The Financial Services Tribunal (FST) has found that a debarment was procedurally fair even though the representative was not sent an explicit notice of intention to debar.
The Tribunal’s decision also addressed the merits of the debarment, which concerned allegations by Medsafu Brokers that the applicant, “GN”, solicited clients for another brokerage.
GN had an independent contractor agreement with Medsafu. The contract prohibited GN from canvassing for or transacting any business for his own or any other person’s account.
Last year, allegations concerning GN’s conduct resulted in Medsafu investigating his email account. On Medsafu’s version, the investigation found that GN had been working as a “new development business manager” for another firm.
Medsafu dismissed and subsequently debarred GN because he allegedly tried to convince its clients to move to a competitor and shared confidential client information with third-party entities without consent.
Wording of two letters
In his reconsideration application, GN submitted that Medsafu did not inform him of its intention to debar him.
The first step in the debarment process is the notice of intention to debar, as required by section 14(3)(a) of the FAIS Act.
On 26 July 2023, GN was requested to attend a disciplinary hearing about potential violation of the FAIS Act relating to honesty and integrity. This first letter also invited GN to respond to Medsafu’s allegations against him.
Five days later, GN’s erstwhile attorneys asked Medsafu for details of the specific charges their client had to answer. Medsafu provided GN’s erstwhile attorneys with the information.
The Tribunal said the initial letter indicated that the outcome of the hearing and/or meeting may include debarment. Further, both the initial letter and the second letter referred to GN’s conduct in terms of the FAIS Act.
“This Tribunal determines that even though the respondent did not issue a document, or a letter specifically titled ‘notice of intention to debar’, the applicant was duly notified and should have been aware that the process may include debarment.”
The FST said it appeared from the initial letter, read with the second letter, that GN was aware and informed of the evidence (grounds and reasons) against him, which indicated that he was no longer a fit and proper person with specific references to a lack of honesty, integrity, and good standing in terms of the FAIS Act. This information was conveyed to GN and his erstwhile attorneys at a meeting on 7 August 2023. It further appeared from the record that GN was informed of the grounds and the reasons for the disciplinary hearing and his debarment.
The Tribunal found that GN was duly informed that the disciplinary hearing might result in his debarment, and GN and his erstwhile attorneys were provided with an opportunity to make representations. This satisfied the FST that the process was reasonable and procedurally fair.
Without merit
GN also contested his debarment on substantive grounds.
He submitted he had been given verbal consent by Medsafu’s officials to work with the other brokerage pending the finalisation of a written agreement. This was denied by Medsafu.
Furthermore, there was no working relationship between Medsafu and the third-party entities with which the information was allegedly shared.
The Tribunal found that GN’s submissions were without merit.
He could not substantiate his assertion that he had been given verbal permission to work with another brokerage.
The evidence on the record established that GN shared confidential client information with third parties. He could not explain why this had been done.
The FST found no reason to interfere with Medsafu’s decision to debar GN and dismissed his reconsideration application.
