Debarment process? What debarment process?

A recent application for reconsideration of a debarment by the Financial Sector Tribunal evoked a number of interesting questions, including ones on responsibility and accountability for transgressions.

Background

Ms M was charged with a number of serious accusations, including “…charges of dishonesty (that she lied to the FSP’s clients), she caused automatic renewal premium increase for client without notice, and for conflict of interest and what is said to be an act of negligence.”

She was found guilty of all the charges, including a charge of theft of the FSP’s property. She was informed that the decision of the disciplinary hearing was of summary dismissal and her employment services with the FSP was terminated on the 20th October 2020.

In the letter terminating the employment contract, the applicant was, inter alia, informed as follows: “As discussed at the hearing we have no option to, and have already commenced, your debarment process.”

Due process not followed

The application for reconsideration does not challenge the evidence led in the disciplinary hearing. Based on the facts, the applicant was found guilty at the legitimately constituted disciplinary hearing on charges that speak directly to her fit and properness, of her honesty as a financial service representative.

During the Tribunal hearing the applicant submitted that she was not afforded an opportunity to be heard since the debarment enquiry had not been conducted. She received a letter terminating her employment contract with the respondent, and in that letter, she was informed that the debarment process will be commenced with. This never materialized. She received a letter dated the 28 October 2020 from the FSCA informing her that a debarment has been recorded against her name in the register.

Debarment process flawed

“The objective and the effect of s.14 of FAIS Act, as well as the requirements for the debarment policy for the FSPs are aimed at ensuring the fairness of the debarment process. In this matter, the entire debarment process appears to have been sacrificed completely.”

At the hearing, the respondent pointed out that, after the letter of the 20th October 2020 was delivered to Ms M, the respondent waited for further assistance from the ‘compliant officer’ or ‘consultant’. When the debarment had occurred, he assumed that the complaint (sic) officer had finalised the debarment. He conceded that the process has been flawed but questions whether the FAIS Act would still permit the applicant to be a representative under the cloud of the outcome of the disciplinary hearing.

Tribunal finding

The jurisdictional requirements for the debarment of the applicant were completely abandoned by the respondent. The debarment is unlawful and must be set aside. The matter does not have to be referred back to the respondent who was not the decision maker.

Earlier, the Tribunal noted that the relationship between the applicant and the respondent has become truly strained.

In an interesting finding, the Tribunal found that “…the jurisdictional requirements for the debarment were completely abandoned by the respondent. The debarment is unlawful and must be set aside. The matter does not have to be referred back to the respondent who was not the decision maker.

Comment

This certainly raises some interesting questions.

1. We now have a person who was found guilty in a disciplinary hearing of misconduct, and who did not dispute the facts before the Tribunal, “unbarred”, and able to work in the industry.
2. Whilst the compliant officer/consultant may have been responsible for not conducting the debarment hearing, the FSP/key individual is still accountable for the transgression.
3. The FSP takes responsibility for the actions of representatives it appoints, and the FSCA approves the appointment of key individuals. Should there not be some measures in place for the Regulator to check for compliance on the part of the FSP, too? The “Debarment Notification form” specifically calls for all related documentation, including details of the debarment hearing which, in this case, was non-existent.