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Category: Financial Advisory
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FINANCIAL Advisory and Intermediary Services ombud Noluntu Bam recently imposed R800,000 fines on two parties for giving dodgy financial advice that resulted in losses for a customer who invested in a suspected Ponzi scheme.

Such cases comprise less than 14% of Ms Bam's case load.

This office received, on average, 9,000 complaints during any specific period, with a total of 3,699 being complaints that fall within our ambit, and which are justifiable matters to be investigated by our case-management department, said Ms Bam.

Ms Bam, who levied the R800,000 fine against financial services provider Mark Alexander Investments and Mark Eiserman in February, says her office does not keep track of the cases it handles, other than the information obtained in her organisation's annual report.

We do have similar complaints currently being investigated by the office, said Ms Bam, adding, however, they do not in any way represent a significant portion of the matters under investigation.

The ombud's 2014-15 annual report showed that most of its complaints, 2,491, were against short-term insurance products. These dwarfed complaints involving investment products, which numbered 1,266 last year.

But most of the fines Ms Bam and her staff have meted out have been to those peddling investment products.

To date, the fine against Mark Alexander Investments has been the highest this year. It is more than double the R317,500 dished out to short-term insurer Santam for failing to advise a customer that a tracking device was a requirement for an insurance contract and later rejecting a claim when it found out that the client did not have a tracking device fitted on a car.

The second-highest fine was the R500,000 imposed on Hermann Waschefort for careless advice to a pensioner, who lost an equal sum of capital after following his counsel.

Mr Waschefort, a financial adviser, had directed the pensioner to invest money in one of the funds he had registered, in an apparent conflict of interest.

Alesio Mogentale and Introvest 2000CC were slapped with a R455,000 fine by the ombud for a failed investment into a scam known as BondCare.

The cases raise the question whether the Financial Services Board, which oversees the ombudsman, took the watchdog's case load into account when drafting the Retail Distribution Review. The review, which is aimed at eliminating conflicts of interest and fostering fair financial advisory services, is being negotiated by the regulator and the industry. The ombud sets itself a nine-month target for resolving 85% of all complaints it gets.

Complaints received by this office differ in complexity, and it is therefore difficult to provide an average rate of closure, said Ms Bam. However, this office consistently meets its objective with regards to the number of matters resolved within nine months.