FSCA overlooked FSP’s response because it landed up in a junk folder, says tribunal

The FSCA’s assumption that an FSP had not responded to one of its questions contributed to its decision to debar him. But a pack of documents the FSP sent the FSCA landed up in a junk mail folder, with the result that the Authority failed to take his response into account before the decision was made.

This was the finding of the Financial Services Tribunal (FST) when it set aside the debarment of the FSP, a Mr “YS”.

In November last year, the FSCA withdrew YS’s authorisation and debarred him for five years following allegations of “malpractice” by Old Mutual Wealth (OMW).

The tribunal stated that the FSCA did not conduct an investigation. It relied on the allegations made by OMW and YS’s response or lack of response to its queries in reaching its decisions.

OMW alleged that YS had forged the signatures of two clients. It submitted the signatures to a handwriting expert, who found that some signatures might have been copied and pasted. The FSCA thought this was proof of fraud.

The FST said neither OMW nor the FSCA had “bothered” to ask the clients whether their signatures had been forged.

YS filed an extensive affidavit from one of the clients that established beyond doubt that the FSCA’s suspicion was unfounded. YS filed a statement in which he said that both clients had signed the documents electronically or digitally.

In light of this, the FST said it was unclear how the FSCA, on a balance of probability, could find that YS’s version was false.

“It was not the duty of the applicant to provide an affidavit from the second client to disprove a suspicion. It was for the Authority to make findings on something concrete and not on surmise.”

File was too big

YS had also allegedly engaged in churning. In response, he sent a pack of underlying documents to the FSCA.

“The second batch, because of the Authority’s system’s lack of capacity to accept large documents, landed in a junk box. The Authority therefore assumed that the applicant had no answer to the question.”

As a result, the FSCA did not consider material documents submitted timeously because of its computer system and not because of the fault of the applicant. The decisions were, consequently, taken without complying with the audi principle.

The FSCA argued that the documents did not answer its questions.

But the deputy chairperson of the FST, Judge Louis Harms said a cursory inspection of the documents showed that YS performed a financial needs analysis for the client, and the switches were required to satisfy her need.

Although his advice might have been inappropriate, he had not committed fraud, as had been alleged.

Judge Harms said that if it were up to him, he would not remit the decisions to the FSCA for reconsideration, but that was not within the tribunal’s power. Consequently, he aside the licence withdrawal and debarment and referred the matters back to the Authority.

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7 Responses to FSCA overlooked FSP’s response because it landed up in a junk folder, says tribunal

  1. Andre 2 June 2022 at 1:39 pm #

    Now the Fsca again this week by sending suspension emails to hundreds of brokers who handed their 21 financials in by hand and with a receipt from the Fsca. Also all brokers who sent their financials via email.

    Tthey now have to fix as it was not the fault of brokers.

  2. John C Smedmor 2 June 2022 at 5:57 pm #

    I handed Financials in by hand on 25/6/21 and have stamped rec .letter. Received e-mail from Fais Dept yesterday informing me that my license is going to be suspended for non- submission of 2021 Financials.
    Tried to respond.. Phones not answered and e.mail box full.
    Not expecting an apology for the stress caused to this old man.

  3. Wayne 3 June 2022 at 9:34 am #

    FSCA this is an absolute disgrace (including happenings such as set out by John C Smedmor- you are just like any other ANC entity.

  4. Craig A 3 June 2022 at 9:35 am #

    I also got the very badly worded email form the FSCA this week. I deleted it immediately because is looked like a scam/virus email that i get every day from the banks, SARS, Post Office etc.

    I contacted my CO and she confirmed that is was from them. They were threatening to suspend my licence for not submitting 2020 financials. I did it online and I have the proof. I can’t even imagine the trouble I would have to go through if I hadn’t sent this to my CO. My CO then sent the financials to them and they are now seen as being submitted 2 years late, which I am sure is not a good thing to have on your record.

    It is unbelievable how they expect us to act at the highest level, yet they are incompetent. I asked them if they are going to send an apology? I very much doubt it.

  5. Jackie Steele 3 June 2022 at 12:09 pm #

    I hoe YS in article above takes the FSCA to court. There is more at stake than a FSCA licence for YS it is a reputation , relationship and so much more .

  6. Jannie van der Merwe 3 June 2022 at 2:48 pm #

    Both my FSP’s also received notices wrt withholding of our licences because of not handing in 2021 financial statements. These notices were received on 30 May (almost a year after we had in fact handed our financials in by hand before the end of June 2021). The fact that the FSCA only reacted a year after the deadline of 30/06/2021 begs the questions: why be given a deadline if the authority did nothing wrt to the financials for almost a year, and also, how can documents handed in by hand go missing in their offices? If an FSP, however, was to “lose” a client’s personal information there would be serious reaction from the FSCA (POPPI).

    This notice also barred us from doing any new business “with immediate effect” I immediately sent an email, together with written proof that our financials were handed in timeously,, and signed for. To date they haven’t reacted. I have since sent a follow up urgent mail – and still no response. Shocking to say the least!

    • CraigA 4 June 2022 at 10:05 am #

      Mine were for the 2020 financials. TWO years ago and they wake up now. And the were submitted electronically via their website. They still lost them!
      Seems like there are rules for us and rules for them.

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