Secondary

Remorse as a Mitigating Factor

The latest decision by the FSB Appeal Board contains an interesting perspective on the impact of remorse in cases where a review of a decision by the Regulator is requested.

The reasons for the debarment is summarised as follows:

  • The appellant misrepresented to Discovery that 4% commission was due to him as a result of an investment of R 345 000.
  • The appellant knew that the client had already paid him R 12 000 as commission.
  • The appellant acted dishonestly in submitting an application reflecting the 4% commission to Discovery as commission due to him, when the client had in fact paid him directly.
  • The appellant therefore unlawfully obtained an additional 4% commission on the client’s investment, thus earning double commission.
  • The appellant further advised the client that by paying commission directly to him the client would effectively pay less commission than would otherwise have been the case.
  • The appellant assured the client that Discovery would not deduct commission against her investment.
  • Furthermore, armed with information regarding how much money the client held in her investment portfolio, the appellant on two occasions attempted to solicit loans of R 5 000 and R 60 000 from the client.

After thorough investigation, the FSB debarred the appellant. The appellant served the notice to appeal the debarment. In his grounds for appeal, the appellant did not deny receiving commission directly from the client. However, he emphatically denied receiving commission from Discovery. As such, the appellant’s version was that there was no double commission.

The following information contained in the Appeal Board decision provides more clarity on the circumstances of the case:

“However, the evidence viewed in totality indicates that at the time of the alleged misconduct, the appellant was in financial distress. He owed Discovery commission of about R 154 000. The appellant’s arrangement with Discovery was such that Discovery would have been entitled to retain 50% of commission the appellant earned to reduce commission he owed Discovery. The appellant understood that Discovery would deduct against commission received if the client paid commission to Discovery directly. Unwilling to incur deductions the appellant arranged for the client to pay him directly instead. There was no suggestion that the appellant tried to pay over to Discovery any portion of the monies he directly received from the client. Instead the appellant seems to have consciously snatched the opportunity to have it all to himself and to leave Discovery to hang dry.”

As the case progressed, the appellant changed his tune to such an extent that he eventually conceded that all the above was in fact true, and that he only wanted to appeal the “sentence”. This led to the Appeal Board stating: “The appellant seems to have typically played the process until all his options ran out.”

Admissions and Remorse 

The Appeal Board expressed the following views on this:

“With regard to admissions, we took cognisance of the fact that the appellant did make certain admissions regardless of when they were made. We observed that generally our courts would view an admission of guilt in favour of the accused but would not regard such admission as a mitigatory factor in itself. Therefore an admission, although a sign of penitence, may therefore not be considered as mitigatory in isolation.”

“In the matter of Pieter Labuschagne v Registrar of Financial Services it was stated that when considering the appropriateness of sanction, the Board has to consider whether the appellant admitted to some kind of remorse and admitted his fault. In this matter, it was also stated that it is important for the appellant himself to first properly identify the defect of character or attitude involved, and thereafter to act in accordance with that appreciation. Until and unless there is such cognitive appreciation on the part of the appellant, it is difficult to see how the defect can be cured or corrected. [Emphasis underlined]”

“Bearing in mind the above, the appellant showed no signs of remorse despite making admissions. He remained resolute that he was a man of integrity.”

“The appellant’s lack of honesty and integrity went deep. For the purposes of this matter it suffices to state that we were satisfied that the Registrar’s decision was correct.”

“Further, at no stage was the appellant ever prepared to accept that he had done anything untoward, let alone admitting that he fell short of the standard required of him by the FIAS Act, until the very last, when he had nowhere else to turn. There was therefore no basis on which to find any differently to the Registrar on the basis of penitence as the appellant showed no remorse.”

Please click here to download Appeal Board Decision.

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