A recent application for the reconsideration of a decision by the FSCA provides clarity on an aspect which has always been a bit of a grey area. In rather crude terms it is often referred to as rent-a-KI (Key Individual). This is often necessitated when an FSP unexpectedly loses the services of such a person and has to find a replacement in double quick time to be able to continue doing business.
In this particular case, the applicant is a chartered accountant and active in the financial services sector. He was, at the time, the registered key individual of three financial service providers.
During 2019, he concluded an agreement with an FSP in terms of which he was to be appointed as the key individual of the Company. The effective date of the agreement was 1 December 2019, and the term of the agreement was for one year, i.e., until 30 November 2020. (This seems to indicate that this was just an interim appointment until such time as a permanent solution could be found.)
The Company applied to the FSCA through its compliance officer for the appointment of the applicant as its KI under the FAIS Act. The application mentioned that the applicant would spend 11 hours per month in performing his duties as the Company’s KI and 90% of his working time at two of the other FSPs, which “belong” to him.
The FSCA was not satisfied that the applicant would, in the circumstances, be able to fulfil the statutory duties of a KI in relation to the Company’s requirements, and that he would not have the necessary operational ability as required by the FAIS Act. It raised the issue with the compliance officer and the applicant on 1 November 2020, and formally with the Company in its capacity as applicant for the profile change of the present applicant on 30 November 2020.
The Company did not respond and the FSCA dismissed the Company’s application on 2 February 2021. It gave the following reason:
The role of a key individual is a critical, key and full-time “hands-on” function with the necessary decision-making powers and authority closely related to or inherent in the management and ownership structures of the FSP. The key individual functions are therefore such that they cannot be performed on an occasional part-time basis. It is on this basis that the concerns were raised around the proposed KI’s perceived inability to adequately, effectively and properly manage and oversee the activities as alluded to above.
The Company did not apply for the reconsideration of this decision, but the applicant for reconsideration of the FSCA decision did so on the ground that he was not provided with an opportunity to respond to the enquiry contained in the letter of 30 November since it was addressed to the Company only.
The first problem with the present application is that it is moot because the contract between the applicant and the Company has run its course.
The second is that the applicant was not a party to the original application and the decision refusing it did not, in legal terms, “aggrieve” him. The Tribunal addressed this issue before in the Hollenbach and Aon decisions and it is not necessary to revisit it again. In both these cases, the Tribunal referred to Section 230(1) which states that “a person aggrieved by a decision” of the FSCA may apply for a reconsideration of the decision.
The applicant, accordingly, does not qualify as a person aggrieved as required by sec 230. If the Company was dissatisfied, it should have applied.
The application was dismissed in terms of sec 234(4) of the FSR Act.
As indicated above, unforeseen events like death, illness or resignations can lead to a situation where an FSP suddenly finds itself in a position where it is unable to continue functioning due to the loss of a key individual. The obvious solution is thorough succession planning.
Bigger institutions with several KIs can ensure that they “cover” each other’s terrains by complying with the various requirements, but smaller FSPs would need to create alliances which can avoid the reasons for the declinature of the application heard by the Tribunal.