Just more than 20 years after the office of the Financial Advisory and Intermediary Services ombud was formed, the limits on the compensation it can award have finally been increased from R800,000 to R3.5-million.

The Ombud Council published new rules for the Financial Advisory and Intermediary Services (FAIS) ombud this week.

Leanne Jackson, chief ombud of the Ombud Council, says the increase is necessary to ensure that the compensation the FAIS Ombud is empowered to award recognises changes in the value of money and market realities since the compensation limit was first set two decades ago. It is also somewhat more consistent with the compensation levels available from other financial sector ombud schemes.

The office of the short-term insurance ombud has a limit of R3.5-million for all complaints except homeowners or buildings cover, which has a limit of R6.5-million. The office of the long-term insurance ombud does not have a monetary limit. The two offices were incorporated into the Financial Services Ombud scheme earlier this year, along with the banking ombud, and the credit ombud.

"The outdated previous limit (for the FAIS Ombud) compromised the effectiveness of the ombud system by unreasonably restricting access to free, effective, independent alternative dispute resolution, and forcing several customers prejudiced by poor financial advice to resort to expensive formal litigation to seek redress," she said.

Commenting on the new rules, the office of the FAIS Ombud said complaints...