Secondary

Tribunal protecting rights

Tribunal protecting the rights of representatives

The Manasse decision by the Financial Sector Tribunal again underlines just how important compliance with Section 14 of the FAIS Act is. In particular, it requires that a debarment process must be lawful, reasonable and procedurally fair. The number of times financial institutions, some of them big players, were rebuked for riding roughshod over the rights of representatives, makes one shudder to think what happened before the Tribunal lent a semblance of legality to the process.

Extract from the Tribunal ruling

Section 14 sets out the debarment process. An FSP is obliged to debar a representative from rendering financial services if the FSP is satisfied based on the available facts and information that the representative no longer complies with the ‘fit and proper’ requirements.

S. 14 (3)(a) and (b) obliges the FSP to give adequate notice in writing to the person against whom it intends to enforce a debarment and states the grounds or reasons for the debarment in the notice. In addition, the FSP’s formal debarment policy must be provided to that person and he or she must also be afforded reasonable opportunity to make submissions in response to the grounds relied on by the FSP for debarment.

The Guidance Note on the debarment process, published by the FSCA, is aligned to s. 14 (3) of the FAIS Act. The guidance note similarly provides for the serving of adequate notice and setting out the grounds for the debarment and the requirement that a copy of the written policy and procedure governing the debarment process should be attached to that notice.

It therefore follows that in a debarment process, all the relevant available facts and information must be considered, including the response received from the FSP. It is for this reason that the section makes it obligatory that the debarment process must be rational and reasonable. This means that the action taken by the FSP must make sense and be justifiable, given the information that is available to the person who makes a decision or takes the action.

In the bad old days, debarments were often used for nefarious purposes, including settling old scores, getting rid of under-producing representatives, or bypassing the legal requirements to terminate services. No doubt, much of it is still happening, but the actions of the Tribunal have contributed in a substantial manner to restore the balance.

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