The latest case from the appeal board deals with the debarment of an employee.
The Registrar debarred an employee for a period of three years, preventing her from rendering any financial services to clients on behalf of a financial services provider in terms of S14A of the FAIS Act. S14A of the Act allows the Registrar to debar a person or a representative if it is found that they do not, or no longer meet, the fit and proper requirements. This relates to the personal character qualities of honesty and integrity as well as certain competence requirements.
This case illustrates the length of time it can take to finalise the debarment of a person who does not meet the fit and proper requirements of the FAIS Act.
9 April 2013
The investigation was started by the appellant’s employer in 2013, after they became concerned about her conduct in relation to the handling of certain of her clients’ policies. A forensic investigator conducted the investigation and issued an interim report which found that she had substantially inflated income in the policy application forms of at least five clients.
The investigator noted that the reason for the inflated amounts was personal financial gain for the appellant. The appellant was provided with an opportunity to respond to the forensic investigator’s findings, but she only did so in respect of two of the five identified clients. No explanation was provided as to why the other three clients’ income had been inflated.
During the same month of the investigation, she tendered her resignation. It became clear that this was to avoid her employer taking action against her as they would no longer have jurisdiction over her. Her resignation was therefore not accepted.
21 August 2013
The investigator’s final report found that the appellant had been dishonest by making false representations to Sanlam by submitting policy applications with inflated clients’ income. He also found that she acted in breach of the General Code of Conduct for FSPs, which requires FSPs and its representatives to at all times render financial services honestly, fairly, with due skill, care and diligence in the interest of clients and the integrity of the financial services industry.
With one of the clients, her gross misconduct even extended to her contacting the client and asking him to depose to an affidavit confirming the falsified income. The client refused to involve himself.
16 September 2013
A disciplinary hearing was held to charge the appellant with three counts of dishonesty and one of non-compliance with the FAIS Act and the Sanlam Code of Conduct.
18 September 2013
She was found guilty on all four counts. She was found to have acted dishonestly, with intention. She knowingly and willingly influenced a client to perjure himself with the aim of influencing the report of the company in her favour.
30 September 2013
Her contract with Sanlam was terminated. On the same date, Sanlam submitted a complaint against the appellant to the Registrar relating to the same conduct which was subject to the investigation and hearing.
20 September 2014
The Registrar informed the appellant of their intention to debar her, as a consequence of her dishonest conduct in respect of the clients identified in the investigation. She further failed to respond to the Registrar’s notice of intention to debar.
22 October 2014
The Registrar took the final decision to debar the appellant. The Registrar found that as a result of her conduct, the appellant no longer satisfied the fit and proper requirements.
28 October 2014
The appellant notified the Registrar that she had not received the notice of debarment and informed the Registrar of her intention to lodge an appeal against the decision of the Registrar. Her reason was that she understood her mistakes and undertook never to repeat them again.
Her further defence was that she was working under supervision and that she was not ready to take responsibility for her actions. The appeal board found that such level of finger pointing is not indicative of a reformed person who embraces the values of integrity and honesty. She was also not entitled to an appeal owing to new evidence provided which is not permissible.
31 July 2015
The appeal board found that her appeal therefore could not succeed and was dismissed. Her three-year debarment remained in force.
In our newsletter dated 21 July 2015, we referred to an article written by the Head of FAIS Enforcement about the process of debarment of representatives which also emphasised the burden that debarments can place on an FSP.
This case illustrates that the process of debarment has to be fair, however, the question remains whether the process is fair to the protection of clients. This is of great concern, as during this period, the appellant held different positions in the Financial Services Industry as a Broker and Compliance Consultant.
If you have a situation in your business where you feel that debarment may be an option, please contact your Masthead regional office should you require clarity on the process of debarments. It is also important to do the necessary due diligence on the people you intend to do business with and/or employ, before any formal agreements are concluded.