Tribunal not confident FSP will follow the correct debarment procedure

The Financial Services Tribunal has set aside the debarment of a representative and declined to refer the matter back to the FSP for reconsideration, because the tribunal had no confidence that the FSP understood its rights and duties under the FAIS Act.

This month’s ruling is another example of an FSP falling foul of the debarment procedure contained in section 14 of the FAIS Act.

Read: Tribunal: FSPs must adhere to section 14 when debarring representatives

The tribunal summarised the procedure that an FSP must follow before debarring a representative. The FSP must provide the person with:

  1. Adequate written notice of its intention to debar;
  2. Reasons for the debarment;
  3. Any terms attached to the debarment;
  4. A copy of the FSP’s policy and procedure governing the debarment process; and
  5. A reasonable opportunity to make a submission in response.

According to the tribunal’s judgment, Brough Capital (Pty) Ltd informed the applicant in May last year that it “contemplated” embarking on a process to debar him.

The following month, it sent him a letter addressing his alleged breaches of his duties as a director, saying it was therefore “obliged to report your conduct” to the FSCA and the Companies and Intellectual Property Commission.

Reporting conduct is not debarment

The tribunal said that contemplating an intention to debar or reporting conduct to the FSCA does not amount to a statement of an intention to debar under section 14(3)(a).

It said neither letter addressed items 3 or 4 listed above.

Furthermore, the FSP did not comply with section 14(3)(c), which requires an FSP, immediately after deciding to debar a representative, to notify the person in writing of:

  • Its decision to debar;
  • His or her rights in terms of chapter 15 of the Financial Sector Regulation Act; and
  • Any formal requirements in respect of proceedings for the reconsideration of the decision by the tribunal.

The tribunal said it would be “inappropriate in the circumstances” to agree to Brough’s request to refer the matter back to it for reconsideration.

“The respondent’s lack of understanding of what its rights and duties are as FSP does not produce the necessary confidence that the respondent will be able to do matters correctly.

“In addition, there is some merit in applicant’s submission that the respondent conflated employment (more correctly, contractual and company law) issues with FAIS issues. If the respondent wishes to proceed with debarment, it has other avenues,” the tribunal said.

Moonstone has dealt extensively with the procedural requirements for debarring a representative.

Read: Essential procedural considerations when debarring an errant representative

, , ,

Comments are closed.
SA Corona Virus Online Portal Logo