Sales staff turnover in the financial services industry has always been notoriously high. Of late, it has become evident, from decisions by the Financial Services Tribunal, that due process was not always followed to the letter. In fact, some of the biggest mistakes were made by institutions with more than enough legal and compliance knowledge to have prevented this from happening.
On 1 April 2018, the debarment process under the FAIS Act was amended by the Financial Sector Regulation Act 9 of 2017 (FSRA) as a result of exactly this. Since then, numerous applications for revision of debarment decisions were made.
In the latest published application for reconsideration, the applicant claimed that he never received the debarment notification. This case provides clear guidelines on the steps an FSP should take to ensure compliance with the FAIS Act, particularly in a case where the employee had left the employment of the FSP.
Factual background
The applicant was employed by the respondent as a telesales consultant on 1 August 2018.
On 21 December 2018, the FSPs “Group Quality Department” lodged a complaint against him for capturing a policy in a manner that constituted a breach of the FSPs procedures as well as committing fraud in the process.
The complaint was brought to Mr D’s attention on 17 January 2019. The matter was discussed with his sales coach, he apologised and received training. However, he left the employment of the FSP on the same day. The FSP only issued a notification of a debarment hearing on 1 April 2019, via email.
The applicant denied that the email address shown was his. He also denied ever receiving a notice.
Reconsideration application
TheTribunal had to consider whether the Notice of debarment met the requirements set under section 14 of the FAIS Act.
| ● | Section 14 (1) of the FAIS Act places an obligation on the FSP to debar an FSR who has failed to comply with the provisions of the FAIS Act in a material manner. Section 14 (3) goes further to state the procedure that must be followed to effect the debarment. |
| ● | Section 14 (2) (a) of the FAIS Act stipulates that the FSP is obliged to ensure, prior to effecting the debarment, that the process of debarment is lawful, reasonable and procedurally fair. If the FSP makes a material misstep, the debarment cannot be sustained. The matter may be remitted back to the FSP in terms of section 234 of the FSR Act for the FSP to review a procedural step it may have missed. |
| ● | Section 14 (2) (b) of the FAIS Act further states: “If a provider is unable to locate a person in order to deliver a document or information under subsection (3), 7 after taking all reasonable steps to do so, including dissemination through electronic means where possible, delivering the document or information to the person’s last known e-mail or physical business or residential address will be sufficient.” |
| ● | Therefore, the FSP is required to locate the FSR for the purposes of delivering documents that relate to the impending debarment. However, if, after exhausting all reasonable efforts to locate the FSR, the latter’s whereabouts remain unknown, sending an email, for instance, to the FSR’s last known address will be regarded as a sufficient method for the delivery of such documents. Put differently, sending an email will not be sufficient if the FSP cannot show that it took all reasonable steps to locate the FSR to deliver the Notice. |
| ● | Section 14 (2) (b) places emphasis on the FSP’s obligation to ensure that the FSR is properly notified about the debarment specifically when the FSR has long left the employ of the FSP as is the case in this matter. |
The Tribunal’s findings
From the evidence it was clear that no attempt was made by the FSP to locate the Applicant to deliver the Notice. The FSP opted to send the Notice electronically by email only, despite having contacted the applicant via his mobile phone on a number of occasions after he had left.
The Tribunal pointed out that a delivery note of an email merely serves to indicate delivery of the Notice as opposed to serving as confirmation that the Notice was delivered to the applicant.
The FSP failed to ensure that the debarment process was lawful, reasonable and procedurally fair.
The Tribunal remitted the matter back to the FSP for further consideration.
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