Financial advisors are required to clear many hurdles when it comes to regulatory compliance. Those who choose to ignore the rules can find themselves at the wrong end of justice. In the financial services industry it’s definitely not about “rules are there to be broken”. This was clearly borne out by the considerable number of appeals against debarments which the Tribunal referred back to FSPs for reconsideration.
On 1 April 2018, the debarment process under the FAIS Act was amended by the Financial Sector Regulation Act 9 of 2017 (FSRA). In terms of section 14(3) of the FAIS Act, a FSP must, before debarring a person, take specific steps in order to arrive at a fair and just outcome. Section 39 of the FAIS Act further stipulates that any person aggrieved by a decision of a FSP, including electing to debar a person in terms of section 14, may now also apply for the reconsideration of the decision to the Financial Services Tribunal.
The Tribunal Rules set out the procedures to be followed in an application for reconsideration of a “decision” by the “decision-maker” which has been defined in section 218 of the Financial Sector Regulation Act. These rules specifically define the timeline and the format of the application.
Since April 2018, many debarment cases have been referred to the Tribunal. In most cases the debarments were uplifted and remitted back to the FSP for reconsideration and, specifically, to follow the prescribed debarment process. In order to assist FSPs, the FSCA published Guidance Notice 1 of 2019 on 6 June 2019, to clarify the role of all parties in this process.
In the latest case, the FSP followed these rules and steps “to a T”, and the Tribunal ruled against the applicant.
The background and complaint
The essence of the matter concerns an incident wherein it was alleged that Mr K forged a client’s signature on a loan application form. Standard Bank instituted a disciplinary hearing which resulted in Mr K’s dismissal. Mr K pleaded guilty to the charges. Mr K was afforded an opportunity to make representation as to why he should not be debarred but failed to do so. Standard Bank then proceeded with the debarment on 7 December 2018. Mr K filed the reconsideration application only on 10 April 2019. This was found to be out of time.
As a result, Mr K made a condonation application for the late filing of the reconsideration application, but Standard Bank opposed the condonation.
In this matter, Mr K was aware of the debarment decision from 11 December 2018. In terms of the rules, he had 60 days to file his reconsideration application. His application was only filed on 10 April 2019. The 60 days period for which Mr K should have filed his application expired on 9 February 2019. The reconsideration application was therefore 57 days late. Condonation can only be allowed if the applicant can provide a good reason for the delay.
The Tribunal was of the view that Mr K’s reason for the delay was unreasonable and unacceptable. If he was serious about prosecuting the matter, he could have instructed his attorneys to start with drafting the application earlier.
The Tribunal ruled as follows:
“… Mr K failed to show good cause for the late filing of the reconsideration application. The reconsideration application should thus fail on the ground that the applicant filed the reconsideration application late.
In addition, the Tribunal noted that there was no ‘…prospects of success in the main matter.’
This Tribunal thus makes the following orders:
- The application for condonation is denied;
- The main application is dismissed; and
- No order as to costs.”
According to Macmillan’s dictionary, the saying “rules is rules” is used to indicate to someone that they have to obey a rule, even if they do not want to.
In another case published this week, the Tribunal was even more abrupt:
Application for reconsideration i.t.o. sec 230 of the financial sector regulation act 9 of 2017.
The application for reconsideration is dismissed.
First, it is out of time and there is no application for condonation – sec 230(2) (b).
Second, it is frivolous in the light of the applicant’s admission – sec 23(4).
But rules is rules…
Click here to download the Tribunal Case.