Tuesday, January 18

Fais Ombud recovers almost R50m for consumers in 2020/2021


Since its establishment 17 years ago, the Financial Advisory and Intermediation Services Ombud (Fais) has helped countless consumers who have been taken advantage of by unscrupulous financial advisers.

The last year has not been different, except for the fact that the number of complaints received exceeded 10,000 for the first time since the 2016/2017 financial year. The number of complaints received increased by 19.43% to 10,552 in its fiscal year 2020/21.

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According to the advocate for Fais Ombud Nonku Tshombe, 66% of the complaints received were within the mandate of the office, resulting in a record 6,975 complaints that were referred to the case management department for investigation and 2,877 complaints They were referred to alternative forums, 1,389 complaints were resolved in favor of the complainant, and 4,245 complaints were dismissed.

A total of 9,755 complaints were resolved during the 2020/2021 fiscal year at a total settlement value of R49 773 803. Tshombe says that on average 84.43% of all complaints received were resolved within three months, the 91.12% in six months and 94.49% in nine months.

These figures do not include property syndication claims, which are kept separately.

Read: Homeowners Insurance Policy Selling Process on a Grill

Portfolio of Property Syndication Complaints

Tshombe also provided an update on the backlog of complaints related to property syndication schemes promoted and marketed by companies such as Sharemax, Realcor and Highveld Syndications.

Read:
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During the 2019/2020 fiscal year, the Fais Ombud office committed to reducing the original number of 1,300 active property syndication complaints by a minimum of 20% annually.

As of March 31 of this year, these complaints had been reduced by 20.31% to 1,036.

Read: Fais Ombud aims to eradicate property syndication delay by March 2022

Crypto complaints

Tshombe said his office has noticed a significant increase in the number of complaints received about investments made in cryptocurrencies during the 2020/2021 financial year.

However, even though his office recognized the high-risk nature of investing in crypto assets and concerns about the suitability of crypto assets as an asset class, he was unable to assist claimants because crypto assets are not regulated in terms of any financial sector law in South Africa.

“As a result, crypto assets are not classified as a financial product, which means that the product falls outside the jurisdiction of this office,” he said.

However, Tshombe said her office is encouraged by a statement from the Financial Sector Conduct Authority (FSCA) issued on June 24 indicating that it is considering declaring crypto assets as a financial product.

This statement followed the publication of a document in the same month by the Intergovernmental Fintech Working Group (IFWG) on Crypto Assets, which provided a framework on how these assets will be regulated in the future and made 25 recommendations on how to bring crypto assets to market. . South African regulatory universe.

‘Provisional measure’ on the horizon

Tshombe said that one of these recommendations is an interim measure that crypto assets should be declared by the FSCA as a ‘financial product’ in terms of the definition of ‘financial product’ in the Fais Act.

This statement will empower the FSCA to regulate the advisory and broker component of crypto assets and for its office to investigate crypto asset complaints, it said.

Once the Financial Institutions Conduct Act (CoFI) Bill has been promulgated and implemented, brokerage and financial advisory services related to crypto assets will be dealt with under the CoFI Act.

IFWG President Olaotse Matshane says that global daily trade values ​​in crypto assets have risen significantly in recent years, averaging more than $ 200 billion in June this year, and on some days exceeding $ 400 thousand. millions.

“While the viability of cryptoassets as a widely used means of payment remains unproven and is an open question, the market has shown significant resilience over the past decade,” he says.

“The use cases of crypto assets as an alternative investment class, albeit highly speculative and risky, and as a cross-border remittance instrument, appear to be gaining some traction among retail clients.”

But Tshombe cautioned that unrealistically high returns often suggest that an investment is too good to be true, which carries the risk of losing equity despite the promise of significant gains and quick returns during these tough economic times when Such promises can be tempting. .

He added that investments should also not be made without seeking the assistance and advice of duly licensed financial service providers.

Inaccessibility

Tshombe says one of his biggest concerns remains accessibility to the general public.

Data compiled by his office shows that the Northern Cape, Limpopo, Mpumalanga, North West and Eastern Cape had the fewest complaints.

“Even historically, the fewest complaints have been received from these provinces. Most of the areas in these provinces are rural or peri-urban and therefore have underdeveloped telecommunications infrastructures and limited access to the Internet. Recent studies on Internet access in South Africa reveal that the means available to access the Internet are highest in Gauteng and the Western Cape; [and] that the Western Cape and Gauteng also have the highest number of people who have Internet access at home, ”he says.

Tshombe adds that Gauteng and the Western Cape are two of the three provinces from which his office receives the most complaints.

“Compared to the average of 17.3% of households that had Internet access from home in metropolitan areas, overall, only 1.7% of households in rural areas and less than 1% in the Northwest and Limpopo had access to Internet . ”


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