Unlike debarments imposed by the Financial Sector Conduct Authority under the Financial Sector Regulation Act (FSRA), which may include a defined period, an FSP-initiated debarment remains in effect until a reappointing FSP is satisfied that the debarred representative meets the Fit and Proper requirements.
The Financial Services Tribunal (FST) was called upon to explain this difference between debarments imposed by the FSCA and those imposed by financial services providers after an applicant complained that an FSP had not specified the period of her debarment.
The FST’s decision also clarified that an FSP is not required to conduct a formal debarment hearing. Instead, the FAIS Act mandates that the FSP provides the representative with a reasonable opportunity to respond to the allegations.
Background to the debarment
Nthabiseng Joyce Kokoana joined Liberty Holdings Limited as a financial adviser and representative in April 2024. Her role was restricted to providing financial services related to specific long-term insurance products, namely sub-categories A, B1-A, and B2-A.
Her conduct came under scrutiny when Liberty discovered irregularities in her policy-initiation processes. Kokoana was found to have initiated insurance policies under clients’ names without obtaining their authorisation or consent, breaching section 7(1) of Board Notice 194 of 2017.
Kokoana obtained client details from a non-accredited third party and claimed to have verified these details telephonically using contact numbers provided by the same third party. Subsequent investigation found that the details were inaccurate, and the clients had neither requested nor consented to the policies.
Liberty identified multiple procedural and ethical violations in Kokoana’s actions:
- She did not meet the clients in person to confirm their identities or needs.
- She failed to conduct a financial needs analysis or maintain a record of advice, both of which are mandatory under regulatory guidelines.
- She accepted and submitted policy initiation documents from a non-accredited individual, despite knowing this contravened her obligations.
- She collaborated with the third party to sign policy application documents using incorrect contact details, which were then used to falsely verify the policies.
These findings led Liberty to conclude that Kokoana no longer satisfied the Fit and Proper requirements of honesty, integrity, and competence.
Liberty initiated the debarment process by issuing Kokoana a notice of intention to debar in November 2024.
In response, Kokoana submitted an affidavit outlining how she had obtained the clients’ information from the third party. She also included an affidavit from the third party, who admitted to supplying her with false details.
Liberty proceeded with the debarment in December 2024, simultaneously terminating her employment and removing her from their representative register.
In her reconsideration application, Kokoana raised two key issues. First, she argued that she was not afforded a debarment hearing, suggesting a lack of procedural fairness. Second, she expressed concern about the unspecified duration of the debarment, noting its potential impact on her future career prospects.
Kokoana admitted to not meeting the clients in person and relying solely on telephonic verification with third-party-provided numbers. She expressed remorse for her actions and indicated a willingness to adhere to ethical standards in future.
Tribunal’s findings: procedural and substantive issues
The Tribunal first addressed Kokoana’s procedural objection regarding the absence of a debarment hearing.
Section 14 of the FAIS Act requires that an FSP affords a representative a reasonable opportunity to respond to allegations prior to debarment. The Tribunal noted that Liberty had complied with this requirement by issuing the notice of intended debarment and allowing Kokoana five days to submit her representations. She availed herself of this opportunity by providing affidavits in response.
The Tribunal clarified that the Act does not mandate a formal hearing for debarments initiated by FSPs but requires that a representative or key individual is afforded a reasonable opportunity to respond to the allegations made against them. Consequently, Kokoana’s claim of procedural unfairness was dismissed as unfounded.
On the substantive issues, the Tribunal reviewed the allegations and Kokoana’s admissions.
Kokoana conceded she had not met the clients, had not conducted independent verification of their details, and had relied on information from a non-accredited third party. These actions, the Tribunal found, demonstrated a failure to act with the requisite honesty and integrity or in the best interests of the clients.
Her reliance on telephonic verification using unverified contact numbers further compounded her breach of competence standards. The Tribunal concluded that Liberty’s decision to debar her was justified based on these uncontested facts.
Duration of a debarment
Kokoana’s concern about the debarment duration prompted further clarification from the Tribunal. Unlike debarments imposed by the FSCA under the FSRA, which may include a specified period, debarments by FSPs under the FAIS Act do not allow for a fixed duration.
The Tribunal explained that a debarred representative may be reappointed by an FSP after a minimum of 12 months, provided the FSP is satisfied that the representative is fully qualified.
“This includes qualifying with the personal character qualities of honesty and integrity. Where the debarment was effected due to dishonesty or a lack of integrity, the reappointing FSP will have to be satisfied that the representative has been rehabilitated and reformed. The responsibility to establish whether a debarred representative now qualifies rests with the FSP.”
The Tribunal dismissed Kokoana’s application for reconsideration and upheld the debarment imposed by Liberty.
