On 1 April 2018, the debarment process under the FAIS Act was amended by FSR Act 9 of 2017. Besides stipulating that an FSP must, before debarring a person, take specific steps, the amendment also introduced a vastly improved channel for appeals. The outcome of these amendments has been an increase in debarments that reached the Tribunal’s office. In many of these cases, the debarment was set aside as a fair process was not followed by the FSP.
But what happens if a fair process was followed and a representative is debarred? What are the requirements to reappoint a debarred rep?
NB – The FSCA cannot lift a debarment unless instructed to do so by the Financial Sector Tribunal or a court of law. Only through the application by an FSP to the Authority can a debarred rep be reappointed.
When a representative has been debarred by a Financial Services Provider (FSP), there are specific requirements that must be adhered to for the reappointment of such a representative.
In December 2017, the FSCA (then FSB) published a Guidance Note too —
|(a)||clarify the role of the Registrar of Financial Services Providers in the reappointment by an authorised FSP of a representative that has been debarred in terms of section 14(1) of the Financial Advisory and Intermediary Services Act, 2002);|
|(b)||clarify the responsibilities of an FSP that reappoints a debarred representative in terms of Board Notice 82 of 2003 (BN 82); and|
|(c)||list the information an FSP must submit to the Registrar after it has reappointed a debarred representative.|
Debarment of a representative under section 14 of the FAIS Act
If a person is debarred under section 14 of the FAIS Act, it prevents a person from rendering any financial services as a representative of any FSP, and not only the FSP who brought about the debarment. As a result, the debarment has an industry-wide effect.
We covered the latest debarment requirements extensively in an article by Alan Holton on 8 November 2018 as well as an article on 24 January 2019, and suggest you read this again to familiarise yourself with the facts.
When can an FSP reappoint a debarred financial representative?
- A rep can only be reappointed if all unresolved business of the debarred representative that has not been concluded prior to his/her debarment, has been completely resolved or thoroughly concluded
- Any legal proceedings or complaints against the debarred representative submitted by clients to the FSP, the Ombud or any court of law must be concluded. Any other administrative or legal proceedings in terms of the FAIS Act or any other law have to be complied with.
- All fit and proper requirements must have been met.
Further, the representative must be debarred for a minimum period of 12 months unless the person was debarred due to the fact that he/she did not meet the fit and proper requirements at the time, in which case the representative can be reappointed when the requirements have been met. The Qualification or regulatory exam requirements are examples of this.
However, if a person was debarred for a more serious transgression, like dishonesty, it is up to the FSP hiring the person to decide whether or not the person has been rehabilitated and reformed.
It is very important to remember that the FSCA can still reject an application that meets all the requirements. This would usually happen in cases where the representative was debarred for a severe contravention – the FSCA would then act in the best interest of the financial services industry and its integrity.
List of debarred persons
A debarred representative can only be reinstated if reappointed in terms of BN 82. Therefore, even if the 12 month period referred above has elapsed, the name of the debarred representative will not automatically be removed from the list of debarred persons. A debarred representative’s name can only be removed from that list when he or she is reappointed in terms of BN 82 as a representative of an FSP.
Notification of reappointment
The notification by the FSP of the reappointment of a debarred representative must be accompanied by at least the following documentation to enable the Registrar to monitor compliance with the requirements of BN 82:
- An affidavit from the reappointed representative confirming that all matters referred to have been resolved or concluded and, where applicable, that it has complied with all decisions, determinations or court orders; and that he or she complies with all the fit and proper requirements.
- Where the representative was debarred due to a lack of honesty and integrity, he or she needs to set out the reasons for reform or rehabilitation.
- Any other information or documentation considered by the appointing FSP in the reappointment of the debarred representative.
- Confirmation from a key individual of the FSP that he or she is satisfied that the representative had complied with all requirements for reappointment as set out in BN 82.
The new debarment requirements entail substantially more information about the debarred rep than before and should assist the FSCA to ensure that persona non grata are not allowed to slip back into the industry.
Click here to download the Guidance on the Reappointment of Debarred Representatives as published by the FSCA.