The Financial Sector Regulation Act (FSRA) enables a person who is aggrieved by a “decision” to ask the Financial Services Tribunal (FST) to reconsider that “decision”.
Two recent rulings by the Tribunal provide clarity on what does and does not constitute a “decision” by the FSCA in terms of the Act. What is important to note is that not all the actions performed by the Authority’s staff qualify as “decisions”.
The establishment, powers, and functions of the Tribunal are set out in Chapter 15 of the FSRA. The chapter starts, in section 218, by defining certain terms, including a “decision”. One of the meanings of a decision is: “A decision by a financial sector regulator or the Ombud Council in terms of a financial sector law in relation to a specific person.”
An investigation is not a decision
In one of the recent cases, the FST’s decision records that the National Director of Public Prosecutions (NPA) obtained a preservation order in respect of bank accounts held in the name of the applicant and a company of which he was the sole director. An FSCA investigator deposed an affidavit in the NPA’s ex parte application for the order.
In his reconsideration application, the applicant submitted:
- A statement in the investigator’s affidavit meant she had decided before he was questioned that he had contravened the FAIS Act.
- The investigator’s “decision and conduct should be regarded as been done by the FSCA”.
- The decision was serious and final, which the FSCA acted upon and provided a basis for the NPA’s Asset Forfeiture Unit to institute proceedings against the applicant.
The FST summarily dismissed the application.
It said the FSCA appointed the investigator to investigate the applicant and his company in terms of section 134(1) of the FSRA. This provision does not confer decision-making powers on an investigator. She was not delegated to make decisions, and without a delegation under section 71 of the Act, she could not make any decision on behalf of the Authority.
Furthermore, what the investigator stated in her affidavit was her opinion. Her opinion had no legal relevance – it was for the court seized with the matter to determine whether the facts justified her conclusion. Neither the court (in the ex parte application for the preservation order) nor the Authority’s decision-makers were bound by the opinion expressed in the affidavit.
The Tribunal said a distinction must be made between the FSCA’s investigative and administrative functions. In this regard, the FST quoted from what it said at paragraph 24 in JP Markets (Pty) Ltd SA v FSCA (2020):
“Although the word ‘decision’ is defined for purposes of our jurisdiction, it does not mean that it lost its inherent meaning. The decision referred to is an adjudicative decision where the FSCA is the final arbitrator and not a decision taken during an investigative process which is not determinative of the issue.”
The Tribunal made the same point when it rejected the other reconsideration application.
In this matter, the applicants, the trustees of a trust, complained to the FSCA about the alleged negligence of an FSP. One of the founders of the trust appointed the FSP as his broker and authorised him to register the cession of a life policy to the trust. The FSP was also the founder’s executor.
The nub of the trustees’ complaint was that because the FSP failed to fulfil his duties, the incorrect beneficiary had received the proceeds of the life policy.
A member of the FSCA’s investigations department investigated the complaint.
The investigation vindicated the FSP, finding that he discharged his duties properly and in accordance with the contractual relationship and the instructions of his client.
The founder, however, acted without proper the authorisation of the trustees when he signed the cession document and change-of-beneficiary forms.
The FSCA pointed out that the internal arrangement relating to the operation of the trust did not fall within the scope of financial services, and the trust was not the FSP’s client.
FSCA is not a civil court
The trustees applied to the Tribunal for the reconsideration of the investigation department’s apparent “decision” on the ground that the deceased did not have the power to nominate his widow because the policy had been ceded to the trust outright.
But the Tribunal said it was not clear what the trustees believed the FSCA should have decided.
Based on the trust’s subsequent argument, the FST said it assumed the trust wanted the FSCA or the Tribunal to order the FSP to pay the amount paid to the founder’s widow as damages to the trust.
However, even if it were assumed that FSP was also the trust’s broker and that he failed to comply with his duties as a broker, and that the trust suffered a loss equivalent to the amount paid to the widow, the FSCA could not do anything that would assist the trust, the Tribunal said.
The FSRA circumscribes the powers of the Authority. The Authority is not a civil court, and it does not make civil orders in favour of complainants “who wish to bypass the courts”.
The FSCA has the power to debar the FSP if he contravened any financial sector law in a material way. But his debarment would not be of any value to the trust in its attempt to recover the amount paid by the insurer to the widow.
The FSCA can impose a fine on someone who has contravened a financial sector law. Once again, this would not benefit the trust.
The Authority’s findings in respect of the investigation have no legal consequences. The apparent “decision” does not bind a court or lead to any executable judgment, nor does it have any administrative consequences.
Furthermore, as the Tribunal pointed out in the matter discussed previously, the FSCA did not make a “decision”; it conducted an investigation.
Who qualifies as an ‘aggrieved person’?
The absence of a “decision” created a related problem for the trust in terms of section 230(1)(a) of the FSRA, which states that “a person aggrieved by a decision” may apply to the Tribunal for a reconsideration of that decision.
Furthermore, the trust could not be an aggrieved person interested in a decision not to debar or impose a financial penalty, the FST said.
The Tribunal said many of its decisions have addressed what is meant by “a person aggrieved”, and it was “unnecessary to reinvent the wheel”.
In Michelle Hollenbach v FSCA (2020), for example, the Tribunal essentially held that to qualify as “a person aggrieved”, the applicant must have a legal grievance – in other words, the applicant must be someone whose legal rights have been infringed by the decision. Having a pecuniary interest is insufficient to qualify as “a person aggrieved”.
