OMBUD COUNCIL RULEs

The Ombud Council has the power to make Ombud Council Rules (binding subordinate legislation) which impose obligations on ombuds and ombud schemes.

We published the Ombud Council Rules for the Ombud for Financial Services (FAIS Ombud), 2024, on our website on 1 July 2024. These Rules are binding regulatory instruments made under the FSR Act and came into operation on the date of publication.  The most significant effect of the Rules is to increase the amount of compensation the FAIS Ombud may award for financial prejudice or damage, from the previous long-standing maximum of R800,000 to a maximum of R3,5 million.  In addition, the Rules revoked and replaced previous Rules on proceedings of the FAIS Ombud made in 2003 under the Financial Advisory and Intermediary Services Act (FAIS Act).

They covered practical procedural matters regarding the operation of the FAIS Ombud’s office.  The new Ombud Council Rules serve the same purpose, although they update outdated terminology, refine aspects of the FAIS Ombud’s jurisdiction, and effect process improvements based on practical experience.

Other new provisions include:

• Providing that the FAIS Ombud will not deal with complaints where advice or intermediary services were provided by persons illegally operating without FAIS authorisation, in contravention of the FAIS Act. An important purpose of financial legislation is to ensure that financial institutions are properly licensed and consumers only deal with those licensed entities.

• The new Rules state that for a complaint to be considered by the FAIS Ombud, it must relate to a financial service rendered by or on behalf of an authorised provider. The Rules oblige the Ombud to refer complaints about unauthorised business to the FSCA, which has the necessary enforcement and investigative mandate and capacity to consider appropriate action. This reinforces the importance of dealing with FAIS-authorised financial advisers, where one of the benefits of doing so is access to the dispute resolution services of the FAIS Ombud.

• The Rules create clearer consequences for providers that do not cooperate with the FAIS Ombud. A new Rule requires the FAIS Ombud to advise the FSCA of material contraventions of the Rules, or persistent or material failure to cooperate with the Ombud by a financial services provider or representative. Such conduct is inconsistent with a provider’s obligations under the FAIS Act, and reporting this conduct to the FSCA will enable the FSCA to consider appropriate enforcement action. The Rules also grant the Ombud discretion to dispose of a complaint on available facts and information where a party to a complaint fails to respond timeously, or otherwise fails to comply with the Rules. This gives the Ombud some flexibility to resolve complaints, where appropriate, despite a lack of cooperation from one of the parties.

Below are key documents relating to the 2024 Rules.