An FSP cannot have a competitor FSP’s representative debarred because he approached some of its clients.
While this may seem obvious to most, the Financial Services Tribunal (FST) was asked to weigh in on this issue in a matter between a representative of Independent Distribution Network (Pty) Ltd (IDN) and Cape Investment Advisors and the FSCA (the first and second respondents, respectively).
The applicant, “AS”, has been employed by IDN for about 11 years. According to the Tribunal’s decision, Cape Investment Advisors took issue with AS when he approached certain of its clients. The FSP embarked upon a process to debar AS, even though he was neither its employee nor representative.
On the strength of Cape Investment Advisors’ submissions, the FSCA debarred AS and advised IDN accordingly on 29 September last year.
In its decision, the Tribunal said Cape Investment Advisors had “fundamentally misunderstood the procedure to be adopted on debarment and conflated the requirements and procedure for a debarment by an employer under section 14 of the FAIS Act with the requirements and procedure for a debarment by the FSCA under section 153 of the FSR [Financial Sector Regulation] Act”.
It didn’t take long for AS’s attorney to point out these fundamental procedural missteps to Cape Investment Advisors and their attorneys following the notification of debarment. Two days after hearing from AS’s attorneys on 4 October 2023, Cape Investment Advisors attempted to retract the “application re the debarment” by addressing the FSCA in writing.
But up until the date of the Tribunal’s decision, the debarment had remained in place.
In addition to wanting the debarment set aside, AS in his application to the Tribunal requested that Cape Investment Advisors be ordered to pay the costs of the application on the grounds that its conduct in debarring him was “vexatious, unlawful and an abuse of process”.
He also sought costs from the FSCA only in the event it opposed the relief, which it did not.
The Tribunal said that “clearly”, Cape Investment Advisors had no right to follow the procedure in section 14 of the FAIS Act. It stated that AS was not its employee or its representative.
“Furthermore, it misunderstood the procedure required by section 153 of the FSR (debarment by the FSCA) and attempted to conflate the two methods. This is not permitted.
“Put differently, the debarment should never have been recorded on the ‘application’ or documentation filed by Cape Investment Advisors with the FSCA,” the decision read.
Regarding the request for costs, the Tribunal is empowered in section 234(2) of the FSR Act to order costs in exceptional circumstances. But the Tribunal said these were not exceptional circumstances.
“In the premises, the debarment must be set aside with no order as to costs.”
Surely you are making a joke…This is the people that’s meant make judgments on us.
How can we take this seriously if my opposition can debar me…the Tribunal should have
proposed disciplinary steps against the persons that allowed this and should also recommend an investigation on the “fit and proper” status of CIA…Either this was done maliciously or explain how can someone that fundamentally understood the debarment process so wrong be fit and proper. CIA attorney’s should also be reported for their ” fundamental procedural missteps”
And so sorry your article heading is misleading. The FSP did debar another firms representative with the help and incompetence of the FSCA….either that or their fraudulent actions.
It makes me worry about the ability (or lack there off) of the Tribunal wrt FAIS & FSR act matters (they should be experts in this). This application should never have been entertained at this level unless the client have been wronged. And about the ‘client’, the client decides whose client he is – you cannot ‘ring-fence’ a client. ‘Your’ client is always exposed to a more lucrative offer and you as a rep, to competition. Its a hard fact that a advisor/rep needs to accept
Competition in the industry has been fierce for several years now. The amount of reps are ever increasing and the the pool of clients are diminishing due to lack of employment and stagnant GDP growth.. Too many reps (especially CAT 1)has been under supervision far beyond legal limits with no intention or effort of completion wrt (qualification & COB,CPD etc.) requirements and the FSCA continue to dish out exemptions year after year. Time for the FSCA to enforce FAIS (sec 14) is long over due here. This is where the line should be cut.