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Moonstone Monitor - 23 November 2017 |
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Paul Kruger
Author/Editor |
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Normal is not something to aspire to, it's something to get away from
– Jodie Foster |
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Distributed to 49,013 subscribers.
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From the Crow's Nest |
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Ombud Council to Oversee Various Ombud Schemes |
The Financial Sector Regulation (FSR) Act was signed by the President in
August 2017. The National Treasury announced that it will be publishing a series
of consultation documents, setting out in more detail the work being undertaken
for each component of the Act.
The first of these is a consultation policy document published in September
titled “A Known and Trusted Ombud System for All” which provides guidance on how
dispute resolution mechanisms may look in future.
The Twin Peaks reform presents an opportunity to consider the current legal and
structural arrangements for financial sector ombuds, and develop a policy
framework that responds to identified challenges and better aligns the ombud
system to the emerging Twin Peaks architecture, in order to achieve the
following:
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Ensure that all financial products and services are covered by the ombud
system.
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Reduce fragmentation of the ombud system, making it easier to promote
awareness and recognition of the role and functioning of the ombud schemes to
financial customers.
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Develop best practice standards of conduct across all ombuds (whether
voluntary or statutory), that takes into account matters of governance,
complaints handling, jurisdiction and reporting.
The Financial Sector Regulation (FSR) Act, which will establish the Twin Peaks
architecture, includes provisions related to the ombud system. The FSR Act
builds on the Financial Services Ombud Schemes (FSOS) Act (which will be
repealed) and the FSB Act (also to be repealed) to strengthen the role and
powers of the existing FSOS Council. It replaces the FSOS Council with a
full-time Ombud Council, which will be required to promote the awareness,
accessibility and use of the ombud system, and take steps to improve its
effectiveness, including by imposing common standards of best practice and
promoting cooperation and coordination amongst ombuds. The Ombud Council would
thus oversee all ombud schemes, becoming a “regulator” of ombuds. In instances
where the jurisdiction of a complaint is unclear, the Ombud Council is empowered
to determine which ombud is responsible for hearing the complaint.
In particular, the FSR Act:
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Provides for coverage of all financial product and financial service providers
by appropriate ombud schemes, including by requiring financial institutions to
be a member of an industry ombud scheme operating for its sector, and giving
powers to the Ombud Council to allocate a case to the best-suited ombud where no
voluntary ombud is available.
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Enhances the role of the existing FSOS Council, by establishing a stronger
Ombud Council as a statutory body, with a clear mandate and capability to
harmonise and improve the ombud system, and with strong oversight powers over
both statutory and voluntary (now named as “industry”) ombuds.
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Appoints a Chief Ombud as head of the office of the Ombud Council, in effect
to give the body its “hands”, i.e. the power to exercise its functions.
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Provides for the Ombud Council to recognise industry schemes, set enhanced
governance and accountability requirements, and harmonise and strengthen
standards of practice for each ombud scheme through rule-making and enforcement
powers, to develop a uniform and consistent framework for external dispute
resolution mechanisms across the financial sector.
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Requires all ombuds to consider the principle of equity and fairness in
investigations and decision making (in addition to the laws of contract and
financial services).
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Provides for complainants to appeal a decision made by the statutory ombud to
the Financial Services Tribunal established in the Act (consideration should be
given to extending this right to apply to decisions taken by industry ombuds as
well).
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Requires the Ombud Council to establish a single point of entry into the ombud
system. Clarifies the relationships between the Ombud Council, ombuds, financial
institutions and the Financial Sector Conduct Authority, in respect of
governance, reporting, respective responsibilities, and cooperation and
coordination, to better support the outcomes-based approach to conduct
regulation cemented through the FSR Act.
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Facilitates further reform to the ombud system.
It is important to note that while the FSR Act provides for the appointment of a
Chief Ombud, this position will not carry any ombud powers. In other words, the
Chief Ombud will not, under the FSR Act, be empowered to rule on any customer
complaints. The Chief Ombud is in effect the Managing Director of the Ombud
Council, responsible for carrying out the specified functions of the body. The
naming of the Chief Ombud does however provide for options in terms of potential
further reform of the ombuds system as explained in Chapter 6.
In addition to responding to structural considerations due to the regulatory
reform process underway, the changes proposed in the FSR Act also aim to improve
the performance of the ombuds system, in line with international learning and
best-practise principles.
In view of harsh criticism from the FSB Appeal Board in the past, the
establishment of the Ombud Council, and far easier access to appeal mechanisms
than in the last, will certainly add practical impetus to the requirement that
the Ombud should resolve complaints impartially, expeditiously and economically.
The National Treasury will host a workshop in Pretoria on 29 November for
interested stakeholders to discuss the reforms proposed to the financial sector ombud scheme system. |
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Your Practice Made Perfect |
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FAIS Ombud on Short-term Insurance Trends |
The 2016-2017 Annual report notes the following trends in complaints
received from the public.
The number of complaints that relate to short-term insurance policies
far exceed those from any other product category of complaints received
by the FAIS Ombud, both in the period under review and in previous
financial years.
Selling on premium
FSPs still violate provisions of the FAIS Act and the Code by providing
the most affordable premium possible, regardless of the implications for
the client, who might only in the event of a claim find out what the
true cost of the lower premium is. This true cost could include a
reduction or exclusion in the cover provided or the numerous additional
excesses payable.
Failure to obtain relevant and available information
The term “single need” is used by FSPs as a way to circumvent the
requirements of section 8(1) (a-c) of the Code. By claiming that the
client requires assistance only for a specific need, such as insurance
for his new motor vehicle, FSPs argue that there is no need to obtain
all relevant and available information and by extension, no need to
conduct a needs analysis for the client.
Semantics
A disconnect exists between the client’s understanding of comprehensive
cover and the FSP’s understanding. When a client requests such cover,
the expectation is that the entire value of the vehicle (including
extras) will be covered in the event of theft or a total loss. For an
FSP, comprehensive cover often means that the vehicle is insured for any
eventuality up to the retail value of the vehicle, with extras not taken
into account. There is a failure to determine whether the vehicle has
any extras that would need to be specified. For example, canopies on
bakkies are not covered unless specifically noted in the policy.
Financing
FSPs might ask clients whether or not a vehicle is financed but very
rarely offer or recommend top-up cover, which often compromises clients
if they make a claim in the early stages of the credit agreement.
Homeowners
FSPs tend to fail to disclose to clients the exclusions that exist in
terms of their homeowners’ policy. This is especially true for new
homeowners who, in the absence of these disclosures, are unable to take
any steps to mitigate their losses. It is devastating when, for example,
one’s roof collapses during a heavy storm and the claim is rejected for
wear and tear.
Content
With insurance on household content there is failure to provide for
accidental damage, which is not automatically covered. FSPs also fail to
advise clients about items such as jewellery, laptops and cell phones,
which should be specified. |
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FAIS Ombud Settlement Cases
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Whilst determinations by the Ombud receive wide exposure in the media,
settlements are only published in her annual report.
This year, there were 1005 settlements and 68 determinations. The
settlement amounts in case studies published in the report varied
between R5 000 and R570 000.
The Ombud notes:
“While a decrease was seen in the number of settlements overall, from 11 504 to 1 005, the settlement value increased from R50 215 518 during
2015/2016 to R58 343 824 during the 2016/2017 financial year. This
increase in settlement value is attributable to the 68 determinations
that were issued, the second highest number of determinations ever
issued by this Office. Last year the office issued 24 determinations.”
The increase in determinations was largely due to property syndication
complaints again being heard after a lull due to legal uncertainty.
Knowing how keen most of our subscribers are on reading lengthy annual
reports, we extracted these case studies for your weekend reading
pleasure.
Click here to download
the relevant information. |
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Technologically Speaking
Moonstone Information Refinery |
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Insights on rejuvenating the Millennial conversation |
InvestmentAdvisor magazine recently published some surprising
results from a survey on millennials and their take on financial
matters.
Most Millennial studies tell only half the story, focusing on dollars
but overlooking humanity. That’s why our 2017 Millennial Survey
brought the love, asking about happiness, priorities, and passions.
The results revealed a disconnect between meaning and money for this
generation. The majority of Millennials:
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Are happy and most closely associate love (not money) with happiness
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Want to conquer their financial anxiety
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Lack the skills to manage money confidently
The good news? This is an optimistic generation that has a problem
you can help solve, and they’re ready.
Read our
Findings Snapshot and start empowering the next generation
of wealth accumulators today.
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Regulatory Examinations
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Frequently Asked Regulatory Exam
Questions |
| 1. |
What exam must I write?
Both the RE 5 and RE are Level One exams. RE 5 is for Representatives and
RE1 for Key Individuals. The RE 3 exam is for licence category II
candidates.
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| 2. |
How much does it cost?
The FSB determines the fee. Currently it costs R1163 per exam, also in
the case of a re-write.
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| 3. |
What preparation material is available?
Fully updated resources are available for those requiring access to the
legislation applicable to the regulatory examinations:
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Please make sure that you first read the
FSB’s Preparation Guide to
make sure you follow the right process in preparing. Page seven includes
a recent amendment to guide candidates in studying in the correct
manner. |
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Click on the following highlighted sections to download the relevant
updated Inseta learning material for key individuals,
RE 1, and
representatives,
RE 5. |
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LexisNexis provides a “Legislation Handbook” together with a
“Preparation Guide” containing the qualifying criteria, with a link to
the relevant legislation. |
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The
Juta FAIS Pocket Statutes also contains a CD with a comprehensive
list of updated supplementary legislative material for reference
purposes. Please click here to order this from our online shop. |
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The FSB’s telematics broadcast on the RE 1 and RE 5
provides a good introduction and overview, and can also be ordered
online in: |
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DVD format or on a
USB memory stick
MP4 direct download - 2 Gb |
| 4. |
Where can I write?
Go to:
http://www.faisexam.co.za/show_venues |
| 5. |
What dates are available?
Go to:
http://www.faisexam.co.za/view_schedule |
| 6. |
What training is available?
As an Exam body we are not allowed to recommend companies that offer
face-to-face Regulatory exam classes. You can try Google for someone in
your area.
Bear in mind that this exam tests your knowledge about the laws
applicable to the provision of financial advice and intermediary
services. The questions are based on very specific qualifying criteria
set out in the FSB preparation guide. Any training that does not have
this as a basis will not prepare you properly for the exam. Do your own
research and don’t just accept what others say. |
| 7. |
Where can I buy old question papers?
There are no genuine “old question papers” available. Be very careful
when buying such preparation aids as some of those on offer are not in
line with the high standard prevailing in the actual exams and often
lead to a false sense of knowledge which is sadly exposed when
confronted by the actual exam. Follow the guidelines provided in the FSB
Preparation Guide and you are far more likely to achieve success. |
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Careers Platform
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Are you hiring? Advertise your position on Moonstone’s Career Platform
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The Moonstone website -
www.moonstone.co.za
- enjoys an average of 15 000 visits and approximately 39 000 page views per month. |
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Moonstone boasts an exclusive newsletter mailing list of over 49000
dedicated financial decision makers who receive 2 newsletters per week. |
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Our audience is relevant and industry specific: individual and corporate advisors and brokers in the following financial sectors:
Investment, Risk, Healthcare, Banking, Retirement, and Insurance. |
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In Lighter Wyn |
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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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or the sending of e-mail communications for other than strictly
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The complete disclaimer can be accessed
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