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Tribunal finding that Industry is improving in debarment process

A fundamental character trait of a person who provides financial services and furnishes advice to members of the public is honesty and integrity. This goes hand in hand with conducting business with the necessary due skill, care and diligence. If an adviser fails to meet these requirements, and the correct disciplinary process is followed, he or she will be debarred.

Legislative changes in 2018 contained the right to appeal against a debarment decision. This led to a substantial increase in debarment cases being referred to the Financial Sector Tribunal. In most of these cases, the process was challenged. Three years later, a substantial number of such cases are remitted back to the FSP for reconsideration and to follow the prescribed disciplinary and debarment steps (Guidance Notice 1 of 2019 on 6 June 2019 refers).

One of the latest debarment decisions by the Financial Services Tribunal illustrates that there is some improvement.

Background

During 2019 and 2020 the applicant made misrepresentations to Liberty and/or its staff and/or its clients or potential clients, that resulted in a loss or a potential loss of approximately R150 000, i.e. commission payable for initiating policies for two clients.

It is alleged that, in the application documents of the policies, he forged and/or altered signatures, as well as client information including bank details, addresses and email addresses. As a result of including his own banking details, the clients could not become aware of these policies being initiated. Furthermore, the loading of incorrect email and cell phone information ensured that the clients were notified of these policies.

In addition to the above fraudulent and dishonest behaviour, he also loaded his manager’s information and manipulated his contact details in a fraudulent manner. As the applicant was under supervision, he fraudulently circumvented the sign-off process in order to get the policies issued and commission paid.

Besides these multiple fraudulent actions, he also accessed client policy information via Astute without the client’s permission.

The applicant’s version of events

The applicant denied that he acted fraudulently, as all his actions were because of various administrative errors, including the “fact” that:

  • others entered the information onto the system,
  • he in error supplied his own bank particulars,
  • he had problems during the lockdown with the FSPs internet systems, and
  • he was not appropriately trained by the FSP.

What lead to the rejection by the adjudicator?

“The adjudicator rejected his explanation because, as he said, it is plausible that there are processing errors or human errors when documents are meant to be submitted electronically. However, where a process requires three separate pin numbers from three separate cell phone numbers, yet all three pin numbers come from the same cell phone number, the plausibility of this being a simple processing error comes into question. It is also plausible that one can make a mistake by entering one’s own bank details on a client’s policy application. However, this error happened twice, with two different clients. It is implausible that this too was a processing error, at different times, one may add,” according to the Tribunal notes. As a result, the adjudicator rejected the exculpatory evidence and found that he did commit fraud.

The Tribunal’s decision

The Tribunal found that the main stumbling block for the applicant was that he did not dispute the fact that he loaded his manager’s information and manipulated his contact details in a fraudulent manner. He pointedly ignored the full statement by his manager in both his answer to the charges and in his reconsideration application.  “These facts corroborate the conclusion on the first two allegations. The applicant did manipulate the system and acted fraudulently in order to earn commissions during a period when he was financially strained.”

As a result, his application for the reconsideration of his debarment was dismissed.

Click here to download the Tribunal case notes.

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