Vol. 441 Cape Town 19 March 2002 No.
The Minister of Finance intends tabling the Financial Services Ombudschemes Bill, 2002 in Parliament during the third parliamentary term.
241(c) of the Rulesof the National Assembly. Interested persons and institutions areinvitedto submit written representationon the bill to the Secretary to Parliament by no later than29 April 2002.
In this Act, unless the context otherwise indicates-"board" meanstheFinancialServicesBoardestablished by section 2 of the 5 Financial Services Board Act, 1990 (Act No.
"financial institution" means-a bank as defined in sectionl(1)of the Banks Act, 1990 (ActNo.
"registrar"means the executive officer appointed as such in termsof section 13of the Financial Services Board Act, 1990(Act No.
There is hereby established a Committee as the Financial of the board to be known Services Ombudschemes Committee.
The Committee consists of a chairperson designated by the board, and other 20 members, including persons representative of financial institutions and clients affected by this Act, appointed by the board.
(2)If the chairperson is absent or is for any reason unable to act as chairperson, any other member of the Committee elected by members, may act as chairperson.
The registrar is a member of the Committee by virtue of the registrar office.
A member of the Committee holds office for such period as the board may determine at the time of the member's appointment.
(2)A person whose term of office as a member of the Committee has expired, is eligible reappointment.
on resigning as a member; or if the member is discharged by the board on the grounds of misbehaviour or incapacity.
If a member vacates office as a result of any of the grounds contemplated in subsection (l),the Committee may continue its work as long as not fewer than three members are in office.
The Committee maymeet or otherwise arrange forperformance of its functions 40 and may regulate its meetings as it thinks fit.
(2)The decisions of the Committee are validif taken by a simple majority of members in office at the relevant time.
A member of the Committee who is not in the full-timeemployment of the State or 45 the board is paid the remuneration and allowances determined by the board as well as any expenses incurred in the performance of the functions of the Committee.
dj must perform such other functionsas the board may direct in order to achieve objects Act.
For purposes of fundingtheexpenditure of theCommitteeinrendering any service to a recognised scheme, the board may charge a service fee in accordance with a tariff published by the board from time to time in the Gazette.
such other requirementsas the board may stipulate, after consultation with the Committee.
Nothing contained in subsection (1) precludes a scheme from providing that its participants are boundby other rules not in conflict with the provisions of subsection (1).
A recognition once granted to a scheme does not preclude the Committee from imposing additional requirements on the scheme based onthe requirements set out in subsection (l),after thescheme has been aEorded a reasonable opportunity to be heard.
submit its application in writing in the prescribedformandwiththe supporting documentation and a non-refundable fee determined by the board.
An independent body referred to in section 9(l)(b) or a representative of the category of financial institutions concerned may appear before the Committee in order to submit the applicant's application for recognition and to present its case in support of such recognition.
any guidelines provided to the Committee by the board.
The Committee may, at the request of the scheme or of its own accord after the scheme has been afforded a reasonable opportunity to be heard, review or amend the conditions and restrictions imposed in terms of subsection (5).
If an application has been granted, the Committee must issue to the applicant a written recognition with appropriate particulars, to operate a voluntary ombudscheme, and the recognition must be published by the registrar by notice in the Gazette.
if the scheme no longer complies with the requirements of this Act.
in the Gazette.
paragraphs (b)and (c)of subsection (1) may only be made after the scheme concerned has been afforded a reasonable opportunity to be heard.
"the statutory ombud") may, subject to section 16(l)(d), deal with complaints in the circumstances and on the basis set out in subsection (2).
the ombud of a scheme with jurisdiction has determined thatit would be more subsection (3) to exercise jurisdiction over the complaint.
The statutory ombud, after consulting other ombuds who may be involved, must determine which ombud, or ombuds jointly, may exercise jurisdiction over a specific complaint if the jurisdiction of different ombuds overlaps in respect of such complaint.
(5)The statutory ombud who deals with a complaint in terms of this section, may before the end of the proceedings determine a fee payable by the financial institution concerned in order to cover the costs of dealing with each complaint officially received assuch, inaccordancewithguidelinesset by the Committee and afterentertaining representations from the financial institution on the amount of the fee.
Official receipt of acomplaint by an ombudsuspendsanyapplicable contractual time barring terms or the running of prescription in terms of the Prescription Act, 1969 (Act No 68 of 1969), for the period from such receipt until the complaint has either been withdrawn by the complainant concerned or determined by the ombud.
at the request of the Committee at any time, furnish the Committee within a reasonable time with such informationor report regarding the operation of the scheme and other matters relating to the scheme asbemaynecessary to ensure compliance by the withprovisions of this Act.
The Committee must submit reports and information received from an ombud to the board with such comment or recommendation as the Committee deems necessary.
Neither this Act nor the operation of a recognised scheme affects the activitiesof the office of the Pension Funds Adjudicator established by section30 B of the Pension Funds Act, 1956 (Act No 24 of 1956).
This Act is called the Financial Services Ombudschemes Act, 2002, and comes into operation on a date fixed by the President by proclamation in the Gazette.
MEMORANDUM ON THE OBJECTS OF THE FINANCIAL SERVICES OMBUDSCHEMES BILL, 2001 1.
The Bill is the result of a consultative process between the Financial Services Board, on the one hand, and a wide spectrum of financial services industry representatives and other interested parties, such as the industry ombuds, on the other hand. The gravamen of opinion gainedduring this process was that there was roomfor thestatutory recognition of voluntary ombud arrangements that exist in the industry, provided they were sufficiently supported by industry players and complied with certain minimum criteria. In addition it wasthought that client complaintsdirected at a financial institution which did not participate in an ombud arrangement, should be dealt with by a statutory ombud to be created in a new Act.
The main objects of the Bill are, therefore, to provide for the statutory recognition of voluntary ombudschemes, whether presently in existence or not; to lay down minimum requirements for such schemes; to empower the ombud for financial services providers to act as a statutory ombud; to establish a Committee which will oversee the application of the Act; and to provide for matters incidental thereto.
Clause 1, whichis the definition clause, defines the principal words and expressions used in the Bill. It appears from this clause that banks and mutual banks, collectiveinvestment schemes and management companies, and long-term and short-term insurers are to be the financial institutions covered by the provisions of the Bill. Any other institution or body may also be declared a financial institution for purposes of the Act.
Clause 2 provides for theestablishment of the FinancialServices Ombudschemes Committee, a body representative of consumers, industry and others, which will function as a committee of the Financial Services Board and be responsible for the application of the Act. The Executive Officer of the Financial Services Board will serve as a member of the Committee and the administrative work of the Committee willbe the responsibility of the Financial Services Board which will also fund the activities of the Committee, with the right to raise fees on participating schemes.
to receive and consider annual reports by the ombuds.
Clause 9 lays down the minimum requirements for recognition of a voluntary ombudscheme.
provision for the effective enforcement of determinations of the ombud.
Clause 10 sets out the procedures to be followed when application for recognition of a voluntary ombudscheme is made. The Committee has to be satisfied in the respects laid down by theAct and will be entitled either to grant or refusethe application, or, when granted, toimpose conditionsand restrictions on the scheme and its ombud.
fi Clause 11 provides for suspension or withdrawal of an authorisation granted to a scheme in certain circumstances.
(i)Clause 12 empowers the ombudfor financialservicesprovidersto entertain client complaints if those complaints cannot be accommodated by any of the ombuds in the voluntary arrangements. That would for example be the caseif the financial institution complained against is from a sector which has not seen fit to form a voluntary ombud arrangement, or in the instance where there is such an arrangement, but the financial institution in question has elected not to participate therein.
The procedures adopted for the resolution of complaints referred to the statutory ombud will be the same as those provided for in the Financial Advisory and Intermediary Services Act, 2001.
The statutory ombud will also deal with the situation where there is an overlap of jurisdiction of ombuds.
Clause 13provides for the suspension of barring clauses or prescription while a complaintisinthe hands of an ombud and furthermakesclearthat a complainant's rights to institute action through the courts, are not affected.
Clause 14requires all ombuds of voluntary schemes to submit annual reports to the Committee and furtherto furnish any information which the Committee may require from time to time. The Committee in turn must submit these reports to the FinancialServicesBoard, withsuch recommendations as it deems necessary.
Clause 15 of the Bill excludes the activities of the Pension Funds Adjudicator from the ambit of this Act.
Clause 16 enables the Financial Services Board to issue rules ona number of aspects in order to supplement the provisions of the Bill.
Clause 17 contains the usual provision for the commencement and short title of the Bill.
The drafting of the Billhasbeenpreceded by anextensiveconsultative process with the financial services industry and other role players suchas the existing voluntary ombud offices and consumer bodies.
After exposure on a limited basis, a further draft of the Bill was prepared and publicised for comment.
The Bill has no financial, organisational and personnel implications for the State, except that the statutory recognition of voluntary ombudschemes, all funded by industry, are likely to alleviate the burden of the courts.
Client complaints lodged with an ombud are submitted on a voluntary basis and any client may still elect to take recourse to law through the ordinary process of court, rather than following the ombud route. In these circumstances the provisions of the Billare not seen to be in contravention of any constitutional right.
The Bill does not have communication implications other than thecommencement of the Bill as an Act of Parliament being publishedin the Gazette.
ParliamentaryProcedure Intheopinion of the StateLawAdvisorsandthe Financial Services Board this Bill should be dealt with in terms of section 75 of the Constitution. None of the procedures laid down in sections74 and 76 of the Constitution are applicable.