A representative working under supervision who wrongly completed contracts as new policies instead of replacement policies has had his debarment set aside.
Lebohang Modimo Brokers (Pty) Ltd debarred Ntwanano Mabunda in October 2023 because of alleged non-compliance with the Fit and Proper requirements, specifically pertaining to honesty and integrity.
The FSP employed Mabunda as a financial adviser at the beginning of the year. He was supposed to work under supervision for 12 months.
But Mabunda quit after eight months, in August. According to Mabunda, he resigned because he was not paid his rightful share of the commission on the policies he sold.
Central to the debarment decision was, on the FSP’s version, Mabunda’s informing clients he was writing a replacement policy, whereas he completed a new policy. Most of Mabunda’s clients cancelled their policies because they found they were paying double deductions, Lebohang Modimo told the Tribunal hearing. They were unhappy they had been issued with a new policy, whereas they were under the impression that their policy would be replaced.
Furthermore, the policy cancellations resulted in the commission being clawed back.
Modimo said that when the problem first came to light, Mabunda was asked whether he understood the procedure for effecting a replacement. According to Modimo, Mabunda said that he did. However, the problem persisted.
Procedural problems
Mabunda brought his reconsideration application on procedural and substantive grounds.
The Tribunal’s deputy chairperson suspended his debarment in February this year because he was not satisfied that the FSP had followed the procedure prescribed in section 14 of the FAIS Act.
The Tribunal’s decision fleshed out why the debarment was procedurally unfair.
Modimo told the hearing that Mabunda was emailed a notice of intention to debar, setting out the grounds and reasons for the debarment. But he could not locate a copy this notice in the record before the Tribunal.
Section 14(3)(a)(iii) of the FAIS Act mandates that a person facing debarment must be given a reasonable opportunity to make a submission in response to the notice of intention to debar.
The Tribunal found that the brokerage did not provide Mabunda with an opportunity to make a submission or respond to the allegations before the debarment decision was made, which was a violation of the procedural fairness requirement.
Modimo claimed that Mabunda was informed of the debarment process through a WhatsApp conversation. However, this was found to be inadequate. The FAIS Act requires a formal written notice, which includes specific details of the debarment process, and a structured opportunity for response.
Lack of dishonest motives
Mabunda told the Tribunal that he wrote to Modimo in November 2023 asking for reasons for his debarment. The FSP’s response, inter alia, referred to the case of a client where the “replacement record of advice” page on the application form was crossed out with wording indicating that the policy was new. This caused the insurer to enforce the policy as a new one, rather than a replacement. This, according to the FSP, demonstrated Mabunda’s dishonesty and lack of integrity.
But Mabunda submitted it was standard practice for Modimo to complete a manual Replacement Policy Advice Record (RPAR) on his behalf because he was under his supervision. He said that, as a representative under the supervision, he never completed any of the RPAR documents of the clients with whom he concluded business. Mabunda’s version, the Tribunal said, was not contested by Modimo.
One of the issues before the Tribunal was whether Mabunda had been properly and adequately trained on how to complete a replacement contract.
The Tribunal said it was not in dispute that Mabunda underwent three days of training by the product provider, followed by four days of training by the FSP on how to complete a replacement contract. However, Mabunda submitted that the training provided by two of Modimo’s employees had been inadequate, and they had argued constantly.
The FST said the facts indicated that Mabunda’s conduct of completing clients’ contracts as new instead of replacements was probably because of naivety or inadequate experience because of limited training, rather than dishonest motives.
There was no indication that Mabunda deliberately completed the clients’ policies as new contracts instead of replacement contracts to derive a commission through improper means.
On the contrary, the evidence indicated that both Mabunda and the brokerage suffered commission loses because the insurer clawed back the money that had been paid as commission to Modimo.
The evidence did not support the FSP’s allegations of dishonesty or misconduct serious enough to impugn Mabunda’s honesty and integrity. The Tribunal concluded that the debarment was primarily driven by a contractual dispute and was not based on valid, substantive grounds related to the Fit and Proper requirements. As a result, the decision to debar Mabunda was substantively unfair.
The FST drew attention to Guidance Notice 1 of 2019, which states that debarment should be effected only in circumstances relating to a representative or key individual’s non-compliance with the Fit and Proper requirements or material non-compliance with a provision of the FAIS Act. FSPs should not misuse debarment to satisfy contractual or other grievances.
