In a recent Financial Tribunal case, the applicant, a sole proprietor and key individual of a brokerage, lodged an appeal for reconsideration of an FSCA decision in October 2018 to decline his application for exemption from certain Fit and Proper requirements.
These requirements related specifically to the regulatory exams and qualification obligations.
As the applicant was authorised before 31 December 2009, he benefitted from the special dispensation applicable at the time.
What was the applicant’s motivation to apply for an exemption?
- If the application for exemption is not granted, he will suffer financial hardship and will be unemployed.
- The applicant suffered from permanent cognitive disorder (mental ability) since the year 2000.
- It will be unfair toward his clients that he has retained for many years. This serves as a testimony of his ability to carry out his responsibilities and duties.
- The applicant further pointed out that as a result of a violent home invasion in 2012 and 2017, he suffered from post-traumatic stress disorder, which is an ongoing disorder.
Grounds for refusal of the application for exemption
FSCA’s decision was based on the following:
- Mr V had sufficient time to comply with the examination requirements;
- his conduct lacks commitment and a disregard of the unconditional requirements of the FAIS Act;
- a decision to grant an exemption will be in conflict with the public interest, prejudice the interest of clients and frustrate the achievement of the objective of the FAlS Act; and
- the FSCA is not satisfied that reasonable grounds exist to warrant an exemption from the examination requirements.
What is the power of the Financial Services Tribunal?
“Section 234(1)(a) of the FSRA restricts the powers of the Tribunal with respect to the decisions of the FSCA. The Tribunal can either set aside the decision and remit the matter back to the FSCA for further consideration or dismiss the application. There is no room for the Tribunal to substitute the FSCA’s decision for its own.”
The Tribunal’s investigation
Besides not adhering to the Fit and Proper qualification requirements, the FSCA’s decision also pointed out the following:
- Mr V only wrote both the RE5 and RE1 examinations once, that is on 28 May 2012 and 11 June 2012 respectively;
- Mr V was required to obtain 60 credits at NFQ level 4 by 31 December 2009 and according to the lNSETA records of results, he had only obtained 30 credits at NFQ level 4;
- The FSCA had on numerous occasions taken regulatory actions against Mr V for failure to comply with the requirements of the FAIS Act, including the late submission of financial statements and/or compliance reports.
- The financial position of Mr V does not really differ from that of any other person that is in a similar position and who has to comply with the examination requirements.
- The FSCA took his medical condition into consideration. However, Mr V has not taken any steps to find alternative methods to comply with the requirements.
Mr V made a similar application to be exempted from the regulatory examinations in 2015 which was also declined. He never provided an explanation as to why he ignored that decision. He continued doing business for a period of almost 3 years knowing that he was not compliant with the required competency requirements and was not exempted.
Although a letter from a clinical psychologist stated that Mr V’s mental condition caused permanent cognitive disability to the extent that he cannot perform the study/examination process, he still –
- undertook an examination with INSETA in 2010 despite the effect of his mental condition;
- only failed the RE1 and RE5 regulatory examinations by 1% when he tried to write it and that indicates that he was not far off to complete the REs successfully; and
- submitted that he has extensive experience which has taught him in instances of memory failure to offer sound and accurate advice to his clients and refer to relevant legislation and guidance documents.
The Tribunal’s conclusion
“Having considered the evidence and the reasons provided on the record, we, therefore, find that the decision of the Respondent (FSCA) for refusing the exemption application is justified.”
What’s sauce for the goose is sauce for the gander. In our view, the applicant can thank his lucky stars that he managed to continue to operate as long as he did whilst being non-compliant. Thousands of others who toed the line did not.
Click here to download the Tribunal case.