Two decisions handed down recently by the Financial Services Tribunal (FST) highlight the tribunal’s approach to applications for the reconsideration of a debarment on the grounds that an FSP did not notify the applicant of the intention to debar.
In both cases that came before the FST, the applicants were debarred after being found guilty of defrauding clients. The tribunal could not find fault with the FSPs’ findings in this regard.
Reconsideration applications to the FST on the grounds of procedural unfairness are common. Often, the form of these applications is that because the person was not informed of the intention to debar, the applicant did not have an opportunity to state his or her case and therefore the debarment was procedurally unfair.
In some of these cases, it seems the applicants are relying on the assumption that because they did not acknowledge receipt of the notification, which was sent electronically, the FST will conclude that they were not notified. But an applicant’s bold claim that he or she did not receive the documents will not suffice.
Sending documents to a representative
In assessing whether a debarment was procedurally fair, the FST will invariably refer to sub-sections 14(2) and (3) of the FAIS Act and paragraph 3.3 of Guidance Notice 1 of 2019.
Paragraph (a) of sub-section 14(2) imposes an obligation on an FSP to ensure that the debarment process is “lawful, reasonable and procedurally fair” before the FSP effects a debarment.
Paragraph (b) of this sub-section is of particular relevance in the context of two of the FST’s recent decisions:
“If a provider is unable to locate a person in order to deliver a document or information under sub-section (3), after taking all reasonable steps to do so, including disseminating through electronic means where possible, delivering the document or information to the person’s last-known email or physical business or residential address will be sufficient.” (Emphasis added)
As the wording of paragraph (b) states, the criterion for delivering the required documentation is met if the FSP uses the applicant’s last-known email address. And this was the FST’s finding in both cases.
In one of the cases the tribunal pointed out that there is no requirement in law for an FSP to have the sheriff serve the notice of the intention to debar, along with the other required documentation, to the person’s residential address.
The FST found that the FSPs in both cases had met the criteria in paragraph (b) because they could provide evidence that they had sent the documents to the applicants’ last-known email addresses.
Applicants who contend that they did not receive the documents because the email address used by the FSP “is no longer in operation” do not help their cause by using that same email address in their correspondence with the FST. The tribunal does notice these things.
Although paragraph (b) does not mention contacting the person via cellphone (voice call and/or SMS), decisions by the FST indicate that many FSPs do this in addition to sending notices and documents via email. The FSP’s ability to provide evidence that it attempted to contact the representative via cellphone will help the FSP if the case comes before the tribunal, particularly if the representative claims the cellphone number “is no longer in use”, but the tribunal finds it can contact the representative using that same number.
In similar vein, in both cases the applicants contended that their debarment was not procedurally fair because they had not been notified of the debarment decision, as required by sub-paragraph 14(3)(c)(i).
Although paragraph 14(2)(b) refers to the use of a last-known email address in the context of delivering documents prior to the debarment decision, the FST has applied the same principle when confronted with allegations by representatives they did not receive the debarment notice. In other words, an FSP’s use of the last-know email address and/or contacting the debarred representative using their last-known cellphone number is sufficient.
Documents the FSP must provide
Paragraph (b) referred to the documents or information that the FSP must provide in terms of sub-section (3). Paragraph (a) of sub-section (3) states that before debarring a person, an FSP must:
(i) Give adequate notice in writing to the person stating its intention to debar the person, the grounds and reasons for the debarment, and any terms attached to the debarment, including, in relation to unconcluded business, any measures stipulated for the protection of the interests of clients;
(ii) Provide the person with a copy of the financial services provider’s written policy and procedure governing the debarment process; and
(iii) Give the person a reasonable opportunity to make a submission in response.
In the two cases that came before the tribunal, the FSPs were able to provide the FST with evidence that they had sent the representatives all the documentation required per sub-paragraphs (i) and (ii).
Speak now or forever hold your peace
Paragraph (3)(b) requires an FSP to consider any response provided by a representative in terms of sub-paragraph (3)(a)(iii) before effecting a debarment.
As Guidance Notice 1 of 2019 states, the purpose of the process envisaged in terms of section 14(3) of the FAIS Act is to afford a representative an opportunity to make submissions in response to the grounds and reasons that inform an FSP’s intention to debar him or her.
It then goes on to state that an FSP is not prevented from considering the matter and taking a decision concerning the debarment of that person if the representative chooses not to use the opportunity to make submissions.
The Guidance Notice also points out that section 14 does not require that an oral hearing is held. In other words, the debarment can be decided on the written submissions received by both parties.
In neither of the cases decided by the FST did the applicants use the opportunity to respond to the allegations, nor did they attend the debarment hearings. But this did not invalidate the debarments, the tribunal found.
Parting comment
It seems there are representatives who believe they can either avoid debarment or put a spanner in the procedural wheel by ignoring the entire proceedings. Perhaps they hope to find a sympathetic ear at the tribunal. From the cases discussed above, it is clear that this tactic will not work if the FSP has fulfilled its obligations in terms of section 14.
