On 19 June 2020, in response to a request from a client, an FSP’s the representative, a private banker, transferred funds from the client’s cheque account to a new investment account, despite the client having such a facility. It appears from the Financial Services Tribunal’s papers that the reason was that the representative was incentivised for opening a new account.
On 13 July 2020, the representative (the applicant before the tribunal) was suspended with immediate effect by the respondent, pending an investigation. On 5 August 2020, the applicant received notice of a disciplinary hearing. The hearing was concluded on 31 August 2020. The applicant was found guilty of dishonesty and of neglecting her duties. Consequently, she was dismissed on 8 October 2020.
On 11 December 2020, the respondent commenced the debarment process by issuing the applicant with a notice of intention to debar. The applicant was invited to make submissions within 14 calendar days from the date of the above notice.
In a letter dated 1 February 2021, the applicant was informed that she was debarred in terms of section 14 of the FAIS Act on the grounds that she no longer met or complied with the requirements of section 13(2)(a) of the FAIS Act, specifically, the Fit and Proper Requirement of honesty, integrity and good standing as provided for in Board Notice 194 of 2017.
Grounds for application for reconsideration
Subsequent to the debarment notice, the parties reached a settlement agreement whereby the respondent gave an undertaking not to oppose the applicant’s application to the Financial Services Tribunal for the lifting of the debarment.
In addition, it amended the applicant’s certificate of service and confirmed that the applicant was no longer listed in the Register of Employee Dishonesty System (REDS). According to the applicant, the respondent, by giving an undertaking that it would not oppose her application, admitted and/or conceded that the applicant should not have been debarred.
The respondent indicated that it did not intend to oppose the application for reconsideration. However, it was represented at the hearing for the purposes of providing clarity of what it meant when the settlement agreement was concluded.
FSP debarment obligations
Section 14(1)(a) of the FAIS Act places an obligation on an FSP to debar, among others, a representative if the FSP is satisfied on the basis of the available facts and information that the representative:
- Does not meet, or no longer complies with, requirements referred to in section 13(2)(a) of the FAIS Act; or
- Has contravened or failed to comply with any provisions of the FAIS Act in a material manner.
Failure to do so is a contravention of the FAIS Act, which can result in sanctions against the FSP.
Counsel for the respondent clarified that when the parties entered the settlement agreement, the respondent did not admit and/or concede that the applicant should not have been debarred. He stated that when the words “upliftment of debarment” were used, the respondent anticipated an application to the FSCA in respect of Board Notice 82 of 2003. This Board Notice provides a procedure and the requirements in respect of the re-appointment of representatives.
However, during the hearing of the matter, the applicant’s legal representative was made aware of the Board Notice for the re-appointment of representatives and opted to persist for the application for reconsideration before the tribunal.
Tribunal’s findings
“On plain reading of the agreement of settlement of the labour dispute, one does not understand why the applicant submitted that when the respondent entered into the settlement agreement it meant to concede that the applicant should not have been debarred. There is no information or facts supporting that conclusion.
“This panel granted the applicant an opportunity to make an application to lead oral evidence. The chairperson of this panel determined, amongst other things, that the applicant could not provide the very nature of the evidence or defence sought to be led.
“This panel finds no merit that justify the setting aside of the debarment dated 1 February 2021. The grounds submitted by the applicant in this application for reconsideration do not, in our view, sustain this application. Therefore, this panel finds no basis in law and/or fact to interfere with the decision of the respondent to debar the applicant.
“The application for reconsideration is accordingly dismissed in terms of section 234(1)(c) of the FSR Act.”
Comment
I find the actions of the FSP rather strange, particularly in terms of the settlement agreement. If the actions of the employee were such that they warranted debarment, then sweeping the transgression under the carpet – removing her from the REDS and changing her certificate of service not to reflect this incident – is questionable, to say the least.
Perhaps a case of debarment remorse?
