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Did the Crime fit the punishment?

Further to last week’s article Bark without Bite?, we expand on the closing sentence which read: “ We are not propagating stricter censure for transgressors, but merely asking that a uniform standard be applied, whatever the size of the FSP.”

We received the following media release from the FSB on Friday:

The Registrar of Financial Services Providers (Registrar) referred a case against Mr Pieter Labuschagne (the Respondent) to the Enforcement Committee of the Financial Services Board.

The referral related to the Respondent’s contravention of section 2 of the General Code of Conduct for Authorised Financial Services Providers and Representatives (“the Code”), in that during or about January and February 2010 the Respondent failed to render financial services fairly, with due skill, care and diligence and in the interests of his clients and the financial services industry. The Respondent rendered financial services to two clients and negligently failed to discharge the following duties:

Obtain and analyse sufficient information relating to the clients’ financial position and experience in respect of financial products recommended.

The advice given was not adequately recorded.

The insurance policy application forms that were submitted to the product supplier were not signed by the Respondent.

In respect of one client, whose business the Respondent received through a referral, the Respondent negligently failed to directly render financial services to such client but instead merely availed his broker code to secure the business.

The Respondent admitted the contravention and agreed to settle the matter. The Registrar took into account, amongst others, that the Respondent co-operated with the Registrar’s investigation and the enforcement action. Consequently, the Registrar agreed to a penalty of R150 000, which penalty was imposed by the Enforcement Committee on the Respondent on 11 October 2012.

The FSB website shows that the licence of the only person by this name lapsed on 16 August 2011, thus no details are available. It would appear that this was a small brokerage, if not a one-person business. The Ombud’s website, too, contains no details of such a determination.

An article in Personal Finance last weekend listed the following fines meted out by the Enforcement Committee:

Lombard Life was fined R100 000 and financial services company Financial Management International R75 000 for taking deposits from investors in an assurance product, Vision, in contravention of the Banks Act. In setting the fine the committee took into account that the contraventions were as a result of a bona fide misinterpretation of the applicable law. Both parties accepted responsibility for the contravention, co-operated with the registrar’s investigation and enforcement action and “expressed sincere regret” for the contravention.

Capital Alliance Life was fined R100 000 for contravening the Financial Advisory and Intermediary Services Act in that it conducted financial services related business with Eagle Watch Financial Services, which was not an authorised financial services provider.

Absa Investment Management Services was fined R100 000 for failing to maintain liquid assets equal to or greater than 13/52 weeks of its annual expenditure.

Absa Asset Management was fined R10 000 after it changed an investment mandate it held from an institutional investor after the initial mandate had been approved by the FSB but before the mandate was enacted. The initial mandate allowed for only an annual asset management fee, but a performance fee was added, with the agreement of the institutional client, to a new version of the mandate that was not approved by the FSB. The FSB says the change has now been approved and that neither the institutional client nor its clients suffered any damage.

No prizes for guessing who was hardest hit in the determinations listed above.

It would be very interesting to know what the decision of the FSB’s Appeal Board would be, should these facts be used as the basis for appeal by Labuschagne. Regrettably, he will not be able to do so, as he admitted to the contravention.

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