The FSB published a Guidance Note – Guidance on the Reappointment of Debarred Representatives – on 18 December 2017 in order to clarify:
- The role of the FSB when an FSP reappoints a debarred representative;
- The responsibilities of the reappointing FSP; and
- The information which the reappointing FSP must submit to the FSB after it has reappointed the debarred representative.
It is important to note that if an FSP finds that a representative no longer meets the fit and proper requirements or has materially breached a requirement of the FAIS Act, it is the responsibility of the FSP (not the FSB), after following due process, to debar that individual. A debarred representative is prohibited from rendering any financial services as a representative of any FSP unless reappointed as a representative.
Similarly, the reappointment of a debarred representative is the prerogative of an FSP (not the FSB), as long as the requirements set out in BN82 of 2003 have been met. The Registrar cannot interfere in the reappointment of a debarred representative and only becomes aware of the reappointment when the reappointing FSP informs the Registrar of the changes to its representative register. The responsibility of the FSB is to ensure that the correct process has been followed by the reappointing FSP.
This means that an FSP that wants to reappoint a debarred representative must have a thorough understanding of what is required and take all necessary steps to ensure that it does not fall foul of BN82 of 2003. If an FSP does not follow the correct process, the Registrar may take action against the FSP for failing in its duty to comply with these requirements, which could include licence suspension or withdrawal.
What are the requirements?
A debarred representative may be reappointed as a representative of an FSP if:
(a) At least 12 (twelve) months since the debarment date has elapsed, unless the debarment was a result of the representative not having qualified with any of the fit and proper requirements. Therefore, a debarred representative can be reappointed within 12 months of the debarment date as long as the reappointing FSP has satisfied itself that the representative is fully qualified. This includes qualifying with the personal character qualities of honesty and integrity. Where the debarment was effected due to dishonesty or a lack of integrity, the reappointing FSP will have to be satisfied that the representative has been rehabilitated and reformed. The responsibility to establish whether a debarred representative now qualifies rests with the FSP and should not be taken lightly.
(b) All unconcluded business of the debarred representative (concluded prior to debarment) has been properly concluded;
(c) All complaints or legal proceedings submitted by clients to the Representative, the debarring FSP, the Ombud or a court of law or other administrative or legal proceedings in terms of any law, arising out of any acts or omissions in which the debarred representative was involved prior to the debarment date, have been properly concluded, and any decision or order as a result thereof, has been complied with.
(d) All fit and proper requirements are met.
What information must be submitted to the FSB?
An FSP that has reappointed a debarred representative must notify the FSB of this so that the individual’s name can be removed from the list of debarred persons. This notification must include:
- Affidavit from the reappointed representative confirming that all business has been concluded, that all decisions or orders have been complied with and that he/she meets all the fit and proper requirements. If the debarment was due to a lack of honesty and integrity, then the Affidavit must also set out reasons for reform or rehabilitation.
- Any other information which the reappointing FSP considered prior to the reappointing.
- Confirmation from a Key individual of the reappointing FSP that he/she is satisfied that the representative had complied will all the reappointment requirements.
- FSP5 Form for Representatives requesting the FSB to update its central register of Representatives. This process can normally be done electronically via the FSB’s FAIS ePortal system. However, at present the electronic system will block any individual who is on the list of debarred persons and a manual process must be followed. The FSB has advised that it is in the process of updating its electronic system to allow for the electronic uploading of information of a reappointed representative and will communicate this to the industry once finalised.
FSPs that are looking to reappoint debarred representatives to their licence must be aware of the updated Determination of Fit and Proper Requirements (Board Notice 194 of 2017) which was published in December 2017. Many of the ‘new’ fit and proper requirements come into effect on 1 April 2018 with a few provisions effective at later dates. Once each of these various provisions are effective, the measure which FSPs will need to apply to satisfy themselves that a debarred representative meets all the requirements will also need to change in order to align with the new Determination.