An FSP’s failure to provide a representative with a copy of its debarment policy when it conducted a disciplinary hearing that resulted in the representative’s debarment did not mean the debarment was procedurally unfair, the Financial Services Tribunal (FST) has decided.
Standard Bank dismissed and debarred an employee for acting dishonestly when he applied for increases in his overdraft facilities on its internet banking channel from October 2020 to April 2021.
The bank alleged that he inflated his income when making the applications, which resulted in the overdraft limits being increased beyond what would otherwise have been granted.
The representative applied to the FST for reconsideration on substantive and procedural grounds.
The application of section 14(3)(a) of the FAIS Act came under the spotlight in the tribunal’s decision. This paragraph states that before an FSP debars a person, it must:
(i) give adequate notice in writing to the person stating its intention to debar the person, the grounds and reasons for the debarment, and any terms attached to the debarment, including, in relation to unconcluded business, any measures stipulated for the protection of the interests of clients;
(ii) provide the person with a copy of the FSP’s written policy and procedure governing the debarment process; and
(iii) give the person a reasonable opportunity to make a submission in response.
Was the applicant sent the debarment policy?
The FST brought it to Standard Bank’s attention that its debarment policy was not included among the documents that formed part of the record. This was despite the “Notification of potential debarment” indicating that this policy was among the documents provided to the applicant.
The bank’s representative at the hearing could not explain to the tribunal why the debarment policy was not attached to the notification or annexed to the record.
The representative asked for an adjournment, so she could find out whether the policy had, in fact, been provided to the applicant. On her return, she could not provide the panel with an unequivocal answer either way.
The FST decided that the absence of a written debarment policy in the record was “not fatal to a lawful, reasonable and procedurally fair process” because:
- The provision of sub-paragraph 14(3)(a)(ii) is not couched in negative terms;
- There is no sanction or injunction attached to this provision; and
- The scope and the object of the provision, which is to provide the applicant with a fair process, appear to have been achieved.
The purpose of the FAIS Act, which included a stable financial system that works in the interest of financial customers, will be defeated should one insists that the absence of a written debarment policy in the record before us makes the process fatal in law.
Was the disciplinary hearing procedurally fair?
Another issue the FST considered was the relationship between the disciplinary hearing and the debarment.
If the results of the disciplinary hearing were to be used in a subsequent debarment hearing, the disciplinary hearing was de facto also a debarment hearing, in which case, the FST said the disciplinary hearing would have to comply with sub-sections 14(2) and (3) of the FAIS Act.
Standard Bank warned the applicant in its “Notice of virtual disciplinary hearing” that, when preparing for the disciplinary hearing, he must bear in mind the possibility that he might be debarred based on the results of the disciplinary hearing.
The wording of this notice indicated that Standard Bank was “always of the view” that the results of the disciplinary hearing could be used in the debarment process that might follow, even though it did not intend the debarment hearing to run concurrently with the disciplinary hearing, the tribunal said.
The bank’s notification of summary dismissal, which followed the disciplinary hearing, also informed the applicant that the bank intended to debar him because of the guilty finding.
Although the evidence indicated that the bank had already concluded that the results of the disciplinary hearing pointed to the foregone conclusion that applicant no longer complied with the fit and proper requirements, it only formally notified him of its intention to debar him “after completing the issues which were purely related to the disciplinary hearing”.
However, the FST said it did not think it particularly mattered when the debarment process formally started, because the applicant participated in the disciplinary hearing and made representations before the debarment decision was taken.
“This process does not appear to be inimical to a process that is lawful, reasonable and procedurally fair.”
The tribunal dismissed the application after finding that the applicant had not advanced any information or evidence to attack the merits of Standard Bank’s case.
