Secondary

FSB: Debarment Guidelines

At the end of October, we published an article titled, New Debarment Notification Document, containing details of a new form which has to be completed and sent to the FSB when a key individual debars a representative (a section 14(1) debarment). The article contains a link to the actual document.

The FSB has now published a more detailed set of guidelines to be followed in the event of such a process. This resulted from numerous complaints by debarred representatives after due process was not followed. In many instances, the actions of the key individual could be ascribed to malicious debarment.

  1. The provider did not notify the person that he/she were to be debarred.
  2. The debarred person is aggrieved by the debarment as the key individual that effected the debarment had no authority to act on behalf of the FSP.
  3. The person was debarred for reasons not related to the rendering of financial services.
  4. The person was debarred after they had left the service of the provider.

A debarment in terms of s 14(1) of the FAIS Act is a regulatory instrument intended to rid the industry of incompetent and dishonest representatives. Debarment should not be used to satisfy a provider’s contractual or other grievances against a representative, unrelated to fitness or competency requirements. Such use would be an unfair revenge or retaliation on the representative.

Providers are cautioned against the abuse of their powers under s14(1) of the FAIS Act. A debarment must be effected for the purpose it was intended. It is important that providers understand that they can terminate an agreement with a representative without debarring him/her. Debarment must relate to non- compliance by the representative with the competency and integrity requirements as postulated by s 13(2)(a), read with s 8(1)(a) and (b) of the FAIS Act; or with any applicable code of conduct or law on the conduct of business (s 13(2)(b)).

The guidelines then proceed to provide detailed practical advice on how to proceed, and pitfalls to avoid. It cautions against failure to comply with the provisions of section 14(1), as this could lead to regulatory action against the defaulting key individual.

Please click here to download the guidelines.

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