An interesting court case is due on 6 May, when investors in an imploded investment scheme take on one of the major life offices. According to a Business Day report, the main complaint is that the product house failed to comply with it’s obligations under the FAIS Act. It “…was in breach of its duties by not ensuring the representatives complied with the applicable codes of conduct and for not employing resources and procedures to eliminate the risks.” A further point raised is that “…the fit and proper compliance systems to monitor representatives every year, as required by FAIS, were marked as “developmental” for three years.” The report also mentions concerns about outstanding audits on the franchise’s books.
It appears that one of the product house’s former franchises had committed fraud by implying that the investments it sold was underwritten and endorsed by the product house. Business Day says that it established that the licence number, logos and letterheads of the product house were used.
The latter denies this, saying that the investors knew it was not their products.
Mr. Gerry Anderson, Financial Services Board deputy executive officer for FAIS, said on Monday that while a FAIS licensee was responsible for a representative’s actions, his understanding was that the product house’s view was that the agreement with the franchise stated that no products outside of those agreed between the parties were to be sold.
“We will be watching what the courts do,” he said.
