The Full Bench of the High Court in Cape Town has dismissed an appeal by former financial adviser Giles Alexander Power Maynard against Carrick Wealth (Pty) Ltd, leaving intact an earlier High Court ruling that a financial services provider cannot avoid its statutory debarment obligations under the Financial Advisory and Intermediary Services Act through a private settlement agreement.
Although the appeal court endorsed much of the reasoning in the original judgment, it emphasised that the broader legal questions decided by the court a quo – including whether the FAIS Act imposes a duty on an FSP to initiate debarment proceedings and whether such a duty can be contracted out of – were not before it on appeal. Leave to appeal had been granted only on two narrower issues relating to the application of those principles on the facts of the case.
Background
The dispute arose following the breakdown of the relationship between Maynard and Carrick Wealth, where he had worked as a wealth manager.
After negotiations, the parties concluded a settlement agreement in November 2023 intended to resolve disputes arising from his departure from the firm. The day after the agreement was signed, however, Carrick issued a notice of intention to initiate debarment proceedings under section 14 of the FAIS Act.
The proposed debarment related to the transmission of confidential client information to a representative of a competing firm. According to the record before the Court, the information included the names of approximately 80 clients, as well as policy details and values of assets under management.
Maynard approached the High Court seeking to set aside the notice and to interdict Carrick from continuing with the debarment process.
In the initial judgment, the Court held that the FAIS Act’s debarment provisions form part of an integrated statutory scheme designed to protect financial services consumers. The Court concluded that an FSP’s duty to debar representatives who no longer meet the fit and proper requirements necessarily entails initiating the statutory process where appropriate, and such obligations cannot be overridden by private agreement.
Read: Agreement can’t override an FSP’s duty to initiate debarment proceedings
Limited scope of the appeal
In the appeal proceedings, the Full Bench noted that leave to appeal had been granted only on two issues:
- whether, on the facts of the case, Carrick was required to initiate the debarment process; and
- whether the process had been initiated for an ulterior purpose.
The earlier Court’s broader legal conclusions therefore remained in place and were not formally reconsidered on appeal. Nevertheless, the Full Bench expressed strong agreement with the reasoning of the court a quo, including its interpretation of the FAIS Act’s debarment framework.
The judgment, handed down on 4 March, was written by Acting Judge Elzanne Jonker, with Judge Mark Sher and Judge Nobahle Mangcu-Lockwood concurring.
Threshold for initiating proceedings
A central question was whether the information available to Carrick at the time was sufficient to trigger the statutory process.
The Court applied the objective test articulated in Viking Pony Africa Pumps (Pty) Ltd t/a Tricom Africa v Hidro-Tech Systems (Pty) Ltd: whether the decision-maker was aware of information which, if verified, could justify the relevant regulatory action.
On the facts presented, the Court held that the admitted transmission of client data – including client names, policy details, and asset values – to a representative of a competing firm without client consent constituted information that could prima facie indicate a breach of section 3(3) of the General Code of Conduct. That was sufficient, the Court found, to justify the initiation of the statutory process.
Ulterior motive argument
Maynard also argued that the debarment notice had been issued for an ulterior purpose, namely, to restrict his ability to compete after leaving the firm.
The Court acknowledged that the timing of the notice – issued shortly after the settlement agreement – might appear “troubling” or “suspicious”. However, applying the evidentiary approach required in motion proceedings under the Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd rule, it found insufficient basis on the papers to reject Carrick’s explanation for initiating the process.
Appeal dismissed
The Full Bench ultimately dismissed the appeal and ordered Maynard to pay the costs of the proceedings, including the costs of two counsel.
Implications
Although the appeal turned largely on the facts, the judgment reinforces the regulatory framework governing debarment under the FAIS Act.
For FSPs, the case highlights that once credible information emerges suggesting that a representative may no longer meet the fit and proper requirements, the statutory process for considering debarment may need to be initiated – irrespective of any parallel contractual or employment disputes between the parties.
