Presentation to the National Council of Provinces on Financial Sector Regulation Bill “Impact on Voluntary Ombuds” 14 February 2017

Introduction We welcome the provisions of the Financial Sector Regulation Bill as they relate to Ombuds. We support the unified regulatory approach in the Financial Ombuds sphere.

Specific Areas of Impact We have identified five main themes under which we summarise the impact which the enactment of the Bill could have on our respective offices. These are: Continued Existence Section 301(6) – under the heading Savings of approvals, consents, registrations and other acts provides for “An ombud scheme that, immediately before the repeal of the Financial Services Ombuds Schemes Act, 2004 (Act No. 37 of 2004), came into effect, was recognised in terms of that Act must be taken to be a recognised industry ombud scheme as if it had been recognised under this Act.” This section ensures continuity of service to the financial customer with the least disruption.

Specific Areas of Impact cont. 2. Raising Awareness The objective of promoting public awareness of ombuds and ombud schemes and the services they provide is enshrined in the Bill and will go a long way to promote much needed awareness of our offices. The following sections, inter alia, underpin these objectives: Section 196(3)(b)(ii) – provision that the governing rules of the industry ombud scheme require the members of the industry ombud scheme to inform financial customers about the scheme. Section 209(1) – The Ombud Council must, as soon as practicable after this Part comes into effect, establish and operate one or more centres to facilitate financial customers’ access to appropriate ombuds. Section 210(2) – A financial institution must disclose to its financial customers applicable ombud schemes, and how to contact and submit complaints to those schemes, in accordance with Ombud Council rules that may be issued in this regard.

Specific Areas of Impact cont. 3. Co-Operation and Consistency The ombuds support the approach that greater co-operation between the various offices and consistent processes and requirements, will ultimately benefit the financial customer. Hereunder are some relevant sections in support of the intended outcome: - Section 201(5) – Ombud Council rules must provide for a consistent approach and consistent requirements for all ombud schemes as well as co-operation and co-ordination between ombud schemes. - Section 213 – Collaboration between Ombuds and Ombud Schemes “The ombud schemes, and the ombuds, must cooperate and collaborate with each other regarding complaints about financial institutions in relation to financial products and financial services, including by developing processes and procedures to jointly hear and determine complaints, on their own initiative or as may be required by ombud council rules.”

Specific Areas of Impact cont. 4. Effectiveness An ombud scheme can only be effective if there is total buy-in from all the members from the relevant industry. The current voluntary ombud schemes will enjoy greater industry participation again to the benefit of all financial customers. The following sections support the outcome: - Section 211(3) – “If a financial institution provides financial products and financial services and there is a recognised industry ombud scheme that provides for the resolution of complaints about financial products or financial services of that kind, the financial institutions must be a member of that industry ombud scheme.” - Section 215 – Obligation to comply with governing rules of recognised industry ombud scheme. 215(1) “A financial institution that is a member of a recognised industry ombud scheme must comply with the governing rules of the scheme.” 215(2)”Without limiting any other right that a financial customer of a financial institution that is a member of a recognised industry ombud scheme may have, the financial customer may enforce the obligation in subsection (1) in relation to a financial product or a financial service as if the obligation were a provision of the contract in terms of which the financial product or financial service was provided to the financial customer.”

Specific Areas of Impact cont. 5. Quality Control The quality of services provided by an ombud scheme is imperative for the credibility of all the ombuds in the financial system. We support the provisions in the Bill that relate to quality control of the various offices in that it will ensure optimum service delivery by the Ombudsman offices. Hereunder are a few relevant sections which ensure adequate quality control and oversight: - section 200 – Procedure for varying, suspending and revoking recognition - section 204 – Compliance with financial sector laws - section 205 – Debarment - section 206 – Administrative penalties - section 208 – Supervisory on-site inspections and investigations

General Observations Section 176 – Objective “The Ombud Council is to assist in ensuring that financial customers have access to, and are able to use, affordable, effective, independent and fair alternative dispute resolution processes for complaints about financial institutions in relation to financial products, financial services, and services provided by market infrastructures.” The jurisdictions of the various ombuds may have to be widened/amended to accommodate the above stated objective of the Ombud Council. The potential impact of a widened jurisdiction is not clear but may be far-reaching. A similar concern arises out of the provisions of section 211, in terms of which the Ombud Council has the power to assign complaints to a scheme.

General Observation – cont. Section 217 – Reporting - This section will require the ombuds offices to report to the Council in some detail on the nature of complaints, issues raised in complaints, how those issues are being dealt with and the conduct of financial institutions giving rise to complaints. - The impact that this reporting requirement might have on our respective offices will no doubt depend on the level of detail required. - If significant analysis and detail is required, this may require the employment of additional staff and/or enhancements to existing operational processes and systems. Section 201(5)(a) – requires rules that provide for a consistent approach and consistent requirements for all schemes, while section 201(5)(b) allows for taking into account our differences in nature and complexity of the complaints we determine. - This may have an impact on the operation of the various offices.

Section 188 – Chief Ombud We have previously raised our objection to the title ‘Chief Ombud’ as the so-called ‘Chief Ombud’ will be responsible for the day-to-day management and administration of the Ombud Council a function which is clearly not in line with the functions performed by an Ombudsman. An Ombudsman’s main function, amongst other things, is to adjudicate on complaints submitted to the Ombuds Office and make determinations thereon. The title ‘Chief Ombudsman’ is a misnomer, confusing and inappropriate. As previously suggested we believe that a more appropriate title would be – ‘Ombud Council Director’.

Technical Inaccuracies The definition of “recognised industry ombud scheme” in Section 1(1) cross references Section 192. This should in fact be “Section 194”; Section 214 refers to “it” but it is not clear whether the “it” is the scheme or the Council. This should be clarified.

Thank you