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Secondary

regulations

Debarment – When can a FSP debar an ex-employee?

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. But what happens when a financial adviser is debarred after he or she has left the FSP? Is this allowed or not?

In a recent Tribunal case the emphasis is again placed on the process to follow when a FSP wants to debar a financial adviser.

In this case the applicant states that she terminated her employment with the FSP during the course of 2017. She only learnt of the debarment on 16 January 2019 from another company that employed her after she left the FSP.

According to the Tribunal the FAIS Act authorises debarment of financial services representatives who have left the employ of the FSP. The process to be followed to achieve this is clear.

Section 14 (1) of the FAIS Act provides, inter alia, that: “An authorised financial services provider must debar a person from rendering financial services who is or was, as the case may be a representative of the financial services provider …”
Section 14 (5) of the FAIS Act reads further: “A debarment in terms of section 14(1) that is undertaken in respect of a person who no longer is a representative of the financial services provider must be commenced not longer than six months from the date that the person ceased to be a representative of the financial services provider.”

Therefore an FSP would be well within its right and in fact, would be obliged to debar its former representative where justification exists for such debarment. However, section 14 (5) of the FAIS Act sets the period of six months as time within which an FSP must commence the process to have its former FSR debarred. The FAIS Act therefore proscribes the FSP from commencing debarment of its former FSR outside the six months period reckoned from the time the FSR ceased to be its representative.

In this specific case and circumstances the FSP acted outside the boundary prescribed by section 14(5) of the FAIS Act. As a result the debarment was set aside.

If you need to read a case study on how NOT to handle the disciplinary process, click here to read the Tribunal case.

The FSCA Guidance notice on debarments provides excellent background to help you follow the correct procedure in most instances. In the case above, where the six months period had passed, the FSP should have notified the FSCA, rather than conduct an absurd process.

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