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A complaint that the FSP says is too old and covered by an indemnity

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A complaint that the FSP says is too old and covered by an indemnity

Mrs Naidoo complains in writing to Ayanda FSP about advice she received 14 months ago to invest her savings in a five-year endowment. She says she was told she could withdraw at any time without penalty. The FSP acknowledges receipt but does not give a substantive response for three months. Mrs Naidoo then lodges a complaint with the FAIS Ombud. Ayanda FSP replies that the Ombud has no jurisdiction because the client signed an indemnity acknowledging that she took her own investment decision, and because the complaint is 'prescribed' as it relates to advice given more than a year ago. The investment was R300,000.

1. Is the complaint within the FAIS Ombud's jurisdiction?

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  • The Ombud has jurisdiction over complaints by clients against an FSP or its representative about financial services, provided the complainant has first raised the matter with the FSP and given it an opportunity to respond.
  • Mrs Naidoo complained in writing to the FSP first, so that requirement is met.
  • The R300,000 investment is within the Ombud's monetary limit (currently R800,000 per determination).
  • The Ombud's rules require a complaint to be lodged within six months of the complainant becoming aware of the act or omission, or of the FSP's final response; the Ombud has a discretion to accept a late complaint in appropriate circumstances. The FSP's three-month silence is directly relevant to that discretion.
  • The Ombud may therefore investigate; the FSP's jurisdictional objections are not decisive.

2. What were the FSP's complaint-handling failures?

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  • The FSP failed to resolve the complaint within the six-week period, or to give a substantive final response explaining the reasons and the client's right to approach the Ombud.
  • It acknowledged receipt but did not manage the complaint through a complaints register, owner and timelines.
  • The response, when it came, was a jurisdictional brush-off rather than an investigation of the advice and the alleged misrepresentation.
  • No evidence is shown of a fair review of the advice file, the disclosures made, or the client's version of the withdrawal-penalty statement.
  • These failures are themselves compliance breaches and can attract regulatory action.

3. How should the Ombud deal with the indemnity and prescription arguments?

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Indemnity:

  • An indemnity signed by a client does not oust the Ombud's statutory jurisdiction or the FSP's conduct obligations.
  • If the client was misled about withdrawal penalties, an acknowledgement that she 'took her own decision' does not cure the misrepresentation or make unsuitable advice suitable.
  • The Ombud will look at the substance: what was said, what was disclosed, and whether the product suited the client.

Prescription/late complaint:

  • The 'one year' argument is not a correct statement of the rule. Time runs from awareness of the act or omission, or from the FSP's final response.
  • The FSP's own delay in responding weighs against it, and the Ombud may condone the delay.
  • The Ombud should investigate the merits and, if the complaint is upheld, may make a determination within the monetary limit, including ordering compensation.