Page 94 - Profile's Unit Trusts & Collective Investments - March 2025

CHAPTER 5

rules to facilitate the charging of advice fees separate from commissions in order to achieve a
clear demarcation of advice and “services as intermediary”;
an approval process to replace the current outsourcing notification process, plus further
reporting requirements in respect of outsourcing.
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 if they do not see
clients regularly to review their portfolios, needs and risk profiles.
FAIS Ombud
The FAIS Act sets up the Ombud for Financial Services Providers or FAIS 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 the FAIS Act. 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 the limit on awards. This amount was set in the
rules on proceedings under the FAIS Act in 2003 at R800 000. In July 2024 this amount was
increased for the first time in two decades to R3.5 million when the Ombud Council Rules for the
Ombud for Financial Services (FAIS Ombud) were published in terms of FSR Act. The Ombud 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 will be
heard by the Financial Services Tribunal.

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.

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