FSP alleges rep not financially sound because he missed car repayments

A representative was “non-operational” in terms of the Fit and Proper Requirements because he allegedly fell behind with his motor vehicle repayments. This was one of the grounds on which the FSP debarred the rep last year.

The rep, “DE”, told the Financial Services Tribunal (FST) that Pro-Life Invest (Pty) Ltd “coerced” him into signing a letter of resignation in May 2023.

On 14 July 2023, the Commission for Conciliation, Mediation and Arbitration (CCMA) found that DE’s dismissal amounted to a constructive dismissal and made an award of R40 000 in his favour.

DE told the Tribunal that Pro-Life debarred him merely “to ventilate employment and contractual grievances” following the CCMA award.

He was employed by the insurance brokerage in November 2018 and acquired a 5% shareholding in the company in 2020.

For its part, Pro-Life alleged that DE no longer met the Fit and Proper Requirements because of dishonesty, lack of integrity, poor operational ability, and not being financially sound. It also alleged that he contravened section 7 of the FAIS Act.

The grounds on which Pro-Life reached these conclusions were set out in the notices of intention to debar, dated 26 July and 4 September 2023.

Pro-Life alleged that DE:

• Sold insurance products to himself and his mother despite knowing that he and his mother could not afford the premiums.
• Failed to adhere to undertakings to repay outstanding lapsed instalments.
• Failed to pay the instalments due under his motor vehicle finance agreement, which resulted in the repossession of the vehicle and DE owing R150 000. This rendered him “non-operational” in terms of Part 1 of Chapter 6 (“financial soundness”) of Board Notice 194 of 2017.
• Failed to render services to two short-term insurance clients. He failed to change a client’s residential address, which “may” result in the client’s claim being repudiated. With the other client, he created the impression that the client’s wife had cover for a rental vehicle, whereas this was not the case.
• Unlawfully removed life insurance files and documents from Pro-Life’s premises.
• Unlawfully entered the FSP’s premises after his resignation.

DE countered the abovementioned allegations as follows:

• He denied he knew, when the policies were instated, that he could not afford the premiums.
• The lapsing of his mother’s policies could not be attributed to him.
• He settled the money he owed in respect of his lapsed policies.
• He denied being R150 000 in debt and losing his motor vehicle. The vehicle was undergoing repairs. In any event, his alleged indebtedness did not constitute a lack of financial soundness for the purposes of being a representative.
• There was no proof that the insurer rejected the client’s claim because his residential address was not changed. He denied the misrepresentation regarding cover for the rental vehicle.
• He denied unlawfully removing files from Pro-Life’s premises or entering its premises without consent. DE said he entered the premises on 9 June 2023 with the FSP’s written consent and tendered the return of the files, which Pro-Life refused.

DE declined to attend an inquiry to be held on 14 September 2023 but made written submissions in response to the allegations contained in the notices.

Pro-Life decided to debar DE on 4 October 2023 after finding that he did not “appreciate and understand” his actions and did not “respect the financial industry enough”.

Lack of financial soundness allegation

The Tribunal decided DE’s reconsideration application on the papers.

It said the allegation that DE lacked financial soundness, as required by Chapter 6 of Board Noice 194 of 2017, was “misplaced”. Section 43 of the Board Notice clearly states that the chapter does not apply to a key individual or a representative who is a natural person.

As to DE’s operational ability, the FST said Pro-Life had made “a bald allegation” without providing evidence that he lacked the ability to function effectively as a representative or perform the activities for which he was appointed.

Pro-Life did not proffer any facts that warranted the application of section 7 of the FAIS Act.

Lack of honesty and integrity allegations

The Tribunal then assessed whether DE not meet the honesty, integrity, and good-standing requirements, as alleged by Pro-Life.

The lapsed policies

Pro-Life did not dispute DE’s contention that he settled the amounts owed to the insurer.

However, the FSP said that further lapses, for which DE had to sign acknowledgments of debt, had come to light following his resignation, and evidence was led at the debarment hearing to prove this.

But the FST said Pro-Life had not disclosed the nature of this evidence, nor was it placed before the Tribunal. More importantly, it was not made available to DE to address during the debarment proceedings.

The Tribunal said it was unclear when the debarment hearing took place and which witnesses were called by Pro-Life. The decision to debar DE was made on 4 October 2023 – almost five months after his dismissal. Therefore, there was sufficient time to provide DE with the alleged lapses since his resignation, or to place the facts and evidence before the Tribunal.

Client servicing

The Tribunal said Pro-Life had not shown that the client’s insurance claim was rejected because DE allegedly failed to change his residential address. The allegation that DE “created an impression” with the other client that their insurance cover included access to a rental vehicle was “hardly proof a dishonest representation”.

Removal of the files

Pro-Life and DE agreed, in terms of his letter of resignation, that he would be granted an opportunity to finalise any business in which was engaged. According to DE, this was why he was in possession of certain files, the return of which Pro-Life refused to accept despite tenders to do so by DE and his attorneys.

The Tribunal said Pro-Life did not dispute this, nor did it produce any evidence that DE entered its premises “unlawfully and without consent” after his resignation. Furthermore, the FSP had not alleged that it or its clients were prejudiced by the purported “unlawful” conduct.

According, the FST concluded that Pro-Life’s finding that DE lacked honesty, integrity, and good standing was insubstantial and did not warrant his debarment. The Tribunal set aside the debarment.