The Financial Services Tribunal (FST) has set aside the debarment of a representative who shared confidential proprietary information with his wife and who signed up with a competing FSP while still employed by Nedbank.
According to the FST, the representative, “PH”, signed an employment contract on 29 July 2021 with another FSP while employed by Nedbank’s insurance division and registered as its representative.
His employment was due to begin on 1 August, and PH was registered by his new employer as one of its representatives. He also received a salary for that month.
On the same day he signed the employment contract, PH emailed two attachments to his spouse, who, according to the tribunal, was also in the insurance sector and whose business was “severely affected” by the pandemic.
Nedbank said the attachments contained confidential proprietary information that was sent to PH in 2020 for the purposes of following up on marketing opportunities for Nedgroup Insurance with clients of Nedbank Limited.
PH submitted that he sent the email by accident.
On 10 September, Nedbank became aware of PH’s registration as a representative of his new employer and notified him that it intended to suspend his employment. But PH resigned with immediate effect, which Nedbank accepted.
PH also resigned from his new employer.
A few days later, Nedbank became aware, through a forensic investigation of his laptop, that PH had breached his confidentiality obligations by sending the attachments.
A post-termination hearing followed, which led to Nedbank debarring PH based on two allegations of dishonesty:
- Sharing confidential information; and
- While still employed by Nedbank, taking up a position with another entity without obtaining Nedbank’s permission.
Not Nedbank’s representative
The FST said Nedbank could not have debarred PH on the first ground because of section 14(1)(b) of the FAIS Act: the reasons for a debarment must have occurred and become known to the FSP while the person was a representative of the provider.
PH was no longer employed by, nor did he have a mandate from, Nedbank when it became aware of the breach of confidence. “The fact that he was still on the public and internal registers as a representative did not change this,” the FST said.
Not so dishonest
Regarding the second allegation, PH submitted that he did not think he had signed a contract of employment but an interim contract subject to the fulfilment of training conditions.
In the tribunal’s view, PH intentionally withheld the fact of concluding a contract that could cause an intractable conflict of interest (but did not, because he was not yet entitled to write business for his new employer). On the other hand, PH was seeking other employment in another area, and the second contract appeared to be a safety net.
The FST said that PH’s action, judged on its own and without the wider context of the emails, did not justify debarment.
It quoted from the guidelines on debarment issued by the (then) FSB in 2013: “A debarment in terms of section 14(1) of the FAIS Act is a regulatory instrument intended to rid the industry of incompetent and dishonest representatives. Debarment should not be used to satisfy a provider’s contractual or other grievances against a representative, unrelated to fitness or competency requirements.”
The tribunal said PH’s action was “reckless, disobedient and foolish and not so dishonest that it justified debarment”.