The Financial Services Tribunal (FST) has dismissed the reconsideration application of a key individual (KI) who was debarred by Marsh (Pty) Ltd after she was found to be in unauthorised possession of the insurance brokerage’s trade secrets, and confidential and proprietary information.
The applicant, “TS”, was employed as a corporate client executive until she resigned in August 2022, before her disciplinary hearing in September, the tribunal’s decision said.
TS was charged with two counts of gross misconduct, for the unauthorised transmission of confidential information in July and August 2022, and, in anticipation her resignation, for sending the confidential information to her personal Gmail account.
At the disciplinary hearing, TS pleaded guilty to the charges. However, she stated that her sole reason for transferring the information to her Gmail account was to use it to support her complaint to the Commission for Conciliation, Mediation and Arbitration (CCMA).
Parallel to the disciplinary proceedings, TS was issued with a notice of intention to debar in terms of section 14 of the FAIS Act. The notice was issued by Marsh’s chief compliance officer, “JH”, who was cited as the “decision-maker” and second respondent.
The FST addressed three issues in the reconsideration application:
- Whether the FSP was required to exhaust the internal disciplinary process before starting the debarment process;
- Whether TS was afforded adequate notice in the intention to debar as required by section 14(3) of the FAIS Act; and
- Whether substantive grounds for the debarment were established.
1. Must the internal disciplinary process be exhausted before starting the debarment process?
TS contended that the debarment was procedurally unfair because, among other things:
- JH failed to take into consideration the evidence led by TS at the disciplinary hearing before deciding that she no longer complied with the fit and proper requirements.
- JH appeared to have put the cart before the horse by initiating the debarment process before the formal disciplinary process commenced and without the chairman finding that TS was guilty of gross dishonesty.
The FST referred to the case of Associated Portfolio Sanctions and Another v Basson and others. In this case the Supreme Court of Appeal (SCA) addressed the interplay between disciplinary inquiries convened under the Labour Relations Act and debarments of representatives under the FAIS Act.
The SCA held: “The very purpose of giving Mr Basson notice of the contemplated resolutions was to afford him the opportunity to make representations. To suggest that this amounted to pre-judgment is unsustainable; otherwise, every administrative decision requiring a prior hearing would be susceptible to being set aside on account of pre-judgment.”
The FST made the following observations:
- It was clear from the notice of intention to debar that it required TS to make representations and state why she should not be debarred. The notice also informed TS that evidence led at the disciplinary hearing would be taken into consideration in relation to her debarment.
- In terms of Guidance Note 1 of 2019, a debarment may form part of employment-related disciplinary proceedings. The FAIS Act does not prescribe that an FSP may not issue a notice of intention to debar before the conclusion of the internal disciplinary proceedings.
- Section 13(2)(a) requires an authorised FSP to be satisfied that its representatives and KIs are competent to act and comply with the fit and proper requirements.
- The wording of the notice of intention to debar made it clear that when the notice was issued, Marsh was no longer satisfied that TS complied with the fit and proper requirements. By issuing this notice, JH was complying with the statutory obligations imposed by the FAIS Act as soon as he became aware of the facts.
2. Was the applicant given adequate notice?
TS submitted that the respondents’ conduct of instituting a “multi-pronged” and “swarming attack” meant she did not have sufficient time to make submissions as required by section 14(3)(a)(i) of the FAIS Act.
The FST said the SCA heard and rejected similar arguments in Associated Portfolio Sanctions and Another v Basson.
The SCA also rejected the High Court’s finding that a separate “debarment factual inquiry” should have been held to comply with procedural fairness.
The SCA held: “The facts established in the disciplinary proceedings impacted directly on Mr Basson’s honesty and integrity, raising the issue squarely whether he met the crucial requirement of a fit and proper person to be a representative and key individual under section 8(1) of the FAIS Act. Any further inquiry would have been absurd and unnecessary, particularly as it could hardly be accepted that whilst not a fit and proper person qua employee, he could nonetheless be a fit and proper person qua representative. To insist on a further inquiry in these circumstances would be to place form above substance.”
The FST also said although the five days the notice of intention to debar afforded TS to respond did not seem to be adequate, JH agreed, at TS’s request, to extend the period.
JH submitted that TS responded to the notice of intention twice. On the first occasion, she did not address the fit and proper allegations against her. On her the second occasion, her attorneys responded to the allegations, the tribunal said.
3. Were there substantive grounds for the debarment?
TS contended that the tribunal should reconsider and set aside the debarment based on the following three grounds:
She transferred the information to support her CCMA complaint
TS submitted that, while employed by Marsh, she did not receive any support from management and was racially discriminated against. She transferred Marsh’s confidential and proprietary information to her private Gmail account because she wanted to use it as a backup in her grievance before the CCMA.
The FST agreed with the respondents that TS’s explanation was neither plausible nor sustainable.
TS had not explained or established a link between the nature of the information found in her Gmail and her allegations that the sole purpose of transferring information to her private email was to use it as evidence at the CCMA, the tribunal said.
“It is difficult to comprehend how client listing, commissions and pricing information would assist to show that she was racially victimised and abused by the first respondent’s senior staff members.”
The tribunal also noted that TS did not attach any documents to show that there was a pending dispute before the CCMA.
“She does not take the tribunal into her confidence by placing enough facts before the tribunal regarding the alleged dispute and how the information found in her Gmail address would have helped her to prove her case.”
‘Lawful possession’
TS submitted that she had access to Marsh’s confidential and intellectual proprietary information while she was in its employ. Therefore, she was a lawful possessor of that information. She also transferred the information to her laptop so she could work remotely.
The FST said that TS’s having access to information did not entitle her to transfer the information to her private Gmail address without being authorised to do so.
Doing so was not only a breach of her employment contract but also amounted to dishonesty because TS knew that she was not allowed to transfer that information to her private email but did so anyway, the tribunal said.
Neither the applicant nor a third party stood to benefit
TS submitted that the respondents failed to prove that she intended to use the proprietary information for her benefit or the benefit of a third party. As such, they failed to prove that she no longer complied with the fit and proper requirements.
The tribunal said the question was not whether the respondents proved that TS intended to pass on the information to third parties or used it to her benefit. Instead, it was whether TS was a person who could be trusted with her employer’s sensitive information, or whether she could be trusted to faithfully act and discharge all the duties and obligations as an FSP.
The FST said it was reasonable for JH to infer from the established facts that TS intended to have access to this information after she left Marsh and use it for her benefit or the benefit of a third party.
TS intentionally breached her employment contract by transferring to her private email, sensitive, confidential intellectual proprietary information belonging to Marsh, as well as its trade secrets, the tribunal said.
TS was aware that her contract of employment did not allow her to be in unauthorised possession of her employer’s information. She knew, or ought to have known, that if this information landed in the wrong hands, it could harm Marsh. She therefore breached her fiduciary duty towards Marsh, the FST said.
The tribunal found that TS was dishonest and lacked integrity.
“Debarment is not aimed at punishing the applicant but rather to ensure and maintain the honesty and integrity required from an FSP. A person like the applicant ought not to be unleashed to the unsuspecting public,” it said.
