Secondary

FAIS-Ombud-Settlements

Debarment appeal – Honesty and Integrity AT ALL TIMES, rules Tribunal

As a result of the right to appeal against a debarment decision, there was a substantial increase in debarment cases referred to the Tribunal since April 2018. In most of these cases the process was challenged. Some of these cases were remitted back to the FSP for reconsideration and to follow the prescribed debarment steps. Yet, it is important to mention that an employer or FSP have a duty in terms of Section 14(1) of the FAIS Act to debar a representative who no longer complies with the fit and proper requirements as set out in the FAIS Act.

The fundamental character trait of a financial service provider who provides financial services and furnishes advice to members of the public is honesty and integrity, as well as conducting business with the necessary due skill and care. Therefore, if an adviser fails to meet these requirements, and the correct process is followed, he or she will be debarred.

In a recent Tribunal case it was highlighted that the Code of Conduct requires of financial adviser to at all times render financial services honestly, fairly, with integrity, with due skill and diligence and in the interest of clients. No matter what the circumstances, the emphasis is on “at all times.”

Although the Tribunal acknowledged that the applicant previously complied with the provisions of the FAIS Act, and that he was an experienced representative with a wealth of experience prior to the said actions, they could not ignore what transpired thereafter, despite health issues.

The case at hand

The essence of the application before the Tribunal was that the applicant requested a more lenient sanction. The applicant pleaded that the sanction is too harsh and that alternative punishment is more appropriate. He professed that a severe anxiety disorder led to his misconduct. In essence the applicant submitted that he was suffering from an untreated chronic disorder at the time of the misconduct which caused him to create false sale insurance policies. According to the applicant he did so in order to meet his sales targets.

The Tribunal once again stressed that the debarment policy of the respondent recorded as follows:

“The purpose of debarment is to prevent a representative who fails to comply with the Fit and Proper Requirements set out in the FAIS Act from rendering financial services to clients.”

The respondent therefore had no option but to proceed with the debarment in light of its statutory obligation to the public. As a result the Tribunal found that the debarment was rational, reasonable and justifiable. The applicant failed to meet the fit and proper requirements of honesty and integrity.

“Surely if the applicant recovers from his medical condition he can apply to have his debarment uplifted. It would then be incumbent for him to provide evidence that his defect of character no longer exists and that he had undergone a genuine, complete and permanent reform and can be trusted to engage with the public once again. Until such time, the applicant remains a risk to the public,” the Tribunal concluded.

Of particular significance is the following point raised in mitigation by the appellant:

“…there was huge pressure on us to make very difficult sales targets and I panicked. There was already threats of a review process if the targets weren’t reach (sic) so I really panicked and tried to buy time.”

The RDR proposals were very clear on its stance against the use of stringent budgets and product specific sales targets, as these were contrary to the principle that the client’s needs should come first, not the product provider’s interests (read: fees).

Click here to download the Tribunal case.

Click here to download Guidance Notice 1 of 2019 that the relevant factors of debarment process, the FSP’s duties after the debarment, the debarred persons rights, the powers of the Tribunal should it disagree with debarment decisions and the role of the FSCA upon receipt of a debarment notification.

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