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.