A recent decision by the Financial Services Tribunal (FST) underscores the importance of adhering to statutory procedural requirements in debarment processes.
The debarment process can be rendered invalid if a financial services provider does not provide a representative with adequate notice and opportunities for response, even where a disciplinary hearing has found against the rep.
Background to the case
The applicant, Johanna Catharina Jansen van Rensburg, contended that on 13 December 2024, she received a WhatsApp message from Runis Campher Brokers, containing a photograph of a debarment letter. This letter, also dated 13 December, stated that the FSP had applied for her debarment.
Jansen van Rensburg also told the FST that she received a copy of the debarment notification form on 16 January 2025, which was backdated to 6 November 2024.
Prior to the debarment, on 1 November 2024, the FSP called Jansen van Rensburg to attend a disciplinary hearing. According to the report by the chairperson of the hearing, Jansen van Rensburg understood the three charges against her and pleaded guilty to the charge of gross dishonesty. The report recommended that Jansen van Rensburg be summarily dismissed.
However, the Tribunal said there was no indication that Jansen van Rensburg was served with a dismissal notice or a notice of intention to debar following the outcome of the hearing on 5 November 2024.
Condonation for late filing
Jansen van Rensburg filed her reconsideration application on 22 May this year, along with an application to condone the late filing of her application.
The Tribunal said the document filed in support of the condonation application did little to support a direct request for condonation, instead focusing on submissions that the debarment process was improper.
In terms of section 230(2) of the Financial Sector Regulation Act, Jansen van Rensburg had 60 days from the date on which she was notified of her debarment to file for reconsideration.
The Tribunal said it could not – based on the chronology extracted from the record before it – ascertain the exact date of the debarment. Therefore, the Tribunal, in the interest of fairness, fairness, deemed it appropriate to consider the applicant’s prospects of success in the matter when determining the issue of condonation.
Procedural failings
Turning to the merits, the main issue was whether Runis Campher Brokers complied with section 14 of the Financial Advisory and Intermediary Services Act.
Section 14(2)(a) states: “Before effecting a debarment in terms of sub-section (1), the provider must ensure that the debarment process is lawful, reasonable and procedurally fair.”
Section 14(3) provides that an FSP must:
“(a) before debarring a person—
(i) give adequate notice in writing to the person stating its intention to debar the person, the grounds and reasons for the debarment, and any terms attached to the debarment, including, in relation to unconcluded business, any measures stipulated for the protection of the interests of clients;
(ii) provide the person with a copy of the financial services provider’s written policy and procedure governing the debarment process; and
(iii) give the person a reasonable opportunity to make a submission in response;
(b) consider any response provided in terms of paragraph (a)(iii), and then take a decision in terms of sub-section (1); and (c) immediately notify the person in writing of—
(i) the financial services provider’s decision;
(ii) the person’s rights in terms of Chapter 15 of the Financial Sector Regulation Act; and
(iii) any formal requirements in respect of proceedings for the reconsideration of the decision by the Tribunal.”
The Tribunal found that Runis Campher Brokers had not provided proof that Jansen van Rensburg was given adequate notice in writing of its intention to debar her.
The evidence also indicated that the FSP failed to afford the applicant adequate notice of her debarment and any opportunity to present her side of the story before her debarment.
It followed that Runis Campher Brokers also failed to give Jansen van Rensburg a reasonable opportunity to make submissions in response and failed to consider any response from her before taking its decision.
The Tribunal concluded the debarment procedure was not lawful, reasonable, or fair.
The FST set aside the debarment and remitted the matter to Runis Campher Brokers for further consideration after complying with section 14(3) of the FAIS Act.
