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Investment Indicators - 30 October 2017 |
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Paul Kruger
Author/Editor |
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The greatest danger to our future is apathy – Jane Goodall |
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Distributed to 49,247 subscribers.
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| Rates Review |
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1. Secured Investment Rates |
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Please note that (G) indicates a Guaranteed and (L) a Linked product. In order to understand the difference between guaranteed and linked rates,
kindly click here for an explanation. |
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Company |
This Week |
Last Week |
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1Life (L) |
7.330% |
6.950% |
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2 |
Absa (L) |
7.227% |
6.830% |
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3 |
Assupol (G) |
6.750% |
6.330% |
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Company |
This Week |
Last Week |
| 1 |
1Life (L) |
7.330% |
6.950% |
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2 |
Absa (L) |
7.227% |
6.830% |
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3 |
Assupol (G) |
7.180% |
6.760% |
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2. Money Market Funds |
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Please bear in mind that our figures, though based on the actual quotations that you also use, are for information purposes only,
and can never replace the official quotation from the product house. In terms of the guarantees, you are requested
to clarify the exact extent of such guarantees with the product house prior to advising clients. |
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From the Crow's Nest |
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Professional Indemnity Insurance and exclusions
by Alan Holton |
A recent decision of the High Court in Bloemfontein where
an FSP was found to have been negligent in advising a client to
invest in the Sharemax scheme, is a “must read” for all FSPs. Clear
and explicit, the judgement sets out unequivocally just what the
duties and responsibilities of a financial advisor comprise.
There is an interesting twist to the matter, too, but first, the
background.
The Plaintiff, Mrs Oosthuizen was, at the time the advice was given,
a widow with a two and a half year old boy. Her husband had passed
away in tragic circumstances some four months earlier. She had no
experience of financial products or the financial market. She had
received the proceeds of an insurance policy and wanted to make a
safe investment as the money was earmarked for her son’s upbringing.
Mr Castro, the defendant, had been her deceased husband’s broker and
she trusted him fully to advise her in respect of the investment of
the sum of R2m.
Mr Castro suggested the Sharemax investment and said it was an
investment “in property” and “property cannot disappear”. He made it
clear that he did not even want to suggest any other investments as
the proposed investment was “baie veilig”.
This assurance was given despite earlier articles to the contrary
that had been written by several prominent writers on financial
matters, including the award winning journalist, the late Mr Deon
Basson, Mr Jacques Pauw and Ms Anna-Maria Lombard. A number of
negative articles had also been published in Moneyweb, Noseweek and
in Finweek.
Mr Castro referred Mrs Oosthuizen to a bad copy of a newspaper
article containing negative comments about Sharemax investments, but
informed her that she had nothing to be concerned of as “hulle is jaloers - they are jealous.”
Mrs Oosthuizen accepted Mr Castro’s assurance immediately without
even reading the article.
After argument by Counsel, the judge, JP Daffue J, found that the
FSP, Mr Castro, was negligent, and even dishonest, when he advised
Mrs Oosthuizen, by placing no credence on the negative articles in
the press and failing to objectively investigate the criticism. The
defendant, said the judge, had failed to exercise the degree of
skill, care and diligence which one is entitled to expect from a FSP.
There is an interesting twist to this matter.
Mr Castro had entered into a professional indemnity insurance
contract with Centriq Insurance Company Ltd, one of the insured
events being professional indemnity to the limit of liability of
R2.5m per claim. The policy is known as the "Professional Indemnity
Insurance for Members of the Financial Intermediaries Association”.
Mr Castro claimed indemnity from Centriq in terms of the contract.
Centriq was a party to the court proceedings and denied that it was
liable to indemnify Mr Castro on the grounds that the claim fell
within the parameters of an exclusion clause contained in the
insurance contract.
The clause relied upon by Centriq excluded any claim arising from
“any third party claim arising from or contributed to by
depreciation (or failure to appreciate) in value of any
investments…" Other more complex arguments were also made in
vigorous support of Centiq’s denial of liability.
Mrs Oosthuizen’s counsel argued that her claim did not arise from
any depreciation or a failure to appreciate in value of the Sharemax
investment and that it would be to stretch the words “arising from
or contributed to by depreciation” far beyond their intended
meaning. Such an interpretation would rob the cover of all meaning.
He emphasised that “plaintiff’s claim on the pleadings and in
evidence is that defendant owed her proper advice, that what she
required was a relatively safe and low-risk investment, and that the Sharemax investment was anything but that.”
After careful and very clear deliberation, the court held that the
exclusion clause was to be interpreted restrictively so that it made
business sense, i.e. in the eyes of both insurer and insured.
“It cannot be applicable where the insured advised a client to
invest in a scheme that was a hopeless “investment” from the onset,
contrary to legislation and probably a fraudulent and unlawful Ponzi
scheme. . . The FSP must be entitled to indemnification, bearing in
mind that the ultimate beneficiary is the client who got wrong
advice . . . Defendant breached all principles upon which a skilled
and honest FSP is supposed to conduct himself. It is not a case of
depreciation of an investment as the “investment” was worthless from
beginning to end.”
On the 18th September 2017, the court ordered Mr Castro to pay Mrs Oosthuizen the capital amount of R2 million plus interest in the
amount of R718 600. The court also ordered Centriq to indemnify Mr
Castro against his liability to Mrs Oosthuizen.
On the 10th October 2017, Centriq applied for leave to appeal the
decision of the High Court. Several complex grounds have been
submitted in support of the application.
This is a most important matter as it will have a very far-reaching
impact on the extent of Professional Indemnity cover going forward.
Watch this space for developments.
Alan Holton
is co-owner of Compliance Monitoring Systems CC and an associate of
Moonstone Compliance. |
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| Your Practice Made Perfect |
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Was Ombud entitled to bend the rules? |
This question will be answered on 30 November, when the J C Mostert / L
Landman appeal against a determination by the FAIS Ombud Appeal is heard
by the FSB Appeal Board.
We believe that the essence of the appeal will be against the decision by
the Ombud to rule on the complaint, despite the fact that the complaint
was not initially addressed to the FSP.
In the actual determination, the Ombud reasoned as follows:
[36] I am alive to the fact that there is no record that complainant had
first brought the complaint to respondent’s attention, in order to
afford respondent the opportunity to resolve same before referring it to
this office.
[37] Rule 5(b) provides as follows: “[5] Rights of complainants in
connection with complaints (b) Before submitting a complaint to the
office, the complainant must endeavour to resolve the complaint with the
respondent…”
[38] The provisions of Rule 5 (b) seem to be straight forward.
Complainant must endeavour to resolve the complaint with the respondent
before submitting the complaint to the FAIS Ombud.
[39] The purpose of this provision is to avoid unnecessary costs. In the
event respondent resolves the complaint with complainant, there would be
no need for the FAIS Ombud’s intervention.
It appears rather odd that a legal requirement would be based on cost,
rather than fairness.
The Ombud then cites several case studies to justify her decision.
From a strictly legal perspective, the following applies:
The Ombud is a creature of statute and has no jurisdictional discretion
– unlike a court of law. She has to abide by the Rules - and the Rules
say:
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4. |
Type of complaint justiciable by Ombud. |
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(a) |
For a complaint to be submitted to the Office— |
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(i) |
the complaint must fall within the ambit of the
Act and these Rules; |
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(ii) |
the person against whom the complaint is made must be
subject to the provisions of the Act (hereafter referred
to as “the respondent”); |
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(iii) |
the act or omission complained of must have occurred at
a time when these Rules were in force; and |
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(iv) |
the respondent must have failed to address the
complaint satisfactorily within six weeks of its
receipt.
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5. |
Rights of complainants in connection with complaints. |
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(a) |
The complainant must qualify as such in terms of
the Act and these Rules. |
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(b) |
Before submitting a complaint to the Office, the
complainant must endeavour to resolve the
complaint with the respondent. |
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(d) |
On submitting a complaint to the Office, the complainant
must satisfy the Ombud of having endeavoured to resolve the complaint with
the respondent, and must produce the final response (if any) of the
respondent as well as the complainant’s reasons for disagreeing with the
final response. |
It will be interesting to see the ruling by the Appeal Board. |
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Matthew Lester on Gigaba Mini Budget speech
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Prepare for a ‘bloodbath’ in February after Gigaba’s mini budget.
The biggest day in Malusi Gigaba’s political career so far was strongly
contrasted by a vehemently negative market reaction. While being honest
in his assessment of the state of the South African economy, the Finance
Minister provided little hope that he has a plan to halt the bleeding.
And as Matthew Lester points out below, if Gigaba remains Finance
Minister until the main budget in February, it could be a total
‘bloodbath’ for the country’s economy. – Gareth van Zyl in Biznews
Click here to read the full article. |
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Regulatory Examinations |
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Self-Help Guidelines to make a
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Candidates who wrote with Moonstone can now view their results,
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www.faisexam.co.za
Here is what you do:
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Click on the
Moonstone FAIS Exam website (www.faisexam.co.za)
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Click on the
second heading: “Update Your Booking/Personal Details/Get
results”.
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Key in your ID or
Passport Number used to register for the exam: click on Send
password.
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The system will
send a password to the e-mail address you provided at
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Use this password
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Type in the password – do not copy and paste.
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Click login.
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You will then be able to make a booking, download your
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Frequently Asked RE Questions
– Answers to questions on REs and preparation material
DOFA - Do's and Don'ts
Email enquiries should be addressed to
faisexam@moonstoneinfo.co.za. You can phone us on
021 883 8000 - select option 2 to speak to one of our
consultants. |
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On a more serious note
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For whom the bell tolls |
Today’s nation-wide protest is not the result of one senseless killing
last week. That was possibly just the last straw that broke the
patient camel’s back.
The background to the expression used as the title of this article
is explained as follows on the internet:
"For Whom the Bell Tolls" comes from a statement written by John
Donne in his book "Devotions upon Emergent Occasions”, published in
1624:
No man is an island,
Entire of itself.
Each is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.
As well as if a promontory were.
As well as if a manor of thine own
Or of thine friend's were.
Each man's death diminishes me,
For I am involved in mankind.
Therefore, send not to know
For whom the bell tolls,
It tolls for thee.
For me, today’s protest is against every injustice committed against
all fellow South Africans ever, but even more so where those
affected were often in a defenceless position. Think of women and
children, those who had their basic human rights stripped by
legislation, and a nation currently held to ransom by those in power
who sell our hard fought for birth right for substantially more than
thirty pieces of silver.
In the process, the country is turning into a lawless jungle, where
the most neglected communities are now taking the law into their own
hands, as witnessed by a weekend report of a Biblical stoning to
death of a 50 year old man who abused a thirteen year old girl.
This is certainly not the way forward, but likely to escalate if the
frustrations experienced by the nation are not addressed urgently.
This is the time for reasonable men and women to make themselves
heard.
JK Rowling said the following during an address:
Choosing to live in narrow spaces leads to a form of mental
agoraphobia and that brings its own terrors. I think the wilfully
unimaginative see more monsters, they are often more afraid. What is
more, those who choose not to empathize enable real monsters.
For without ever committing an act of outright evil ourselves, we
collude through our own apathy.
Ask not for whom the bell tolls…
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Tel: +27 21 883 8000 | Fax: +27 21 883 8005
info@moonstoneinfo.com
www.moonstone.co.za
P.O. Box 12662, Die Boord, Stellenbosch, 7613, Republic of South Africa
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The complete disclaimer can be accessed
here. |
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