In a recent decision concerning a Sharemax investment, the FSB Appeal Board said that section 20(3) of the FAIS Act requires the FAIS Ombud to consider complaints in a procedurally fair, informal, economical and expeditious manner, and by what is equitable in all circumstances. Failure to afford a party an opportunity to respond was “inequitable”.
This was repeated in the Mogadima case, published on 2 August 2017. The Appeal Board disagreed with the Ombud’s finding that there was a relationship between the two respondents which led to the complainant’s loss and upheld the appeal.
Background
The client effected a loan for R120 000 and was convinced by a representative from Go Direct to invest R70 000, purportedly with ACM Gold and Forex. The funds were, however, paid into the account of Go Direct, and never paid over to ACM Gold. This transaction took place on 18 November 2012.
The client eventually laid a complaint against both Go Direct and ACM Gold. Whilst the latter cooperated fully with the Ombud, Go Direct did not bother to respond.
The Ombud found against Go Direct “in absentia”, stating that they had no intention of making the investment, or paying the client’s money over to ACM.
She also found against ACM Gold, on the grounds that it allowed Go Direct to provide services on their behalf, which made them equally liable. This assertion was made on the strength of an “Introducer Broker Agreement”.
The only snag, as pointed out by the Appeal Board, is that this agreement was only signed on 22 April 2013, five months after the investment was made.
Appeal Board Decision
ACM Gold applied for leave to appeal on 25 August 2016, but this was refused by the Ombud, citing a set of reasons for her decision. The Appeal Board then granted leave to appeal.
“The chairman of the Board noted a disconnect between the Ombud’s reasons in the (first) ruling and the Ombud’s reasons in response to ACM Gold’s application for leave to appeal.”
It appears that the Ombud first pursued the matter with Go Direct, but when they did not respond, she “…reverted to corresponding with ACM Gold.”
“During argument, it transpired that the core of the appeal lies in the manner in which the Ombud arrived at the conclusion that ACM Gold had a relationship with Go Direct prior to the date on which the IB agreement was signed.”
In arriving at her determination, the Ombud only referred to three earlier letters, and appears to have ignored the last dated 25 April 2016 in which ACM Gold reiterated the fact that their agreement with Go Direct only started 5 months after the investment, something which the Ombud failed to discuss with ACM Gold, as she should have done under rule 6(3) of Rules of Proceedings of the Office of the Ombud.
“Failure to afford a party, in this case ACM Gold, an opportunity to respond was inequitable.”
“Similarly in CS Brokers CC and Others this Board expressed its displeasure regarding the Ombud’s reluctance to implement appropriate procedures to deal with complaints.”
In her response to the request for leave to appeal, the Ombud states: “All this time, since September 2011, they (ACM Gold) were still doing business with frauds at Go direct.”
The Board notes in this regard: “Despite diligent search (sic), nothing in the record shows any evidence of any dealings between ACM Gold and Go Direct, especially in relation to the date September 2011.”
In the Prigge appeal the Board said: “Matters like this (there are other instances) add fuel to the allegation that the Ombud is biased against financial service providers and sees her role as champion of disappointed clients. The Act requires her to deal with complaints impartially (section 20(4)) and whether or not she does so, depends on the facts of each case.”
This case appears to add more fuel to those allegations.
What is clear from this case is that one should not hesitate to appeal if you are sure of your case, and have the right people to assist you.
Click here to download the Mogadima Appeal Board decision.
