Page 98 - Profile's Unit Trusts and Collective Investments 2021 issue 2

CHAPTER 5

These are preliminary proposals that are still to be tested on consumers.
Another RDR proposal with far-reaching consequences seeks to stop agents earning recurring
fees unless the financial adviser is providing recurring advice. Currently many financial advisers
earn commission on recurring monthly payments (such as debit orders) even though they only see
clients every year or two to review client portfolios, needs and risk profiles.

FAIS Ombud
FAIS requires the appointment of an Ombud, charged with adjudicating complaints. In terms
of the Act, the objective of the Ombud is to “consider and dispose of complaints in a procedurally
fair, informal, economical and expeditious manner”. The office of the Ombud provides a dispute
resolution mechanism which avoids lengthy and costly court proceedings. In considering
complaints, the Ombud must consider the contractual arrangements and legal relationship
between the parties, and must act in a fair, impartial and independent manner.
A determination made by the Ombud (or a final decision by a board of appeal) is regarded as a
civil judgement of court.
The Ombud has fairly broad powers in terms of FAIS. He may elect to refer a matter to court if
he feels that there are reasonable grounds why the office of the Ombud should not deal with the
matter. Most disputes between consumers and FSPs or FSPRs, however, will be considered by the
Ombud. Note that the Ombud may not consider a matter which has already been taken to court.
Before beginning an official investigation into a complaint, the Ombud must in writing inform
every other interested party about the complaint, and must give all parties an opportunity to
submit a response to the complaint.
The Ombud must, as a first resort, “explore any reasonable prospect of resolving a complaint
by a conciliated settlement acceptable to all parties”. The Ombud may suggest mediation to the
parties, and may allow legal representation if he feels this is appropriate.
Where possible, the Ombud will suggest a solution to the parties. The parties must advise the
Ombud whether his recommendation is acceptable, and must give reasons if it is not acceptable.
Where the parties accept the Ombud’s recommendations, it has the force of a court order.
If the Ombud is unable to achieve some conciliation between the parties, the Ombud must make a
final determination. This could involve dismissing the complaint, upholding the complaint, or partially
upholding the complaint. In the latter cases, the Ombud may make a monetary award as compensation
for damages suffered, provided this does not exceed an award which may have been made by a court.
He may also order the FSP or representative to take specific action in relation to a complaint.
Any determination made by the Ombud must, of course, be reduced to writing, and must
include reasons for the decision. The Ombud may grant leave to appeal, and such appeals are
heard, if exercised, by a duly appointed board of appeal.
Financial Intelligence Centre Act (FICA)
South Africa became a signatory to the United Nations Convention on Transnational
Organised Crime (UNTOC) in December 2000. This triggered the introduction of domestic
legislation to combat and deter money laundering.
FICA (the Financial Intelligence Centre Act) was promulgated in December 2001 and the Act
effectively came into operation from July 2003. It imposed a range of duties on accountable
institutions to monitor clients and transactions in order to prevent money laundering activities.
FICA complements the Prevention of Organised Crime Act (POCA) which specifically criminalises
money laundering. POCA, however, does not place any KYC (Know Your Client) or reporting
obligations on banks or other entities which may be used by criminals in money laundering (ML) or
terrorist funding (TF) activities. These requirements were introduced under FICA.
Amendments to the original FIC Act were tabled in 2015 and came into effect during 2017. The
amendments were necessary because South African money laundering legislation had fallen
behind international best practice and were no longer in sync with the standards of UNTOC. South
Africa’s updated FICA is in line with the recommendations of FATF (Financial Action Task Force),
an initiative of the G7, based in Paris, that was established in 1989.

96 Profile’s Unit Trusts & Collective Investments — Understanding Unit Trusts