The owner of a brokerage asked the Financial Services Tribunal to award him R2 million in damages because the FSCA refused to grant his firm an FSP licence. The regulator rejected the firm’s licence application because its sole key individual, director and shareholder did not comply with the fit and proper requirements.
The tribunal also noted that the applicant, Thendo Khedzi, was, legally speaking, not entitled to apply for the FSCA’s decision to be reconsidered, because Khavhade Brokerage Firm – not Khedzi – had applied for the licence. The tribunal, however, decided to ignore the misjoinder.
Liberty debarred Khedzi in November 2012 because of a lack of honesty and integrity.
He joined Avbob in 2014 without disclosing his debarment. “Of the policies he wrote during his 18 months with Avbob, 289 lapsed and 75 remained in force. He owes Avbob about R47 000 for lapses and cancellations,” according to the tribunal.
He then joined Assupol, again without disclosing the fact of the debarment. He wrote some 450 policies, of which only about 10% did not lapse. He owed Assupol more than R440 000 for commissions earned on lapsed and cancelled policies. Assupol obtained judgment against him, but it could not execute the judgment, the tribunal said.
Asked why he had not disclosed his debarment on the application form, Khedzi said: “To be honest, I thought I would jeopardise my chances of getting a licence, which I desperately in need of [sic]. As a law-abiding South African, I always strive to do good and to be an example of honesty and integrity.”
Khedzi subsequently said he did not disclose his debarment because he thought he had served its full term, and he thought the past was gone, and he wanted to move on, because what had happened in the past stays in the past according to his religious beliefs.
But the FSCA was not impressed.
Among its reasons for dismissing the licence application, the FSCA said Khedzi’s “repeated failure to honestly and in a frank manner disclose upfront his previous debarment as a result of undesirable conduct is a material fact and points not only to a lack of honesty, integrity and good standing, the failure to observe an obligation on his part imposed by the legislation to make full and frank disclosures concerning his past conduct, but also demonstrates a lack of rehabilitation and reformation on his part”.
R2m damages claim
The tribunal’s judgment said: “The crux of the application is that the FSCA delayed consideration of the application and that it actively sought information behind his back to justify a rejection of the application. This was set out in many pages.
“Apart from asking for a licence, he also asks for payment of R2m for the injustices that occurred. In his 77-page heads of argument (accompanied by bundles of documents), he justifies his damages claim by listing 20 grounds on which the tribunal must ‘punish the registrar’.”
The tribunal said Khedzi assumed it had powers that did not have.
“This tribunal does not have the jurisdiction to grant licences. It also does not have jurisdiction to consider claims for damages or order payment of damages. Finally, this tribunal is not the administrative head of the FSCA, and it is not its function to discipline the FSCA or deal with administrative lapses and delays. Such lapses and delays do not create a right to a licence, nor do the personal and financial circumstances of a party.”
The tribunal’s only power is to determine whether the decision to deny the licence application was right or wrong.
As the FSCA pointed out, the question of whether the proposed key individual was a fit and proper person could be answered only by referring to past conduct.
“Exercising my own judgment and discretion, I would have come to the same conclusion for the same reasons as did the FSCA. Indeed, I would also have dismissed this application summarily as vexatious under section 234(4) [of the Financial Sector Regulation Act] but considering Mr Khedzi’s past conduct bombarding the FSCA and this tribunal with emails and documents, I thought it best to state my reasons,” said the tribunal’s deputy chairperson, Judge Louis Harms.