In a recent review of a debarment order, the FSCA was ordered to reverse the decision to debar a representative (Mr Shuping), revisit the licence suspension and pay 50% of the applicant’s legal costs due to accepting evidence which was not independently verified.
In the matter of Shuping and Shuping vs the FSCA the Financial Services Tribunal (FST) held that the FSCA’s decision to debar Mr Shuping and suspend the licence of Shuping Brokers cc was irregular, prejudicial, and unlawful.
Mr Shuping was the owner, sole member, and Key individual of Shuping Brokers CC. Shuping Brokers had an intermediary services agreement with 1Life. The debarment decision of the FSCA was based on information supplied by 1Life regarding three falsified funeral policy applications submitted by Shuping.
1Life advised the FSCA of possible irregularities regarding several policies that had the same phone numbers and addresses. The FSCA acted on this information, initiated the debarment process, and required the FSP to provide information to address the allegations received. In December 2022, Mr Shuping responded with a bare denial of the charges and provided no further information, which the FSCA advised was not a sufficient response. Mr Shuping then submitted written statements by the policyholders confirming that they did take out the policies referred to. The FSCA rejected this version on the ground that the written client statements appeared to have been written by the same person, finding that the signature on the policy application forms did not match the signatures provided via client statements.
Based on the information above, the FSCA found that Mr Shuping no longer complied with the fit & proper requirement, particularly honesty and integrity and debarred him for a period of 5 years.
Whilst the debarment matter was proceeding, Shuping Brokers CC was also advised that the FSCA intended to suspend the licence due to contravention of sections 19(1) and (2) of the FAIS Act for the non-submission of their financial statements from 2016 to 2021 and required a response during October 2022. Mr Shuping did not respond by the deadline stipulated and no further action was taken, nor was communication received from the FSCA until the debarment of Mr Shuping. A few days after which, the licence of Shuping Brokers CC was also withdrawn.
In February 2024, a reconsideration hearing was held before the Tribunal. Mr Shuping was unrepresented due to his inability to pay his attorney any further legal costs, which resulted from his loss of income due to his debarment and the FSP licence being withdrawn. He argued that the FSCA had not followed a fair process. In his defense, he stated that he was denied a hearing from the FSCA at the time of the debarment, he was further not given a copy of 1Lifes forensic report upon which the FSCA relied and the FSCA errored in not considering the written statements from the witnesses.
During a hearing, the policyholders appeared on behalf of Mr Shuping and confirmed that they did apply for the policies concerned and signed the necessary documents.
The Tribunal found that FSCA did not do its own (independent) investigation and relied solely on the evidence of 1Life, which was “unverified and hearsay evidence”. As there were conflicting versions provided by 1Life and Mr Shuping, the FSCA should have conducted an independent investigation. It was found that by debarring the applicant, the FSCA acted prejudicially.
In respect of the withdrawal of the licence of Shuping Brokers CC, Mr Shuping submitted he applied for an exemption in 2015 and referred the Tribunal to an application made on the prescribed form. Thereafter, there was no response from the FSCA, and Mr Shuping assumed that the exemption was granted. He admitted that he only applied for one exemption for 2015 and not an exemption every year for which financial statements were not submitted.
The tribunal found that the FSCA failed to respond to the request for an exemption and could provide no reason why they failed to respond. They hence could not withdraw the licence. The Tribunal concluded that the primary reason for the withdrawal of the licence was directly related to the investigation and conduct of Mr Shuping, which was proved to be incorrect.
The applicant for reconsideration was upheld, the debarment set aside and the decision to withdraw the license was remitted and referred to the FSCA for reconsideration.
Due to the manner in which the FSCA handled this matter, the Tribunal further ordered the FSCA to pay 50% of the applicant’s legal costs.