Financial Services Ombuds Schemes Bill: deliberation

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Finance Standing Committee

12 October 2004
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Meeting Summary

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Meeting report

FINANCE PORTFOLIO COMMITTEE
13 October 2004
FINANCIAL SERVICES OMBUDS SCHEMES BILL: DELIBERATION

Chairperson:

Dr R Davies (ANC)

Documents handed out:

Financial Ombuds Scheme Bill [B20-04]
Department: Replication on opposing comments
Department: Demarcation of the respective jurisdiction
Department: Proposed amendments
Department: Comments on Johannesburg Stock Exchange submission

SUMMARY
The Committee heard responses to submissions on the Financial Services Ombuds Schemes Bill. It also dealt with the first five clauses of the Bill. Mr Wessels said that the Bill was developed approximately simultaneously with the FAIS Bill in 1998. The intention was to create a law enforcement agency to cover situations where a consumer had complaints against a financial institution. Consumers had problems with voluntary schemes. They did not trust voluntary schemes because the ombudsmen were appointed and paid by the industry. Some of the problems were addressed by providing in the Bill that the ombuds should not be appointed by the industry. An independent Council should make such an appointment.

The Ombudsman for Long-term Insurance suggested that there should be parallel jurisdiction between the schemes. However, there was a proviso that there should be an understanding between the ombudsmen that they would respect each other's determinations. The suggestion of parallel jurisdiction was rejected because it would go against the grain of the status of an ombudsman's determination. An ombuds determination was not binding on a complainant as provided in the FAIS Act and rules of the voluntary schemes.

MINUTES
Mr Justice P Nienaber (Ombudsman for Long-term Insurance); Mr J Dixon (Chief Director: Financial Policy: National Treasury); Advocate G Hoon (State Law Adviser); Mr N Stander (Bond Exchange); Mr G Anderson (FSB: Deputy Executive Officer); Dr F Van Zyl (FSB: Legal Department); Mr L Wessels (FSB: Legal Department); Mr J van Zijl (Ombudsman for Short term insurance); Ms E van Vuuren (JSE: Legal Counsel); Mr G Joubert (LOA: Executive Director), and Mr J Davey (Life Office's Association) attended the meeting. The Financial Services Board (FSB) and National Treasury had proposed some amendments in response to submissions on the Bill.

Ms R Taljaard (ANC) asked if it was appropriate for National Treasury to propose the amendments given that the Bill was already in Parliament. The Chairperson replied that it was up to the Committee to decide whether to accept them.

Financial Services Board briefing
Mr Wessels of the FSB Legal Department responded to submissions on the Bill. He said that the Bill was developed approximately simultaneously with the Financial Advisory and Intermediary Services (FAIS) Bill in 1998. The intention was to create a law enforcement agency to cover situations where a consumer had complaints against a financial institution. Law enforcement was known to all regulators to be very problematic from the perspective of both the regulator and consumers. The FSB was troubled by the situation of consumers. Unless there was an accessible forum for lodging complaints there would be severe injustices. Consumers had no expertise and means to approach courts of law. Hence the need for a facility wherein civil claims could be directed by ordinary consumers to somebody they could trust. There were different kinds of mechanisms that could be employed. The pension funds adjudicator was already in place. There was also the voluntary schemes and the FAIS Ombud was in the pipeline. It would have been possible to encourage a sector that did not have voluntary ombudsman to have them or to join existing schemes.

There had been extensive consultation on the establishment of ombud schemes. Consumers had problems with voluntary schemes. They did not trust voluntary schemes because the ombudsmen were appointed and paid by the industry. Some of the problems were addressed by providing in the Bill that the ombuds should not be appointed by the industry. An independent Council should make such an appointment.

Mr Wessels said that there was no intention to interfere with the jurisdiction of voluntary schemes. It was decided that voluntary schemes should be recognised. He indicated that he had confidence in the schemes. The problem with the schemes was that they were voluntary. It could happen that a particular client could not be a participant in any scheme. This was overcome by creating a statutory ombud. As far as the FAIS was concerned, an important decision was taken that FAIS complaints would have a separate office. The office would deal with complaints relating to financial services as defined. It was intended that the FAIS ombud would have compulsory jurisdiction to deal with complaints falling under the definition of a complaint in terms of the Act. There were no fears that the FAIS ombud would go overboard because his or her scope was determined by the Act. There was no intention to create a super ombudsman. It would not deal with policy mattes or appeals from other schemes.

Mr Wessels said that National Treasury and the FSB had heard and considered submissions on Clause 13(2). They had consistently rejected them and their position remained unchanged. He urged the Committee to accept Clause 13(2). The FAIS Act dealt with every aspect of the FAIS ombud.

He noted the submission by the ombudsman for long-term insurance that 'the two pieces of legislation, as were conceived to function in tandem with the existing (and new) voluntary schemes and with each other. They would encompass the entire field of finance-related complaints. The voluntary ombudsman schemes would deal, as before, with all finance-related complaints against subscribing members and their employees and agents. The FAIS ombud would deal with all advice-related complaints against non-subscribing institutions and brokers. The statutory ombud, to be established in terms of Bill, would deal with all finance-related complaints against non-subscribing institutions and their employees and agents'. He said that this was not true because no draft of the Bill ever suggested that the FAIS ombud would only deal with non-subscribing members. The FAIS ombud chapter was written with an understanding that, no matter what other office existed, the FAIS ombud would deal with issues spelt out in the Act.

Mr Wessels said that about 14 200 financial services providers with about 75 000 representatives were expected to be licensed by the FSB. The FAIS ombud was given the power to deal with complaints against both financial service providers and representatives. Representatives had to meet the same conditions as principals. During the presentation of the FAIS Bill it was evident that insurer's own agents marketed half of financial products. The insurer was liable for the actions or omissions of its agents. Independent brokers marketed the other half. If the idea of parallel jurisdiction was adopted it could possibly meant that a great number of complaints would go to the ombuds for long term insurance. The FAIS ombud was obliged to deal with those complaints. The submission by the Ombudsman for Long-term insurance indicated that the office had capacity problems that needed to be addressed. The Chairperson of their Council indicated in last year's annual report that this was a perennial problem. He was surprised that the Office wanted to take more responsibilities despite this problem. If the idea of parallel jurisdiction was adopted there would be campaigns to induce agents of insurance companies to lodge complaints with the Ombudsman for long-term insurance. In terms of the general code, FAIS financial services providers and representatives should refer complaints to the FAIS ombud. Parallel jurisdiction would create unnecessary confusion and problems in the minds of consumers. It was necessary to have a demarcation.

He noted the argument that every time a complaint was received a lot of time would be spent determining jurisdiction issues. It was asked why should valuable time be wasted. Yet it was said that if a complaint were incorrectly addressed to any of the voluntary schemes it would be transmitted to the right forum. The FSB had never had problems in determining the correct forum. Parallel jurisdiction was best suited to operate between banks and the long-term insurer because there was no long term insurer who did not have a major interest in banks and vice versa. Their businesses were interrelated and one could buy long term insurance in any of the major banks. Yet they had seen it fit to have separate offices. There were examples internationally where an ombud office had allowed different kinds of role players. This had not yet been seen in South Africa.

Mr Wessels denied that FAIS Act introduced overlaps. The Act clearly stipulated what the FAIS ombud would do and there was no suggestion that anybody else would do a FAIS complaint. There was a provision that the FAIS Act to the FAIS ombud might refer a complaint to a court or another ombud provided there were reasonable grounds to do so. Apart from this the FAIS ombud would deal with all complaints failing under the definition.

He noted a suggestion for parallel jurisdiction by the ombudsman for long-term insurance. However, there was a proviso that there should an understanding between the ombudsman that they would respect each other's determinations. This would go against the grain of the status of an ombudsman's determination. An ombud's determination was not binding on a complainant as provided in the FAIS Act and rules of the voluntary schemes. He asked why one would want to taken away the consumer's right to take the matter to another forum if he or she was not satisfied with a determination. The proviso destroyed the whole idea of parallel jurisdiction.

Mr Wessels said that the FSB had a call centre and an insurance department. It was established that consumers did not know where to go when they had problems. A few people knew that if they had a complaint against a bank they could approach the ombudsman for banking services. People also did not know about the FSB and a lot of work still needed to be done about this. The FSB call centre opened in 2002. In 2004 it logged 56 000 calls of which 7 135 related to insurance. The FSB insurance department had 2 700 complaints from the public. It was hoped that the Council created by the Bill would do something about this. It had been proposed that the Council be empowered to co-ordinate and oversee a call centre, but this was rejected.

Mr Dixon said that the view was that consumer interest could best be served by a situation wherein a consumer could go to any forum but the jurisdiction should be determined up front. The referral system was working and there was no reason why it should not continue. The FAIS ombud had built up specialist knowledge and capacity to deal with advice related complaints.

It was preferable that a consumer should choose the forum because as long as there was a referral the complaint would be dealt with. The problem was that this was based on the incorrect assumption that consumers knew the advantages or disadvantages of a particular scheme. In the majority of cases consumers did not make any choice in approaching a particular scheme because they did not have the necessary information to enable them to make a choice.

He said that the suggestion that there was an overlap between the Bill and the Securities Services Bill created an impression that there were conflicts between the Bills. This was not true because there was nothing excluding making rules for the application of the Financial Services Ombuds Schemes Bill. An exemption could be granted in term of the Financial Services Ombuds Schemes Bill. Clause 18 of this Bill would override rules made under the Securities Services Bill because rules were subordinate legislation. Existing rules which in terms of Clause 116(3) of the Securities Services Bill were deemed to be made in terms of Clause18 (2)(t) of that Bill would have to be changed if they were in conflict with the Financial Services Ombuds Schemes Bill.

Mr Dixon said that the intention behind the Financial Services Ombuds Schemes Bill was that all schemes in the financial services sector should be recognised by the Financial Services Ombuds Schemes Council and not the FSB. He did not support the view that Self-Regulatory Organisations (SROs) should be excluded the same way as statutory schemes would be. A further object of the Bill was to co-ordinate activities of recognised schemes. It also dealt with issues of overlapping jurisdictions of different schemes. The establishment of unrecognised schemes would undermine the objective of harmonising and co-ordinating activities of recognised schemes. Another reason for the inclusion of schemes by the JSE under the Bill was the limited application of Clause 18(2)(t) of the Securities Services Bill. The clause provided for the equitable and expeditious settlement of disputes between authorised users and between authorised users and clients in respect of transactions in listed securities. There could be no rules on settlement of disputes between authorised users and clients in respect of transactions related listed securities. Such disputes would have to be dealt with by the statutory ombud in terms of Clause 14(2) of the Financial Services Ombuds Schemes Bill. The overriding principle was consistency across the financial sector and the need to avoid duplication of regulation. There was a need for some mechanism for consultation between the registrar in terms of the rules under the Securities Services Bill and the Financial Services Ombuds Schemes Council.

In terms of options to address concerns raised by the JSE, Mr Dixon said that there was nothing in the legislation that prevented flexibility in the rules of the JSE or other SROs. They could be adapted to incorporate any requirements in terms of the Financial Services Ombuds Schemes Bill. This would mean that there would be no exemption of the JSE or other SROs. They would have to submit their schemes to the Council that would decide if the schemes met the minimum requirements. At the same time they would submit their rules to the registrar in terms of the Securities Services Bill. Between them, the registrar and the Council would have to reach agreement on whether the rules met the minimum requirement. Another approach would be something along the lines where one would grant an exemption to the JSE or other SROs. The registrar would be able to approve the rules provided that he or she had consulted the Council.

DiscussionMs Taljaard said that there was no clear debate on the desirability of the FAIS ombud acting as a catchall ombud in respect of financial advice when the FAIS Act was presented in Parliament. She did not think that in legislating Parliament made a definitive judgement call on this aspect when the FAIS were passed. There was no debate on the relationship between the FIAS ombud and the existing voluntary schemes. No options regarding such relationship were put before Parliament. The thinking of the National Treasury as shown by the submission by the Ombudsman for Long-term Insurance showed that there were questions about the nature of the relationship. Without choosing any side on the issue of concurrent jurisdiction, she said that it was not desirable to dismiss the submissions particularly based on the comments she made on the intention of the legislature when the FAIS Act was passed. Courts had concurrent jurisdictions. Sectoral regulators and the Competition Commission had concurrent jurisdiction and this did not expunge any right, affect any right to mediation or any remedies available.

Ms Taljaard noted a submission by "the FSB that it had never "lost its enthusiasm" for the Financial Services Ombuds Schemes Bill. At all times there was going to be a law providing for a wider, if not an all-embracing, ombud arrangement in the financial services sector. The Bill was merely put on hold to consider alternatives, such as those which were developing in the United Kingdom (a single ombud service) and in Australia (closely coordinated individual schemes accommodated in one center)". The Committee went to the UK to study the different models. Those who followed the debate, which underpinned discussions around the single financial regulator, were alive to the issues. She felt that Clause 13(2) would preempt the outcome of those discussions.

Mr Dixon replied that the debate on the demarcation of jurisdiction between the voluntary schemes and the FAIS ombud did not take place when the FAIS Act was debated in Parliament. The question surfaced only after the Act was passed and some voluntary schemes wanted to deal with advice related complaints even though the Act was fully in operation. The expectation was once the FAIS ombud was set up with a clear jurisdiction the other ombuds would recognise the new player and refer relevant complaints to it. However, this was not the case and the Minister of Finance then asked that the issue should be clarified through the Financial Services Ombuds Schemes Bill. At the time the FAIS Bill was considered there was no debate on the role of the FAIS ombud as a catchall.

There was no preconception of what the ultimate model of regulator would be. There was a study on the issue. It would provide international scans and examine the costs and benefits of various models. As pointed out the issue had been around for some time and there had always been different opinions on what was appropriate. The debate on the issue had become stale and it was agreed in April 2004 that there was a need for a fresh process. He was not sure of the extent to which the outcome of the debate would impact the framework of ombuds. Whatever the outcome the dispute resolution mechanisms should continue to be seen to be independent. There was no doubt that voluntary schemes were doing a good job. The intention was never to destroy existing structures and replace them but to retain what was working and fill in the gaps. This matter needed urgent attention because there were a number of complaints that did not have an effective and easy recourse mechanism because they were not covered by voluntary schemes.

Mr Anderson added that he had attended hearings on the FAIS Act and to the best of his recollection the debate on demarcation never took place. It was accepted that there was a need to create a new office to deal with consumer complaints.

He agreed that concurrent jurisdiction existed in some areas. However, an analysis of the concurrent jurisdiction that the Competition Commission had with other institutions would reveal that the Commission's jurisdiction related to competition issues. It was not a matter of two captains on one ship but two captains each with a different mission.

Ms B Hogan (ANC) understood the problems posed by having a dual regime. The Securities Services Bill was passed without references to the Financial Services Ombuds Schemes Bill hence there were problems. She preferred the second option discussed by Mr Dixon above because the legislation were at odds with each other. The burden of reaching consensus should be put on the two regulators. There was no proper thinking through around the debate on a single regulator. The debate on a single financial regulator was held up for a few years. At the moment there was an unsatisfactory arrangement wherein one statutory ombud would take all advice related problems. She imagined that this would be an interim arrangement.

Mr Dixon replied that the Bill was driven by the need to fill existing gaps. The issue of what would be the correct model would always be a centre of debate for some time to come.

The Chairperson noted that the suggestion that the Council would run a call centre was rejected and taken out of the Bill. He could not understand how much this was related to the bigger debate about a single regulator. Historically, South Africa had had weak consumer regulation. There were a number of possibilities. The first one would be to have a completely voluntary system. The second would be to have compulsory self-regulation and the third would be to have statutory regulators. For good reasons the legislature decided that there was a need for a statutory regulator to deal with advice related matters. The intention was not to extend statutory regulation so that it covered other areas but to provide a basis framework for the regulation of voluntary schemes. The idea that individual consumers would make rational choices between different agencies in the absence of clear demarcation did not correspond to reality. If consumers were going to make rational choices such choices would based on the record of the long-term insurance office. The danger would be that one regulator would be promoted regardless of whether it was better placed to deal with the complaints. It was important that the FIAS ombud was not undermined in any way. The demarcation issue was very important.

He noted that there was an issue about who would manage SROs under the Securities Services Bill and ombuds schemes. If the decision on the complaint mechanism in terms of the Securities Services Bill was an ombud scheme, why should it not fulfil the basic standards of other ombud schemes?

Dr P Rabie (DA) agreed that consumer protection was important. He asked what was the legal position of representatives and whether registered agents were forced to belong to voluntary schemes.

Mr Anderson replied that FIAS became fully operational on 30 September 2004. Over 14000 licences applications were received by the FSB. Licences were granted to any judicial entity of any form. The estimated number of people involved was around 75 000 and 100 000. If an institution had 2000 employees or any number it would still get just one licence. Mr Wessels added that they were all subject to the FAIS ombud.

Ms J Fubbs (ANC) noted that both the FSB and National Treasury recognised the need for the pension fund adjudicator to operate independently. All other schemes would fall under one ombud. She shared the view that consumers needed some protection. The question was whether they would best be served by one scheme only. The FSB and National Treasury said that some complaints would not be dealt with by an ombud. There was a fine line between what constituted a complaint and what a consumer considered to be a complaint. She was concerned that people's complaints would fall between the cracks. This was a weak area in the Bill. The Bill should ensure that whenever a consumer had a complaint it had to be addressed. The point from the FSB and National Treasury about parallel jurisdiction was not convincing. She was also not convinced that a catchall ombud was the answer. The point was to ensure that the majority of consumers were able to get their complaints speedily addressed.

Mr Wessels replied that there was no intention to have the pension fund adjudicator independent and all other schemes under one scheme. The intention was to have each ombud within its domain.

Mr Anderson agreed that all complaints should be dealt with. He did not envisage the FAIS ombud and voluntary schemes operating side by side. If a complaint was referred to a voluntary scheme and it was found that it did not belong there, the complaint should be transmitted to the correct forum.

Mr Y Bhamjee (ANC) said that South African consumers were very poorly informed. He said that he had recently discovered that premiums for motor vehicle insurance should decrease annually. He asked if a person who had been paying premiums for some time but did not have the benefit of the reduction in premiums could claim the money.

Mr S Asiya (ANC) asked who was consulted given that even Members of Parliament did not know much about the issues under discussion.

Mr Anderson replied that there was a need to reach all consumers and make them aware of all recourse mechanisms. The intermediary should inform the consumer that he or she could approach an ombud if there was a complaint. Mr Wessels agreed that consumers were poorly informed.

Ms Hogan asked if the Consumer Institute was fully supportive of the Bill. Mr Wessels replied that the Consumer Institute said that one should be careful to allow jurisdiction because they were perceived to be industry captive.

Ms Taljaard could not understand why concurrent jurisdiction was dismissed. She wondered if there was no merit in having concurrent jurisdiction.

Mr Wessels could not see sufficient merit in the argument for parallel jurisdiction.

Mr Dixon said that both the FSB and National Treasury agreed that the ideal model was to have a common central place where consumers could go. At the back end it was envisaged that there could be a number of specialists. As long as there was a referral system there would be no problem.

The Committee proceeded to consider the Bill clause by clause taking into consideration proposed amendments to the Bill.

Ms Taljaard asked if it was proper to amend the long title of the Bill because it contained the policy and executive intentions.

The Chairperson replied that the amendments were proposals and the Committee was free to reject them if it did not like them. The question was how material the changes were.

Long title
The FSB and National Treasury proposed the amendment of the clause by omitting, in line four, "the ombud for financial services providers" and substitute "offices of ombuds established by law". Another amendment was to insert in the last line of the clause and after "resolution": "to empower the Ombud for Financial Services Providers to act as a statutory ombud in certain cases;"

Advocate G Hoon said that there were problems with amending the long title since the amendments were of a consequential nature.

Ms Hogan asked what was the intention of the amendment and if it was just a matter of inserting the plural.

Dr van Zyl replied that the intention was to shorten the wording of the clause. The clause would include reference to the office of the pension adjudicator, the ombud for financial service providers and the statutory ombud.

Ms Hogan said that the question was why the amendment was talking of offices of ombuds established by law. Was this referring to other ombuds besides the statutory ombud?

Dr van Zyl said that the phrase was a catchall for the various ombuds.

The Chairperson said that the point was that sometimes in the Bill it was necessary to delineate between co-ordinating the activities of the FAIS ombud operating under the FAIS Act and the pension fund adjudicator acting in terms of the Pension Act. Later on the FAIS ombud also acted as a statutory ombud. The new point was allowing the financial service provider ombud to sometimes act a statutory ombud.

Ms Hogan asked if one was also talking about ombuds established in terms of other Acts.

Dr van Zyl said that the long title was important for the interpretation of Bill. However, the context of the Bill referred to the FAIS ombud, the pension fund adjudicator and the statutory ombud.

Ms Taljaard asked if it was not necessary to refer the amendment of the long title to Cabinet.

Mr Bhamjee said that the Committee had a right to amend the Bill. The Minister could withdraw the Bill if he did not like it as amended.

The Chairperson said that he did not share the view expressed by Mr Bhamjee. The Bill would have to be referred to Cabinet if the changes were to cover ombuds in other sectors.

Mr Dixon said it would be better if the first proposed amendment was not included. The amendments were in response to comments made during the informal briefing.

Dr van Zyl said that it was not strange to amend the long title of a Bill. He cautioned against creating a long title that was in contradiction with the rest of the Bill.

The Committee rejected the proposed insertion of the words "offices of ombuds established by law".

Clause 1 definitions
The first proposed amendment in Clause 1was to omit "(1)" in line 4.

The Chairperson said that the LOA wanted paragraph (a) of the definition of "complaint" to refer to a statutory code. He asked the FSB and National Treasury to comment of the suggestion.

Mr Wessels replied that a code would include a statutory code. It was necessary that a voluntary ombud should be able to judge an action in terms of what was published as a code without it being a statutory code.

STRATE said it would withdraw its submission on the definition of "financial institution" should the proposal in Clause 13(1) to allow to SROs to just submit their rules to the Registrar be accommodated.
Ms Hogan asked if a micro lender could be included under the definition of a financial institution. Mr Dixon replied in the affirmative.

The second proposed amendment was to insert after line 38, "Ombud for Financial Services Providers" 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;

The Chairperson said that the LOA had said that there was a need to distinguish between a FAIS ombud acting under the FAIS Act and the FAIS ombud acting as a statutory ombud under this Bill.

The proposed amendment and the definition of statutory ombud were flagged for discussion together with Clause 19. The definition of person was amended to read "person includes a trust".

Ms Hogan noted that the JSE had submitted that the definition of a "scheme" has been expanded to include "any scheme or arrangement established by or for a financial institution or a group of financial institutions" and specifically includes resolution of complaints "by arbitration".

The Chairperson said that the suggestion was to exempt them.

Mr Dixon said that the change was made to close a loophole because the definition would have referred to voluntary schemes only.

Dr van Zyl added that arbitration was included for the simple reason that voluntary schemes already provided for arbitration as a form of dispute resolution.

The definition of "this Act" was amended by the omission from line 18 of paragraph (b) and to substitute: (b) any determination, decision, requirement or condition made, determined or imposed, and any notice published, by the Minister, the Council or the board, under this Act.

Ms Taljaard said that the proposed amendment made no sense in law since it equated a Council to the Minister.

Mr Nienaber said that this amendment appeared in earlier drafts but was removed following discussion between the National Treasury and the Ombuds for long-term insurance. He was surprised that the amendment found its way into the Bill again. He said that the amendment could not be supported.

Dr van Zyl said that there were definitions of such nature in other legislation like the Securities Services Bill. He said that it was up to the Committee to decide if it accepted the proposed amendment.

The Chairperson asked the State Law Adviser if the amendment did not take delegated legislation too far.

Advocate Hoon agreed that there were precedents in other legislation.

Ms Hogan said that the Council occupied a position different from that of the Minister. She said that the amendment would undermine the Minister. She asked why a decision of a Council or board should become part of the Bill. It was unacceptable to give to the Council powers that were equal to those of a Minister.

Mr Dixon said that the amendment was necessary to ensure that conditions laid down by the Council were not disregarded.

There was general agreement in the Committee that the amendment would undermine the position of the Minister. The amendment was flagged for further discussion.

Clause 2: Establishment of Financial Services Ombud Schemes Council
The clause was amended by the deletion of subclause (2).

The Chairperson had no problems with removing subclause (2).

Ms Hogan asked were there no financial implications in setting up the Council?

Dr van Zyl said that the Council would have hands on control in terms of Clause 9.

Mr Dixon said that there would be no financial implications for the State because the FSB was funded by the industry.

Mr Dixon said that it was clear that the Council could not be a committee of the Board. This would underscore its independence. He agreed that it should be deleted.

Clause 3: Composition of Council
The clause was amended by the insertion in line 32, after "and" of "at least three", the omission from line 33, of paragraph (a) and to substitute: (a) A member shall be appointed with due regard to the person's knowledge, experience and expertise with reference to the matters to which the Council has been established, and not as a representative of any sector of the financial services industry. Another amendment was the omission in line 36, of "The majority of members of the Council must not" and the substitution of "Not more than two members may". The clause was also amended by the addition, in line 39, after "registrar" of ", without voting power on matters which the registrar is to be advised by the Council".

Mr L Gabela (ANC) asked why at least three members?

Mr Dixon said that it would be the Chairperson, the deputy Chairperson and at least three members. This would support the quorum requirement. The amendment was in response to comments made during the informal briefing.

Mr Gabela said that there would be no Council should one of the members resign.

Ms Fubbs was concerned that the maximum number of members was not stipulated.

The Chairperson asked how many people should be in the Council

Mr Dixon said that it was envisaged that there would be 10 members. The Committee agreed on a minimum of three members and a maximum of seven other members.

Ms Taljaard said that it was not desirable to set down the number of members of the Council without knowing if the registrar would have voting powers under certain circumstances.

Ms Hogan asked if it was necessary to say that the people would not be appointed as representatives of any sector of the financial services industry.

Dr van Zyl replied that the amendment was necessary to ensure that no members with vested interests would be appointed to the Council.

Ms Hogan did not think that such a situation would arise because the clause stipulated the grounds for appointment.

Mr Anderson said that he was prepared to accept the deletion of "and not as a representation of any sector of the financial services industry".

Ms Taljaard said that it was necessary to ensure that industry players had confidence in the Council. She asked how one would ensure that the industry had confidence in the Council without compromising consumer protection.

Ms Fubbs suggested that a representative should sit on the Council

The Chairperson said that the Council was not meant to be representative.

The Chairperson sensed that the majority of Members favoured the deletion of "and not as a representation of any sector of the financial services industry".

Clause 3(2)(b) was amended to read "no member of the Council…"

Ms Taljaard said that she was supportive of the amendment but asked how one would ensure that the industry had confidence in the Council. She was supported by Mr Rabie who felt that it was important to have members of business on the Council.

Ms Hogan said it was important for members not to be involved in the business of a financial institution so as to prevent conflicts on interests.

Clause 4: Term of office of members of Council
There was general agreement that the reappointment of members should be possible to ensure that there was continuity in the Council

Clause 5: Vacating of office by members of Council
The FSB proposed the amendment of the clause by the omission in line 55 of "R100" and the substitution of "the prescribed amount". The word "office" in page 4 line 9 was also omitted and the following substituted: " the Minister must appoint a person appointed in terms of section 3(1) to act in the place of such member for the unexpired period of term of office where required to maintain a quorum".

Ms Taljaard was concern by the fact that the Minister could dismiss a member for misconduct. The problem was that misconduct was not defined in the Bill.

Advocate Hoon said that the courts knew what misconduct entailed.

Ms Taljaard said that there was no precedent on the meaning of misconduct in relation to the subject matter of the Bill.

Ms R Joemat (ANC) said that a member would be guided by codes of conduct. Ms Hogan said that a member of the Council would not be an employee and therefore not subject to the Labour Relations Act. She asked who would conduct misconduct hearings.

Dr van Zyl said that there would be an objective determination of whether there was misconduct.

Mr Durr said that there was no need for reference to an unrehabilitated insolvent because such a person should not be appointed in the first place.

Clause 5(1)(e) was amended to refer to a Chairperson of the meeting. This was necessary to cater for situations wherein the Chairperson of the council was not in attendance at the meeting.

Dr van Zyl suggested that subclause 2 should be deleted and that subclause (1)(f) should be reworded. The Committee agreed to the suggestions. It was also agreed that the Minister should appoint another member within a reasonable period of time should a member of Council vacate his or her office.

The meeting was adjourned.


 

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