In a recent article in Norton Rose Fulbright’s Financial Institutions Legal Snapshot newsletter, Patrick Bracher, a director of the firm and an insurance law specialist, says: “This is not specifically part of South African law, but it is relevant when considering liability, for instance, of brokers under the Financial Advisory and Intermediary Services Act.
“The difference is between providing information for the purpose of enabling someone to decide on a course of action and advising someone as to what course of action to take.”
The English Appeal Court recently found that accounting firm Grant Thornton was not responsible for the losses incurred by Manchester Building Society when it entered into financial transactions on the basis of its professional advice. The case rested on the fine line between information and advice. Although the accounting firm had advised the building society on accounting practices, the court found it was not responsible for the subsequent transactional course of action taken by the building society.
What is relevant is a 2017 case involving a commercial insurance broker referred to in the judgment. The broker had advised a reinsurance company on what is known as retrocession insurance (whereby reinsurance companies spread their risks) and the reinsurance company had suffered losses as a result.