A representative who was debarred for sending client information to a competitor FSP after submitting her resignation recently applied to the Financial Services Tribunal (FST) for her debarment to be reconsidered.
The applicant, “NC”, was employed as a personal lines representative of Risk Sure Insurance Brokers, the respondent.
On 26 August 2022, NC submitted a letter of resignation, saying she had been offered a better position. She said her last working day would be 23 September.
Risk Sure accepted NC’s resignation but said it was unnecessary for her to work during her month’s notice. Her commission for September would be paid at the end of that month once the reconciliation had been performed.
NC was requested to hand in her laptop and leave Risk Sure’s premises on 26 August, which she did.
A few days later, on 31 August, Risk Sure emailed NC a notice of intention to debar. The notice stated that NC was an employee of Risk Sure until 23 September.
It said Risk Sure had sufficient evidence “to prove” that NC had “acted without honesty or integrity towards the FSP and its clients”, “violated its trust, and internal processes and procedures”, and “breached the Protection of Personal Information Act” by sharing clients’ information with a competing brokerage without the clients’ authorisation.
NC was due to take up employment with the competing brokerage in September. According to Risk Sure, the brokerage later withdrew the employment contract on recommendation of its compliance officer.
Risk Sure elaborated on the reasons for its intention to debar NC in a notice sent on 2 November. It alleged NC:
- Contravened section 3(3) of the General Code of Conduct by disclosing confidential client information to another FSP without prior written consent from the clients.
- Failed to comply with the honesty and integrity requirements of section 8(1)(a) of the Determination of Fit and Proper Requirements by filching company documents (on 25 and 26 August) and submitting them to a competitor FSP (on 30 and 31 August).
- Contravened section 153(1)(c) of the Financial Sector Regulation Act by procuring the services of the competing brokerage to use the unauthorised documents, thereby inducing it to contravene a financial sector law. Disclosing the confidential information had not only caused the competitor FSP to contravene the law, but because the FSP had shared the information with an insurer, NC’s actions had also caused the insurer to contravene the law.
Risk Sure afforded NC an opportunity to respond to the allegations, in August and November, which she did.
However, Risk Sure proceeded with the debarment, which was filed with the FSCA in December 2022.
Grounds for reconsideration
The main ground on which NC challenged her debarment was that her employment with Risk Sure ended on 26 August 2022. Therefore, whatever happened or was discovered by Risk Sure thereafter did not constitute grounds for debarment in terms of the FSP’s debarment policy and the FAIS Act.
In response to the allegation that she had extracted confidential client information so she could transfer the clients’ business to her new employer, NC provided eight documents purportedly constituting the clients’ consent for her to share their information. These documents were either undated or dated 6 or 7 September 2022, according to the tribunal.
Regarding the transfer of confidential information from the laptop, NC said she always used her personal Gmail account for work purposes.
The tribunal said NC did not contradict Risk Sure’s evidence that she had extracted and transferred the client information but complained that the search of her personal email account was unlawful.
NC also submitted that Risk Sure had not followed a procedurally fair and correct process. But the tribunal could find no reason to fault the FSP’s debarment process.
Employment continued to 23 September
In assessing the main basis of the application, the FST drew attention to when NC left Risk Sure’s employ. It said a “plain reading” of NC’s letter of resignation and the FSP’s response led to the conclusion that NC was employed by Risk Sure until 23 September.
Once this was accepted, NC’s argument that she was entitled to disclose information to the prospective employer before 23 September was unsustainable. NC had breached the terms of her contract of employment, the FST said.
NC’s actions between August and the first week of September caused Risk Sure’s clients to consent to activities that were not permitted by law. This, the tribunal said, was a material breach of her obligations in terms of the FAIS Act.
But was NC conduct grossly dishonest and a failure to show integrity that amounted to non-compliance with the Fit and Proper Requirements and the Code of Conduct?
The FST said that NC, in soliciting existing business from Risk Sure to introduce to her new employer and in accessing confidential client information to further her interests through the competitor was evidence of a lack of honesty and integrity. These qualities “are imperative to the financial services industry”. NC thus breached the General Code of Conduct and the Fit and Proper Requirements.
Turning to NC’s complaint that the evidence of improper conduct was uncovered through an unlawful search of her private email account, the tribunal said this contention overlooked that:
- NC chose to use the account on her work laptop and in the course of her employment; and
- The information the employer accessed was not personal or confidential.
NC knew, when she handed in the laptop, that Risk Sure could and would access the information on the computer. “The search was, accordingly, not unlawful and a natural consequence of her own actions,” the FST said.
The tribunal found that Risk Sure’s grounds for debarring NC were sound, and it dismissed the reconsideration application.
