poor be­hav­iour in the fi­nan­cial ser­vices in­dus­try, she need not be. The value of her of­fice has been proved time and again – and it is def­i­nitely hav­ing an im­pact on those who do not put you first.

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