Settlement agreement with representative sinks FNB debarment

A settlement agreement reached after First National Bank (FNB) notified a representative that it intended to debar him played an important role in a reconsideration application that came before the Financial Services Tribunal (FST) recently.

The applicant, “TK”, was a representative of FNB Premier Banking, the respondent.

It was common cause that TK opened a savings account for one of FNB’s customers, a “Mr X”, without his consent. TK also transferred R1 000 to the account from another account held by Mr X.

TK said he did this by mistake. He was attending to Mr X and another customer at the same time. He had meant to open the savings account on the profile of the other customer.

But FNB believed that TK deliberately opened the account without Mr X’s consent and activated it (by transferring the R1 000) to meet his sales target.

FNB dismissed TK in December 2020. He was told that his name would be placed on the Banking Association South Africa’s Register of Employees Dishonesty System (REDS), a database that employers can check to see who has been dismissed by a bank for dishonesty.

In February 2021, FNB notified TK of its intention to debar him because he no longer met the fit and proper requirement of honesty, integrity and good standing as provided for in Board Notice 194 of 2017.

Meanwhile, TK had referred his dispute with FNB to the Commission for Conciliation, Mediation and Arbitration (CCMA).

In March 2021, the parties entered a settlement agreement in terms of which TK withdrew the referral to the CCMA and FNB accepted his voluntary resignation. Both TK and FNB recorded that they did not admit liability to the other, nor to the respective allegations against them. The agreement also barred TK from employment in the FirstRand Group for five years.

Later that month, FNB issued TK with a certificate of service stating that he had resigned voluntarily.

On 21 April 2021, FNB notified TK that he was debarred.

Why the tribunal condoned the late application

TK lodged his reconsideration application on 10 October 2022, which was 18 months late. The application should have been lodged within 60 days, per sub-section 230(2)(b) of the Financial Sector Regulation Act.

Why did the FST find there was “good cause” (per the same sub-section) to condone the late application? The tribunal made the following observations:

• TK did not have legal representation.
• TK seems to have been under the impression that because the settlement agreement and the certificate of service recorded “voluntary resignation” as the reason for the termination of his employment, he was free to seek employment in the financial services industry. But TK found that he could not secure employment in the industry because of the debarment. He brought the reconsideration application only once he realised how debarment affected his prospects of employment in the financial sector.
• Although a year had lapsed since TK was debarred, and he therefore qualified for reappointment (per Board Notice 82 of 2003), the debarment was “a blight” on his prospects of obtaining employment in the financial sector.
• Delay is not an overriding consideration when deciding whether to condone non-compliance with prescribed time-frames. The interests of justice require the tribunal to consider the importance of the issues to be determined, the prospects that the applicant’s case will succeed on the merits, and the prejudice the applicant stands to suffer if condonation is refused.

Lack of evidence

On the merits of the application, the key issue for the tribunal was that FNB’s debarment panel did not have evidence to support the claim that TK’s conduct constituted dishonesty.

The FST said the record suggested that FNB debarred TK because prima facie evidence existed, as contemplated in paragraph 9(1) of Board Notice 197, that he was not an honest person and lacked integrity and good standing.

In this regard, the FST referred to the record of the debarment panel’s decision, which stated that TK had breached paragraph 9(1)(e): theft, fraud, forgery, uttering a forged document, misrepresentation, dishonesty, breach of fiduciary duty or business conduct.

But, the FST said, TK had denied that he was dishonest, and the onus lay with FNB to prove that TK acted with dishonest intent. However, there was no evidence in the record to this effect.

Notice of intention to debar was deficient

Section 14(3)(a)(i) of the FAIS Act obliges an FSP to disclose the grounds on which it intends to debar a person.

The FST said the notice did not inform TK that FNB intended to debar him on the grounds of paragraph 9(1)(e), which was prima facie evidence of dishonesty and a lack of integrity and good standing.

Instead, there was “a broad charge of dishonesty and the attempt to deceive his manager which could constitute a misrepresentation”.

Therefore, TK was not given an opportunity to respond to a case based on paragraph 9(1)(e). This alone was sufficient for the reconsideration application to succeed, the tribunal said.

Settlement agreement overtook the notice

In addition, the grounds to debar TK when the notice of intention was sent were no longer valid when the decision to debar him was made, the FST said. By that time, the parties had signed the settlement agreement in which they agreed that TK had resigned voluntarily, and FNB accepted there was a dispute whether the allegations of dishonesty were true.

By agreeing that the employment contract had been terminated by voluntary resignation, FNB effectively agreed that a dismissal for dishonesty was not warranted, the FST said.

“In other words, the respondent agreed to the reversal of its finding that the applicant did not meet the requirements of honesty, integrity, and good standing. This, in our view, was tantamount to a finding that the applicant was not dishonest and is a person of integrity and good standing.”

It was “unfair and unreasonable” for FNB to have reverted to its pre-settlement position and find that TK was dishonest, lacked integrity and was not of good standing. “The applicant is either dishonest, or he is not. The same conduct cannot be both honest and dishonest,” the FST said.

The tribunal said the settlement agreement should have been considered when the decision was made whether to debar TK. It was “disturbing” that there was no indication that the terms of the agreement were taken into account when the debarment panel arrived at its decision.

When considered holistically, the settlement agreement reveals that FNB had moved away from its earlier position that TK had been guilty of dishonesty. The panel either ignored this or inadvertently overlooked it, the FST said.

‘Nail in the coffin’

In terms of the settlement agreement, FNB agreed to remove TK’s name from REDS. The tribunal described this as the “proverbial nail in the coffin” for FNB.

“The undertaking to remove the applicant’s name from REDS is not insignificant. If the respondent believed that the applicant was dishonest, lacked integrity and was not of good standing, it would not have removed his name from REDS,” the FST said.

The tribunal was not satisfied that the debarment panel’s decision was substantively and procedurally fair or reasonable. It condoned the late reconsideration application and set aside the debarment.

Click here to download the tribunal’s decision.