The importance of the legal requirement to only conduct business with a duly authorised financial services provider was painfully underlined in the latest order by the Enforcement Committee (EC), when the respondent, a representative, was fined R800 000 for failing to do so.
This is of particular relevance in this day and age where businesses are sold or taken over, and both parties need to ensure that they have all the facts at their disposal before conducting business.
In April 2008, Joy Finance’s licence application was approved, with Anthony Lubbe appointed as Key Individual. Scarcely a week later, according to the E.C. order, the licence was withdrawn, and Joy finance was prohibited from applying for a licence for a period of five years.
In October 2008, Joy Finance entered into a “strategic alliance” with Impact Corporate Brokers to transfer its clients to them.
In the same month, Clifford Mey was appointed as a representative of Impact, tasked with servicing the clients transferred from Joy Finance. It appears that Joy Finance and Lubbe continued to do business despite having their licence invoked and being debarred for five years.
On 1 August 2011, Lubbe was again debarred by the FSB after being convicted on two counts of fraud in the Boksburg Regional Court. On appeal, the South Gauteng High Court overturned both convictions. Again, it is not clear from the E.C. order how a debarred person can be debarred again.
The FSB’s records reflect that a licence application from Joy Finance Consultants was received on 23 August 2013, and rejected on 11 October 2013.
From August 2011 to April 2014, Mey conducted financial services business with Joy Finance and Lubbe, knowing that neither entity were authorised to render financial services. Mey did so in his capacity as a representative of Impact.
The E.C. order states that Mey was assured by Lubbe that the debarment, which resulted from his fraud convictions, ceased to exist when he appealed successfully.
Mey only learnt the truth early in 2014 when he sought legal advice and was informed that the debarment remained valid until the Registrar had formally set it aside. Mey then took all the required steps to rectify his mistake, including informing all affected clients.
The fine imposed resulted from the contravention of section 7 (3) of the FAIS Act and section 2 of the General Code of Conduct.
Section 7 (3) requires that an authorised financial services provider or representative may only conduct financial services related business with a person. rendering financial services if that person has, where lawfully required, been issued with a licence for the rendering of such financial services and the conditions and restrictions of that licence authorises the rendering of those financial services, or is a representative as contemplated in this Act.
Section 2 of the GCoC states that a provider must at all times render financial services honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry.