The Retail Distribution Review has reminded us that in 2010 the appeal court in Maree v Chris Booysen t/a NVM Beleggings & Versekeringsadviseurs found that the long-term intermediary was not entitled to an advice fee. Earnings were restricted to a fee for services as intermediary under the Long-term Insurance Act. The matter went through three courts and the hands of at least 10 lawyers (includes judges apparently) without anyone looking at the FAIS Act.
The insured, Mr Maree, was advised by his broker Mr Booysen to move a long-term policy from Sanlam to Momentum. After receiving advice elsewhere that the move was not a good idea, the client cancelled the new policy in the cooling off period in the Policyholder Protection Rules (PPR) and refused to pay the broker his commission. The court held that section 49 of the Long-term Insurance Act read with its rules and regulations only entitled the broker to commission in terms of the Long-term Insurance Act, that the client could not waive his rights to this limitation and that therefore the commission was not payable.
Nobody drew the distinction between the intermediary services referred to in the Long-term Insurance Act and the advice fee which is justified in terms of the FAIS Act and specifically justified by section 3A(1)(a)(iv) of the FAIS General Code.
The Retail Distribution Review (clause 2.4.1 footnote 33) recognises that the issue is ambiguous and subject to varying interpretations and that clarity is needed (3.3.3).
Till this is cured by whatever outcome the RDR brings us, Maree’s case should not be accepted as good law.
