Tribunal rules in favour of rep who found out about her debarment from the FSCA

The Financial Services Tribunal (FST) has set aside the debarment of a representative who was dismissed for allegedly misappropriating funds after finding that the debarment proceedings were irregular and unfair.

The applicant (“SH”) was mandated by Dealer Financial Services CC to sell financial products on behalf of its juristic representative, Fuzion Motor Group (Pty) Ltd (FMG).

SH said she was a partner, via Blackbird Finance (Pty) Ltd, in Fuzion Preowned (Pty) Ltd, a wholly owned subsidiary of FMG.

Fuzion accused SH of misappropriating funds. It is alleged that she instructed a debtor to pay money into her personal bank account and an attorney’s trust account. These allegations have resulted in litigation between Fuzion and SH.

The Tribunal’s decision did not address the merits of these allegations.

Fuzion instructed SH to attend a disciplinary hearing in April 2023. SH disputed the lawfulness of the disciplinary proceedings because, according to her, she was not an employee. She regarded herself as a partner, and because the partnership was dissolved in January 2023, there was no basis in law for Fuzion to initiate disciplinary action against her. Further, the parties were engaged in litigation. Therefore, SH elected not to attend the disciplinary hearing.

The disciplinary hearing found that SH would be found guilty as charged and the recommended sanction would have been summary dismissal, but because she was self-employed, the company could no longer apply disciplinary action.

Dealer FS debarred her later that month.

SH lodged a reconsideration application on a number of procedural grounds.

According to SH, the FSP did not notify her of her debarment. Instead, the debarment came to her attention when she received a notice from the FSCA on 1 June. Upon further investigation, she discovered that the debarment was effected on 12 April.

‘Irregular and unfair’

The Tribunal found the debarment did not comply with the procedures prescribed by section 14(3) of the FAIS Act.

It said Dealer FS implied that the disciplinary proceedings afforded SH an opportunity to be heard in relation to her debarment. But this did not constitute compliance with section 14(3)(a)(iii).

“The respondent appears to conflate the disciplinary proceedings by Fuzion with that of debarment.”

SH was not given written notice of the intention to debar, the grounds and reasons for the debarment, and any terms attached to the debarment.

Dealer FS stated that it informed SH telephonically of the outcome of the disciplinary proceedings, and SH received written notice and the reason for debarment from the FSCA.

The Tribunal said it appeared that the representative of Dealer FS reviewed the information from the disciplinary proceedings and, in terms of his “investigation”, found that SH had acted dishonestly and sent a “debarment notification” to the FSCA.

“The procedure laid down in section 14(3) of the FAIS Act is peremptory and unambiguous. An FSP that intends debarring a representative must give notice in writing to the representative of its intention to do so. Together with the said notice, the FSP must provide the representative with a copy of its debarment policy,” the FST said.

If an FSP cannot locate a person to deliver a document or information after taking “all reasonable steps” to do so, including dissemination through electronic means where possible, it will suffice for the document or information to be delivered to the person’s last-known email address, physical business address, or residential address.

It said Dealer’s reliance on the “purported” telephone call as constituting informing SH of its intention to debar was “wholly inadequate”. The FSP, having had a relationship with SH spanning more than four years, had sufficient means to contact her, including by email.

The debarment policy “purportedly” sent to SH was sent to her in 2019. This appears to have been done during a course registration process, not her debarment, the FST said.

The Tribunal concluded that the debarment proceedings were procedurally irregular and unfair. It set aside SH’s debarment and remitted it for further consideration.

Click here to download the FST’s decision.