From CompliNEWS | Financial Service Intelligence Watch
No record of advice, no defence – Ombud reinforces importance of keeping advice records
A recent case cited by the FAIS Ombud has highlighted a critical compliance failure — the inability of a financial adviser to produce a record of advice — and serves as a stark reminder of the legal obligations imposed under the FAIS General Code of Conduct.
The complaint arose after an insurer partially rejected a jewellery claim worth R785 000, paying out only R135 000 after applying a warranty clause requiring the items to be locked in a safe when not worn. The client believed the jewellery was covered under ‘all risk’ and subsequently lodged a complaint, alleging he had not been properly advised about this specific condition.
While the adviser was able to show that the policy documents and emails included the warranty, he was unable to produce a formal record of advice issued when the policy was taken out. He cited system migrations and the age of the policy as reasons for the missing documentation.
The Ombud noted that under section 9 and section 3(2)(a) of the General Code of Conduct, all Financial Services Providers (FSPs) are required to retain accurate and accessible records of advice rendered. The record of advice is a key compliance requirement and may be the only evidence that can defend an adviser’s actions if a dispute arises.
Due to the absence of this record, the Ombud recommended a settlement of R50 000, which was accepted by both parties.
Read the Additional report by Moonstone Information Refinery here