The Financial Services Tribunal (FST) has set aside Sanlam Developing Markets’ debarment of a senior financial adviser whose debarment was triggered when a client cancelled her policies because of double premium deductions.
The Tribunal found significant flaws with the debarment procedure and with the substantive basis on which the decision was based.
The train of events that led to the debarment were set in motion on 22 July 2021, when the adviser, “RS”, visited the premises of the John Taolo Gaetsewe District Municipality in the Northern Cape. He presented insurance products to several longstanding clients and helped some of them to obtain refunds.
RS told the Tribunal that one client asked him to review her policies. She was unhappy with the monthly premium of R1 750 and the level of cover. RS produced a quote for R1 520 a month for additional comprehensive cover, to which the client agreed.
RS said he recorded his conversation with the client, and sent it to a sales manager, who countersigned the policies the following day.
The hard copies of the policies were not available, and the client signed the PDF versions of the policies electronically on his iPad. The software populated the client’s details and signature where required. He said this was done in the presence of the client.
According to RS, he sent a letter to the client’s employer to cancel her existing policies. She wanted the premiums for the new policies to be deducted from 14 September.
But in September, RS received WhatsApp messages from the client complaining that the premiums for her existing and new policies had been deducted from her salary. The existing policies had not been cancelled.
RS said he phoned the client, who told him she had no money in her bank account and could not afford to buy food because of the double deduction. He said the client begged him to refund her R1 750 until her employer’s payroll department could organise the refund, which she would pay back.
RS said he felt compelled to help the client. He paid R1 750 into her bank account, using the reference “Sanlamsky refund”.
In October, the client cancelled all the policies and requested a refund for five policies on 2 November and again on 24 November for 11 policies.
The cancellation of the policies prompted an investigation by Sanlam Developing Markets’ forensic service.
Allegations of forgery
Sanlam told the Tribunal that the forensic investigator phoned the client in May 2022. She denied signing up for the new policies. Instead, after a few months, she noticed the deductions from her pay slip and contacted RS and told him that premiums had been deducted from her salary for policies to which she had not consented. RS had refunded her by paying the money into her bank account.
According to the client, the meeting had taken place in July or August, during which RS had asked to review her policies and offered to consolidate them into one policy for a lower premium.
In June 2022, the client submitted a written complaint to Sanlam that contained similar allegations. In the complaint, she said the meeting occurred at the end of August. She said she cancelled the policies because she never agreed to take them out. The client disputed signing five of the policy documents.
The investigation report claimed the client disputed a total of eight policies. Sanlam employed a forensic consultant to examine the client’s signatures in respect of the disputed policies, which, in terms of the forensic report, were three. These signatures were compared to two specimen signatures.
According to the forensic report:
- RS forged or allowed the client’s signature to be forged on the policy documents;
- RS obtained the client’s details when he proposed to check the client’s existing policies, which he then used to complete and submit the policy documents; and
- RS contravened Part 2(2) of the General Code of Conduct because he failed to render financial services honestly, fairly, with due skill, care, and diligence.
On 20 June 2023, Sanlam issued RS with a notice of intention to debar. A debarment inquiry was held on 21 July, and RS was debarred three days later.
In the reasons for debarment issued on 25 August, Sanlam stated:
- The policy documents were not signed by the client on the same day she met RS.
- The date of the recording did not correspond to the signature dates on the policy documents.
- RS conceded that he captured the client’s signature on his iPad and “affixed” it to the policy documents.
- When RS deposited money into the client’s account, the payment reference did not mention that the payment was for food.
The reasons for the debarment also referred to FSCA Communication 12 of 2021 (Use of electronic signatures and prepopulated documents) and section 7(2) of the General Code of Conduct, which prohibit a provider from requesting a client’s signature on a document unless all the details required to be inserted thereon by the client or on behalf of the client have already been inserted.
RS cited Sanlam Developing Markets (Individual Life) and the Sanlam Developing Markets (Individual Life) Debarment Committee as the respondents in his reconsideration application.
Procedural problems
The Tribunal’s decision shows there were two major problems with the procedure followed by the respondents.
First, the notice of intention to debar did not disclose the reasons for the debarment.
The notice referred to certain annexed documents, including the debarment policy, the forensic investigation reports, and “applicable annexures”. But the notice did not state how the latter two documents related to the debarment, and which of them constituted the reasons for debarment and to what extent.
The forensic report with its annexures comprised almost 200 pages, and the annexures to the report came to 38 pages. The notice did not disclose which of these constituted the “applicable annexures”, the FST said.
The implied contraventions of Communication 12 and section 7(2) of the Code of Conduct were not part of the reasons for the intended debarment.
As a result, the Tribunal said RS was left to infer the reasons for the debarment when formulating his written response. It said the absence of the reasons contravened section 14 of the FAIS Act and rendered the debarment proceedings unfair and improper.
Second, the Tribunal said what transpired during the debarment hearing was “more alarming”.
After RS made his submissions, he and his legal representative were excused from the hearing, and the debarment committee deliberated on the debarment. The transcription showed that a member of the committee with no voting rights provided testimony about RS. The Tribunal said none of these “very serious allegations” were put to RS.
It was also unclear why this person was part of the deliberations if she was not a voting member of the committee.
Her contribution during the deliberations was “irregular”.
The FST’s finding that the debarment proceedings were “unfair and improper” was alone ground for the debarment to be set aside. Nevertheless, the Tribunal decided to assess the merits given the serious nature of the allegations, how the FSP conducted the debarment inquiry, and the conclusions reached based on the available evidence.
The forgery allegations
The policies were cancelled in October 2021, but Sanlam continued to deduct the premiums from the client’s salary for two months thereafter. In November 2021, the client made two requests for a refund. By June 2022, she had still not received a full refund.
The Tribunal said the allegations that the signatures were forged were made for the first time seven months after the policies had been cancelled, during the telephone conversation between the client and the forensic investigator on 17 May 2022.
The client, when cancelling the policies, never cited forgery as a reason for cancellation.
“It is likely that when the shoe started to pinch, the client claimed that she had never signed the policies in the hope that she would receive her refund sooner,” the Tribunal said.
Discrepancies over when the policies were signed
During the debarment hearing, neither the investigator nor the client was called as witnesses despite RS’s complaint that there were discrepancies in the investigation report. The forensic consultant was also not called as a witness, the FST said.
It was also during the hearing that allegations were made for the first time that the dates on some of the policies did not correspond with the date on which RS met the client and that the date of the recording did not correspond with the date on which they met.
Most of the policies record the date of signature as 22 July 2021. However, some of the policies record the date of signature as 18 June 2021. Notably, all the dates appear to be electronically generated. According to RS, the date of 18 June 2021 was a system error because he had not met the client before 22 July 2021.
The Tribunal said the respondents had the benefit of interviewing the client for purposes of their investigation, yet they did establish that RS met the client before 22 July 2021 to obtain her information and prepopulate the policies.
The ‘Sanlamsky refund’ reference
The FST said Sanlam “made much” of the use of “Sanlamsky refund” as the reference when RS paid the money into the client’s bank account. According to the respondents, the payment and corresponding reference was an admission that RS issued policies without the client’s consent and, when she became aware of his scheme, he refunded her. If RS’s motive for paying the client was feeling sorry for her financial plight, he should have used another reference for the payment.
The Tribunal said Sanlam’s version was “untenable and improbable”.
It said the payment was not for food for the client, although the client’s complaint that she had no food compelled RS refund the client until she could recover the refund from Sanlam.
Notably, the Tribunal said, the client had not alleged that she did not instruct RS to cancel her existing policies. Also, the “refund” of R1 750 was for the existing policies that had been cancelled, not for the premiums deducted in respect of the new policies.
No evidence that the signatures were copied and pasted
It was common cause that the signatures were in electronic format.
The Tribunal noted that the specimen signatures were appended by the client on hard copy documents, whereas the disputed signatures were electronic. The forensic consultant failed to account for this “material factor”, which should have featured in his examination of the specimen signatures.
“The fact that the ‘specimen signatures’ are dissimilar to the ‘disputed signatures’ could very well be attributed to the fact that the latter constitutes electronic signatures and the former not,” the Tribunal said.
Moreover, the implied allegation that RS contravened section 7(2) of the General Code was not supported by the evidence.
There was no evidence that the client signed blank or partially completed policy documents or that the signatures were copied and pasted as opposed to being populated by the software, the use of which was authorised by Sanlam.
RS’s version that the software populated the policy documents with the client’s signature, where required, was “not unconvincing”, the FST said.
Dispute over the recording
The sales manager on two occasions confirmed that she received the recording on 22 July 2021 and countersigned the policies on 23 July. No evidence was produced to suggest otherwise, the FST said.
The client had made a “bare denial” that it was her voice on the recording, but the respondents did provide any evidence to show that the voice was not hers.
The Tribunal found the respondents failed to demonstrate that RS lacked honesty and integrity in his dealings with the client, nor had they shown that he contravened the FAIS Act. Therefore, it set aside debarment.
