REPUBLIC OF SOUTH AFRICA
FINANCIAL SERVICES OMBUD SCHEMES BILL
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(As introduced in the National Assembly as a section 75 Bill; explanatory summary of Bill published in Government Gazette No. of ) (The English text is the official text of the Bill)
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(MINISTER OF FINANCE)
[B - 2004]
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060604SE
B I L L
To provide for the recognition of financial services ombud schemes; to lay down minimum requirements for ombud schemes; to promote consumer education with regard to ombud schemes; to co-ordinate the activities of ombuds of recognised schemes and those of the Pension Funds Adjudicator and Ombud for Financial Services Providers; to develop and promote best practices for complaint resolution; and to provide for matters incidental thereto.
BE IT ENACTED by the Parliament of the Republic of South Africa, as follows:–
Definitions
1. (1) In this Act, unless the context indicates otherwise¾
"Adjudicator" means the Pension Funds Adjudicator appointed in terms of section 30C(1) of the Pension Funds Act, 1956 (Act No. 24 of 1956);
"board" means the Financial Services Board established by section 2 of the Financial Services Board Act;
"client" means a person who uses the services of a financial institution or a person who enters into a transaction with a financial institution in respect of a product of that institution, and includes the¾
"complaint" means a complaint of a client relating to any agreement with, or a financial service or product of, a financial institution, and in which it is alleged that the client has suffered or is likely to suffer financial prejudice or damage as a result of the financial institution¾
(a) having contravened or failed to comply with a provision of any agreement or the law or of a code of conduct subscribed to by the financial institution;
(b) having wilfully or negligently supplied, or failed to supply, a financial service or a product, to the client;
(c) having treated the client unreasonably or inequitably; or
(d) having maladministered the implementation of an agreement with, or the supply of a financial service or a product to, the client;
"Council" means the Financial Services Ombud Schemes Council established by section 2;
"financial institution" means¾
(a) a bank as defined in section 1(1) of the Banks Act, 1990 (Act No. 94 of 1990), or a mutual bank as defined in section 1(1) of the Mutual Banks Act, 1993 (Act No. 124 of 1993);
(b) any financial institution as defined in paragraph (a) of the definition of "financial institution" in section 1 of the Financial Services Board Act; or
(c) any person declared to be a financial institution in terms of section 17;
"Financial Services Board Act" means the Financial Services Board Act, 1990 (Act No. 97 of 1990);
"Minister" means the Minister of Finance;
"ombud" means a person who is empowered in terms of a scheme to resolve a complaint;
"participant", in relation to a scheme, means a financial institution which takes part in the scheme or its funding and which submits to the authority of the relevant ombud;
"person" includes any partnership or trust;
"prescribed" means prescribed by regulation;
"recognised scheme" means a scheme which has been granted recognition in terms of section 11;
"registrar" means the executive officer appointed as such in terms of section 13(1)(a) of the Financial Services Board Act;
"regulation" means a regulation made in terms of section 19;
"scheme", notwithstanding any other law, means any scheme or arrangement established by or for a financial institution, or a group of financial institutions, in order to resolve a client’s complaint by an ombud¾
(a) and includes any arrangement in terms of which resolution of the complaint is to be effected by mediation or arbitration;
(b) but does not include any internal complaint resolution arrangement
established by a financial institution either with or without any affiliate or subsidiary of the institution;
"statutory ombud" means the Ombud for Financial Services Providers, appointed in terms of section 21(1)(a) of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002), and includes a deputy ombud appointed in terms of section 21(1)(b) of that Act;
"this Act" includes¾
Establishment of Financial Services Ombud Schemes Council
2. (1) There is hereby established a council to be known as the Financial Services Ombud Schemes Council.
(2) The Council must be regarded as a committee of the board contemplated in section 10(1) of the Financial Services Board Act.
Composition of Council
3. (1) The Council consists of a chairperson, a deputy chairperson and other members appointed by the Minister after consultation with the board.
(2) (a) The members must include persons who are representative of financial institutions which and clients who are affected by this Act.
(b) The majority of members of the Council must not be actually engaged in the¾
(i) business of a financial institution; or
(ii) supply to a client of a financial service or product of a financial institution.
(3) The registrar is a member of the Council by virtue of the office of the registrar.
Term of office of members of Council
4. (1) A member of the Council holds office for three years or such shorter period as the Minister may determine at the time of the member's appointment.
(2) A member whose term of office has expired is eligible for reappointed.
Vacating of office by members of Council
5. (1) A member of the Council must vacate office¾
(a) on resigning as a member;
(b) if the member is discharged by the Minister on the grounds of misconduct or incapacity;
(c) if the member is an unrehabilitated insolvent;
(d) if the member has at any time been convicted (whether in the Republic of South Africa or elsewhere) of theft, fraud, forgery or uttering a forged document, perjury, an offence under the Corruption Act, 1992 (Act No. 94 of 1992), or any offence involving dishonesty for which the member has been sentenced to a period of imprisonment without the option of a fine or to a fine exceeding R100;
(e) if the member has been absent for more than two consecutive meetings of the Council without leave of the chairperson; or
(f) if the member becomes a member contemplated in subsection (2) and the member is discharged by the Minister in order to comply with section 3(2)(b).
(2) A member who was not actually engaged in the business of a financial institution or the supply to a client of a financial service or product of a financial institution at the time of his or her appointment must inform the Minister if he or she becomes so engaged.
(3) If a member vacates office the Council may continue its work as long as no fewer than five members are in office.
Meetings and decisions of Council
6. (1) The Council may meet or otherwise arrange for the performance of its functions and may regulate its meetings as it deems fit.
(2) The chairperson or the deputy chairperson presides at meetings of the Council, but if both are absent from a meeting the members present must elect another member to preside at that meeting.
(3) The decisions of the Council are valid if taken by a simple majority of members in office at the relevant time, and in the event of an equality of votes on any matter the person presiding at the meeting in question shall have a casting vote in addition to the person’s deliberative vote.
Remuneration of members of Council
7. A member of the Council who is not in the full-time employment of the State or the board is paid the remuneration and allowances determined by the board as well as all reasonable expenses incurred in the performance of the functions of the Council.
Functions of Council and registrar
8. (1) The Council must¾
(a) consider and grant or refuse an application for the recognition of a scheme;
(b) monitor compliance with this Act by a recognised scheme;
(c) promote the education of clients with regard to available
complaint resolution forums;
(d) after consultation with the relevant ombud, develop and promote best practices for complaint resolution by the recognised scheme in question;
(e) ensure that the independence and impartiality of an ombud is not affected when the Council performs its function; and
(f) perform such other functions as the Minister, after consultation with the board, may direct in order to achieve the objects of this Act.
(2) The Council may¾
(a) issue guidelines to inform clients of the jurisdiction of different ombuds and of the procedures for the submission of a complaint;
(b) if necessary, facilitate co-ordination of the activities of an ombud of a recognised scheme and those of the Adjudicator and statutory ombud; and
(c) if necessary, require an independent assessment and audit on the conformity with this Act by any recognised scheme.
(3) The registrar must perform the administrative work incidental to the performance of the functions of the Council.
(4) The Council must each year submit to the board and Minister a report on its affairs and functions during the preceding year ended on 31 December.
Expenditure and service fees
9. (1) The expenditure connected with the functions of the Council is paid out of the funds of the board, and the approval of the board is required for all expenditure proposed to be incurred, or actually incurred, by the Council.
(2) The board may charge a service fee in accordance with the prescribed tariff in respect of any service rendered by the Council to a scheme or participant.
Requirements for recognition of scheme
10. (1) In order to qualify for recognition in terms of section 11, a scheme must comply with the following requirements:
(a) A majority of financial institutions, based on asset value, gross income or client base (as the Council may determine in general or in a particular instance), in a particular category of financial institutions must participate in the scheme;
(b) a body which is not controlled by participants in the scheme and to which the ombud is accountable, must¾
(i) appoint the ombud, settle the remuneration and monitor the performance and independence of the ombud; and
(ii) monitor the continued compliance by the scheme with its constitution, the provisions of the scheme and this Act;
(c) the scheme must provide for minimum requirements relating to qualifications, competence, knowledge and experience with which the ombud must comply;
(d) the scheme must have sufficient human, financial and operational resources, funded by the participants in the scheme, to enable the ombud to function efficiently and timeously;
(e) the proposed procedures of the scheme must enable the ombud¾
(i) to resolve a complaint through mediation, conciliation, recommendation or determination;
(ii) to act independently in resolving a complaint or in making a determination;
(iii) to follow informal, fair and cost-effective procedures;
(iv) where appropriate, to apply principles of equity in resolving a complaint;
(v) to report to the registrar and to a body representative of the relevant category of financial institutions on matters which may be of interest to them;
(f) provision must be made for the effective enforcement of determinations of the ombud;
(g) provision must be made to ensure that the questions, concerns and complaints of consumers are treated equitably and consistently in a timely, efficient and courteous manner;
(h) the scheme must provide for ways in which the public can be made aware of the existence of the scheme and how it functions; and
(i) any other requirements which may be prescribed and which are not in conflict with the objects of this Act.
(2) Nothing contained in subsection (1) precludes a scheme from providing that its participants are bound by other provisions set out in the scheme and which are not in conflict with the provisions of this Act.
Application for recognition by scheme
11. (1) A scheme must submit its application for recognition in the prescribed manner and form to the Council together with the supporting documentation and information determined by the board and a non-refundable prescribed fee.
(2) A properly authorised representative of the body referred to in section 10(1)(b) or of the participants concerned may appear before the Council in order to submit the scheme’s application for recognition and to present its case in support of such recognition.
(3) The Council must, after consideration of an application¾
(a) if satisfied that the scheme complies with the requirements of this Act, grant the application; or
(b) if not so satisfied, refuse the application and furnish the scheme with reasons for such refusal.
(4) At any time after a scheme has been recognised in terms of subsection (3)(a) and after affording the relevant scheme an opportunity to be heard, the Council may impose on such scheme, any requirement contemplated in section 10(1)(i) prescribed after the date of recognition of the scheme.
(5) No change to¾
(a) the constitution of a recognised scheme;
(b) the provisions under which a recognised scheme operates; and
(c) the terms of reference of recognised scheme’s ombud,
is valid unless approved by the Council.
(6) If an application has been granted, the Council must issue a certificate of recognition in the prescribed manner to the relevant scheme and the registrar must publish the recognition by notice in the Gazette.
Suspension, reinstatement or withdrawal of recognition
12. (1) The Council may at any time suspend or withdraw recognition¾
(a) on application by the scheme;
(b) if the scheme has ceased to function; or
(c) if the scheme no longer complies with any provision of this Act.
(2) The Council may reinstate the recognition of a suspended scheme if the reason for the suspension no longer exists.
(3) The registrar must in the prescribed manner publish a notice of suspension, reinstatement or withdrawal of recognition in the Gazette.
(4) A suspension or withdrawal of recognition for the reasons contemplated in paragraphs (b) and (c) of subsection (1)¾
(a) may only be made after the scheme concerned has been afforded a reasonable opportunity to be heard; and
(b) is subject to an appeal by the scheme concerned to the board of appeal established by section 26(1) of the Financial Services Board Act.
(4) For the purposes of an appeal contemplated in subsection (3)(b) the provisions of section 26 of the Financial Services Board Act apply with the necessary changes.
Jurisdiction
13. (1) The operation of a recognised scheme does not affect the activities and authority of the Adjudicator or the statutory ombud.
(2) No ombud of a recognised scheme has jurisdiction to resolve a complaint or settle a matter in respect of which the Adjudicator or statutory ombud has in terms of a law jurisdiction, except in the case of any such complaint in respect of which the Adjudicator or statutory ombud has in terms of a law declined to resolve the complaint or settle the matter.
(3) In the case of uncertainty regarding jurisdiction over a specific complaint, the relevant ombud, Adjudicator and statutory ombud must agree on who has jurisdiction over such complaint.
(4) If the relevant ombud, Adjudicator and statutory ombud fail to reach such agreement, the statutory ombud must determine who may exercise jurisdiction over such complaint.
Authority of statutory ombud to entertain certain complaints
14. (1) Subject to section 13, the statutory ombud may deal with complaints against a financial institution in the circumstances and on the basis set out in subsection (2).
(2) The statutory ombud must deal with a complaint against a financial institution if¾
(a) the financial institution does not participate in a recognised scheme;
(b) the recognition of a scheme in which the financial institution participates, has been suspended or withdrawn in terms of section 12(1); or
(c) the financial institution participates in a recognised scheme, but the ombud concerned lacks jurisdiction in terms of the relevant scheme while the statutory ombud has jurisdiction to entertain such complaint.
(3) The statutory ombud must deal with complaints contemplated in subsection (2) in the manner and in accordance with the procedures, applied with the necessary changes, provided for in Part I of Chapter VI of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002).
(4) The statutory ombud who deals with a complaint in terms of this section may determine an amount payable by the financial institution in question in order to cover the costs of dealing with a complaint in accordance with guidelines set by the board and published by notice in the Gazette.
(5) The determination of an amount in terms of subsection (4) has the effect of a civil judgment given by a court in favour of the board for a liquid debt and any amount recovered becomes part of the funds of the board.
Prescription and saving of rights
15. (1) Official receipt of a complaint by an ombud or the statutory ombud suspends any applicable 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 any such ombud.
(2) No provision of this Act must be construed as affecting any right of a client or other affected person to seek appropriate legal redress by virtue of common or statutory law, before or after the consideration of a complaint by an ombud or the statutory ombud.
Report of ombud
16. (1) The ombud of a recognised scheme must¾
(a) within six months after the end of every financial year of the scheme, submit to the Council, in the form and with the content required by the Council, a report on the affairs and functions of the office of the ombud during the financial year in question;
(b) at the request of the Council at any time furnish the Council within a reasonable time with such information or report regarding the operation of the scheme and other matters relating to the scheme as may be necessary to ensure compliance by the scheme with the provisions of this Act.
(2) The Council must at the request of the board or the Minister, and may of its own accord, submit reports and information received from an ombud to the board or Minister, as the case may be, with such comment or recommendation as the Council deems necessary.
Declaration as financial institution
17. (1) The Minister may, by notice in the Gazette and after consultation with the board, declare any person as a financial institution.
(2) (a) Any person who has not been declared a financial institution and who wishes to be so declared may apply in writing to the board through the registrar for such declaration.
(b) An application contemplated in paragraph (a) must contain substantiating reasons for such application.
(c) The board must submit any application received by it together with a recommendation to the Minister for final decision.
Prohibition and exemptions
18. (1) Notwithstanding any other law, no financial institution may—
(a) participate in a scheme; or
(b) require or invite any client to submit a complaint in terms of any such scheme,
unless the scheme is a recognised scheme or the financial institution is exempted from compliance in terms of subsection (4).
(2) Any participation, requirement or invitation in contravention of subsection (1) is null and void.
(3) Despite subsection (1), any scheme existing and in operation immediately before this section came into operation may continue in accordance with the provisions of that scheme until the expiry of a period of 18 months from the date on which this section came into operation.
(4) (a) The Minister may, after consultation with the board, exempt any financial institution or category of financial institutions by notice in the Gazette from any provision of this Act relating to the resolution of a complaint by an ombud, if¾
(i) the resolution of a complaint against the financial institution or category of financial institutions by an ombud is already partially or wholly regulated by any other law; or
(ii) the granting of the exemption will not conflict with the public interest, prejudice the interests of clients and frustrate the achievement of the objects of this Act.
(b) The Minister¾
(i) having regard to the factors mentioned in paragraph (a), may attach to any exemption so granted reasonable requirements or impose reasonable conditions with which the financial institution or category of financial institutions must comply either before or after the effective date of the exemption in the manner and during the period specified by the Minister; and
(ii) must determine the period for which the exemption will be valid.
(c) Subject to paragraph (d), a conditional exemption lapses whenever the financial institution or a financial institution in the category in question contravenes or fails to comply with any such requirement or condition.
(d) The Minister may on application condone any such contravention or failure and determine reasonable requirements or conditions with which the financial institution must comply on or after resumption of the exemption as if such requirements or conditions had been attached or imposed on the first granting of the exemption.
Regulations
19. The Minister may, after consultation with the board and by notice in the Gazette, make regulations regarding¾
(a) any matter which in terms of this Act is required or permitted to be prescribed; and
(b) any other matter which it is necessary or expedient to prescribe in order to achieve the objects of this Act.
Short title and commencement
20. This Act is called the Financial Services Ombud Schemes Act, 2004, and comes into operation on a date fixed by the President by proclamation in the Gazette.