Doing clients ‘a good turn’ doesn’t deserve debarment, rep tells Tribunal

The Financial Services Tribunal (FST) has upheld the debarment of a financial adviser who claimed she subsidised her cash-strapped clients’ premiums so they would not lose their life cover.

The applicant, “FT”, was employed by Sanlam Developing Markets, a wholly owned subsidiary of Sanlam Life, in October 2019.

Her remuneration included upfront commission on the premiums received by Sanlam on the life insurance policies she sold. Sanlam’s remuneration policy also included a clawback rule, in terms of which Sanlam would recoup any upfront commission paid on a policy if the policy lapsed within 24 months.

Sanlam commissioned an internal forensic investigation after discovering something untoward with EasyPay payments made in respect of policies sold by FT.

According to the findings of the investigation, part payments of R30 each were made in respect of 11 policies sold by FT to four of her clients. The policies had premiums of R126 to R380 a month. All the payments were made within minutes of each other from the same pay point.

Sanlam said FT made the payments to prevent the policies from lapsing, thereby preventing or delaying the recoupment of the upfront commission she earned.

FT’s contract of employment prohibited her from paying any premiums, whether in part or in full, on behalf of clients. A similar prohibition was contained in Sanlam’s EasyPay rules and regulations.

When FT was confronted with the preliminary finding of the investigation and afforded an opportunity to provide a written response, she denied having made the payments.

FT was dismissed. She referred the matter to the Commission for Conciliation, Mediation and Arbitration, where she persisted in her denial that she made the payments. The CCMA rejected her evidence and upheld her dismissal.

Following debarment proceedings, Sanlam debarred FT.

In her reconsideration application, FT said her actions were not designed to circumvent or manipulate the premium payment process.

“My actions were based on a genuine attempt to facilitate payments for clients facing financial difficulties. I aimed to maintain their insurance coverage while they navigated temporary financial challenges. Secondly, the clients involved were fully aware of and consented to the arrangement,” FT said in her submission.

“At no point did I engage in any deceptive practices or attempt to withhold information. The primary objective was to provide support and maintain or [sic] level of financial flexibility for clients facing unforeseen circumstances.

“Furthermore, the decision to debar me fails to consider the positive outcomes of my actions. Several clients were able to maintain continuous coverage during challenging times, preventing lapses that could have left them vulnerable in the event of unforeseen [sic].”

No longer fit and proper

In its decision in May, the Tribunal said the issue for determination was whether FT’s conduct demonstrated that she no longer complied with the Fit and Proper requirements of honesty and integrity.

In making part-payment of the premiums on behalf of her clients, FT deliberately misrepresented to Sanlam that the clients made the payments, which mislead Sanlam into believing that their policies were still of “premium-paying status”, the Tribunal said.

FT benefited by unduly retaining the upfront commissions that were otherwise recoverable from her. This caused prejudice to Sanlam in the form of the non-recoupment or delayed recoupment of the upfront commissions, it said.

For these reasons, the FST said FT’s conduct showed that she no longer complied with the honesty and integrity requirements.

This finding was bolstered by the fact that FT denied having made the payments both in her response to the preliminary findings of the forensic investigation and at the CCMA. Then, in her reconsideration application, she admitted to having made the payments.

The Tribunal dismissed the reconsideration application.