FSB Feedback on Debarment of Representatives II

In the previous article we discussed the importance of following due process in deciding whether a representative should be debarred. Here we share the views of Advocate Matome Thulare, Head of the Enforcement Department at the FSB, as expressed in an article published in the FSB’s FAIS Newsletter 17, published on 30 June 2015.

FAIS requirements versus other legal obligations

In general terms, a fair process would entail the FSP, as the employer, to subject the employee to a disciplinary hearing to determine the guilt or otherwise of the employee under the Labour Relations Act (LRA). In the event that the employee is found guilty, the employer as an FSP must consider whether section 14(1) of the FAIS Act is applicable.

For purposes of a debarment under section 14(1) of the FAIS Act and PAJA, the FSP must afford the representative the opportunity to be heard before an adverse decision is taken. In my view, the fact that the representative was subject to an earlier disciplinary hearing would not constitute adequate compliance under PAJA. The reason is that the initial disciplinary hearing was convened under the LRA whereas the enquiry in terms of section 14(1) is convened under the FAIS Act and PAJA.

The test to determine acts of dishonesty, negligence, incompetence under the LRA is distinct and different to the test under the FAIS provisions, despite the interplay. Whereas the LRA may have as a focus a system of progressive discipline that punishes an employee’s conduct, the FAIS Act has as a focus the protection of clients, the upholding of virtues of honesty, integrity, professionalism and trustworthiness. The person who carries on business as a representative must be honest and competent and devoid of a malevolent frame of mind.

Resignation or abscondment during disciplinary action

The FSP’s challenge may be worsened by the sudden resignation or abscondment of the employee during the disciplinary hearing under the LRA. The response of most of the FSPs has been to discontinue the process and refer the matter to the FSB. In response the FSB has cautioned FSPs that they are expected to continue and determine the issue under FAIS Act. The counter-response of FSPs is that there is no jurisdiction to take any action under FAIS Act after the employee has left the service of the employer as the mandate is automatically terminated.

The issue of jurisdiction is a matter that must be settled in law as it causes confusion. In my view, there are two instances to differentiate. In the first instance, if the employee resigns innocently without any issue but complaints are later brought to the attention of the FSP, then the matter can be referred to the FSB for investigation. In the second instance, if the employee resigns during an investigation or disciplinary enquiry in order to avoid the inevitable result of being debarred, the FSP must continue with the investigation or disciplinary enquiry. In the latter instance, the fact is that the investigation or disciplinary enquiry commenced during the existence of the mandate and the conduct of the employee was aimed at avoidance of a debarment.

In addressing the issue of jurisdiction, it is arguable that the FSP, when effecting a debarment, acts in the public interest and therefore the contract of employment is not relevant for the purposes of the exercise of the public power. The nature of the power to debar is located in public law whereas the contract of employment is located in private law. There should be nothing to stop the FSP from exercising the power to protect the interest of the public despite the fact that the representative has resigned. To hold otherwise would lead to absurdity.

The suggestion that the FSB must become responsible for the debarment where a representative has resigned in order to avoid the consequence is not feasible. The power of the FSB located in section 14A to debar any person does not provide a solution to the jurisdiction dilemma faced by the FSPs. The point is that section 14A was not enacted to substitute the duty imposed on the FSP under section 14(1) of the FAIS Act. In my view, section 14A was enacted to cater for debarment of key persons of the FSPs and any other person who could not be debarred by the FSP under section 14(1) of the FAIS Act.

The position of the FSB is that if a provider had no mandate or contractual relationship with a representative at the time when the reason for the debarment occurred, it cannot effect a valid debarment. If, however, the reason for the debarment existed, but only came to the notice of the provider later, the process of debarment may still be embarked upon.

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