FIDENTIA, THE BROKER, AND THE CLIENTS' CLAIMS Financial services providers risk liability for any poor investment advice they give, and need to comply strictly with their statutory Code of Conduct. A recent determination by the FAIS Ombud illustrates in particular the danger of not keeping the required "record of advice" given to clients. A broker who advised his clients to invest monies with Fidentia was ordered to personally cover his clients' losses, even though the clients were found to have been aware that the investment was a high risk one. Critical factors seem to have been the "exorbitant" commissions earned by the broker, and the broker's inability to provide "any record of advice, or for that matter any other documentation as required by the General Code evidencing the fact that the investment was an appropriate one in the circumstances". As an investor on the other hand, don't be lulled into a false sense of security just because a broker is employed by one of the well-known financial institutions. Sometimes you will be able to recover from the employer (as happened in a similar matter last year involving the same broker), but sometimes not. In this particular case for example the broker was held to have embarked on "a frolic of his own", and as the clients knew there was no connection between the employer and Fidentia, their claim lay against the broker alone. Recent Articles for August 2009; Source: www.dotnews.co.za |
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