Ombudsman ready for a higher caseload
Financial Services Editor
CHARLES Pillai, the Financial Advisory and Intermediary Services (Fais) ombudsman, said last week that he was watching the global market crisis with concern, but remained confident SA had a robust system of financial regulation.
But Pillai, who was speaking at the launch of his organisation�s fifth annual report at Gallagher Estate on Friday, said SA would not come out unscathed.
Pillai�s chairman, Cyrus Rustomjee, said he had no doubt the ombudsman would experience an increased workload. In the year under review, the number of complaints sent to the ombudsman grew 27,5% to 5720. The ombudsman office was able to resolve 486 cases and dismissed 1218 cases. In total 18 determinations were issued and the settlements related to those cases amounted to just over R14m.
Pillai drew attention to a couple of the more meaningful cases. One was to do with what he described as �errant practices� within the retail furniture industry. The Barnetts store in Port Shepstone, which is one of JD Group�s brands, had sold � poorly educated domestic worker� Thulisiwe Gumede a TV , a mini oven and a TV licence. The goods were worth R3004 but Gumede signed �lots of papers� and walked away owing R6468. Upon further examination it was found she had been conned into signing up for a credit life policy, a warranty, and a goods insurance policy in addition to contract fees. The retailer was ordered to refund Gumede with interest.
In the past year, for the first time, the ombudsman pronounced on a case to do with the principles of equity. A pensioner and a widow, Elizabeth September, used a broker from Sanlam Life who took her bundle of cash and put the funds into Fidentia, the pension fund that collapsed early last year. September was promised 20% a year from her investments and, up until February last year, that is what she got. And then there were no payments.
September spoke to Sanlam Life and the company said it had nothing to do with it, referring her to Fidentia. But when the ombudsman stepped in it found Sanlam Life was responsible for the actions of its employees and ordered the company to repay all of September�s money with interest.
Given the collapse of Fidentia and most recently Dealstream, the ombudsman may have set a precedent for investors to get their money back from their brokers.
As for his own office, expenses grew more than 27% to R14,3m. The deficit is funded by the industry regulator, the Financial Services Board, and in the fiscal period it managed to create a process map for complaints, install a data management system, recruit six new case managers and work on its public profile.
However, while the costs of producing annual reports almost doubled to R354988, it slashed its spending on advertising and consumer education from R437371 to just R75918. Entertainment expenses rose 142% to R52816 and the cost of unspecified gifts went from R915 to R8920. Strategy planning and workshops, which cost nothing in the 2007 fiscal period, suddenly cost R52906 in the most recent period, textbook and library costs quadrupled and travel and accommodation costs doubled to R244632.
Some costs had been cut, but expenses were on an upward trend and Pillai was certain the ombud�s journey had only just begun. �The Fais ombud is now set to take centre stage in the financial services industry,� he said.
BUSINESS DAY 20th October 2008