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Debarment process – Financial Sector Tribunal provides practical example on problem areas

Since representatives were given the right to appeal to the Financial Services Tribunal against debarment decisions, many such actions have been set aside by the Tribunal. In most of these cases the prescribed debarment process was not followed.

On 6 June 2019, the FSCA published Guidance Notice 1 of 2019 to further clarify the role of all parties in this process. The question is: Will everyone understand and follow the correct process?

Case studies are a popular form of teaching and have an important role in knowledge building. That’s why it’s always important to study Tribunal cases in order to better understand processes as well as the practical application of legislation.

In one of the latest Tribunal cases the Applicant sought reconsideration of the decision of the FSP to debar her on 7 November 2018. In this case the Applicant stated that the debarment was unlawful, unreasonable and procedurally unfair in that the FSP did not give notice of its intention to debar her and also that the FSP failed to provide grounds for the debarment. This again raised questions about whether the FSP complied with the provisions of section 14(3) of the Financial Advisory and Intermediary Services Act 37 of 2002.

Timeline of events leading to debarment

19 September 2018: The Applicant resigned as an employee of the FSP in order to pursue other employment opportunities. At the time of resignation the FSP had not made any formal complaints against the applicant – this only arose subsequent to resignation.

28 September 2018: The Applicant was suspended pending investigations into her conduct.

11 October 2018: The Applicant was notified of a disciplinary hearing that was scheduled for 17 October 2018. The Notice confirmed that the investigation had been concluded and that the FSP had established grounds on which to bring disciplinary proceedings against the Applicant. The Notice made no mention of the debarment.

16 October 2018: The Applicant was involved in a motor vehicle accident from which she sustained injuries that led to doctors booking her off work until 20 October 2018. As a result, the disciplinary hearing was not held and could not be rescheduled because the Applicant’s employment contract terminated before the Applicant could return to work.

7 November 2018: The FSP debarred the Applicant.

The FSP’s conduct

Although the FSP insisted that it complied with the correct procedure from inception to the date of the hearing, the legal representative of the FSP capitulated during proceedings and admitted that the FSP had failed to comply with section 14 of the FAIS Act.

The Tribunal’s findings

According to the Tribunal the FSP did not properly apply its mind to the statutory requirements relating to procedural fairness until the very last moment.

Therefore, the FSP clearly failed to comply with the mandatory requirements of section 14(3) of the FAIS Act.

In Guidance Notice 1 of 2019, the FSCA specifically emphasises section 14(3) of the FAIS Act and describes the requirements in three practical steps. Step 1 requires that an FSP should give the person adequate notice, with specific mention of the FSP’s intention to debar the person – just one of the steps that the FSP in this case did not follow.

Another important matter addressed in the Guidance Notice is the requirements to debar a person who no longer is a representative of that FSP. Failure to comply with this will also lead to the debarment being set aside.

Click here to read our article on the critical steps to comply.

Click here to download the Tribunal case.

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