The Financial Services Tribunal has set aside Sanlam Life Insurance Limited’s debarment of a former financial adviser, holding that breaches of internal rules and compliance requirements do not automatically establish that a representative lacks the honesty and integrity required under the Financial Advisory and Intermediary Services Act.
The Tribunal accepted that the adviser had breached Sanlam’s internal rules by using his personal bank account to receive client money without prior approval, but it found that the conduct established on the record amounted to negligence and non-compliance, rather than dishonesty or a lack of integrity.
It also found that Sanlam’s findings under sections 28 and 29 of the Financial Intelligence Centre Act (FICA) were not sustainable.
The transaction that led to the debarment
The matter arose from a R100 000 investment by a client in March 2025. The client wanted to invest the money with Glacier but encountered difficulties depositing the cash into his own bank account.
On 31 March, the client deposited R101 200 in seven cash deposits into the adviser’s personal Capitec account. The adviser then transferred R100 000 to Glacier on the same day.
The adviser had contacted Glacier before the transfer about how the cash could be handled. The client later confirmed under oath that he had asked whether he could deposit the money into the adviser’s account for onward transfer, that the adviser had not solicited or suggested the arrangement, and that the full amount was transferred to Glacier. The client said the investment remained in force and that he had no complaint against the adviser.
The adviser nevertheless breached Sanlam’s internal Rule 4.17, which required prior approval before a representative could handle client cash. He later acknowledged that he knew of the requirement but had forgotten it. He also acknowledged that he had not submitted a cash-threshold report or considered whether a suspicious transaction report was required.
Sanlam’s forensic report found that the adviser had failed to report what it regarded as a cash transaction above the applicable threshold and had breached the General Code of Conduct, FICA, and Rule 4.17. It recommended that debarment be considered.
The adviser resigned on 1 September 2025 and completed his notice period later that month. Sanlam notified him of the proposed debarment on 25 February 2026 and, after he made no representations, confirmed the debarment on 16 March 2026. On 20 March, Sanlam notified the Financial Sector Conduct Authority, selecting “honesty and integrity” as the ground for debarment.
Rule breaches are not the same as a lack of honesty and integrity
In its decision of 18 August 2026, the Tribunal accepted that the adviser had breached Rule 4.17 and Sanlam’s internal requirements by allowing client money to pass through his personal account without prior approval.
The client’s consent, the absence of any loss, and the adviser’s lack of personal benefit did not change that finding. The Tribunal said the conduct also engaged section 2 of the General Code, which requires a provider and representative to act honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry.
But the Tribunal drew a distinction between the consequences of that breach and the statutory purpose of debarment.
A breach of Rule 4.17 could be dealt with as a matter arising from the adviser’s internal and contractual relationship with Sanlam. It did not, without more, establish that he was no longer fit and proper to render financial services.
“Debarment is not a substitute for those processes,” the Tribunal said.
The conduct did not establish dishonesty
The Tribunal considered what the established conduct showed about the adviser’s honesty and integrity.
It reiterated that misconduct is “the factual basis of the enquiry and not its conclusion”. A financial services provider must therefore establish the misconduct and then determine what it signifies about the representative’s fitness and propriety.
The Tribunal found no evidence of theft, fraud, misappropriation, forgery, fabricated documents, or misleading conduct. Nor was there evidence that the adviser had personally benefited from the client’s money beyond ordinary commission.
It also considered significant that the money reached its intended destination, the investment remained in force, and neither the client nor the institutions involved suffered a loss.
The transaction had not been concealed either. The adviser had approached Glacier before transferring the money, subsequently raised reporting questions with Sanlam staff, and made disclosures during the investigation.
These facts mattered because the Tribunal was assessing the nature of the conduct that had actually been established, rather than simply asking whether there was proof of dishonesty.
As it put it: “A person who openly escalates a transaction to his provider, and who transfers the whole of the client’s money to the intended destination on the day he receives it, does not display a deceptive state of mind.”
The Tribunal concluded that the conduct amounted, at most, to negligence and breaches of the adviser’s internal contractual obligations. It did not support a finding that he lacked honesty and integrity.
FICA findings also fell short
Sanlam had also relied on alleged contraventions of sections 28 and 29 of FICA.
The Tribunal found problems with both.
Section 28 places the obligation to report a cash transaction above the prescribed threshold on an accountable or reporting institution. The Tribunal found that the record did not establish that the cash received into the adviser’s personal account was attributable to such an institution for purposes of the reporting obligation.
There was also a question about the seven deposits. They totalled R101 200, but the individual deposits were below the R49 999.99 threshold. The Tribunal noted that the requirement to aggregate separate cash transactions had been removed from section 28 in November 2022. Sanlam therefore needed to establish why the seven deposits constituted a single transaction for reporting purposes. Its forensic report did not address that issue.
Section 29 presented a different issue. A suspicious transaction report requires the requisite knowledge or suspicion. The adviser’s admission that he had not considered making such a report did not establish that he knew or suspected that the transaction involved unlawful proceeds, lacked an apparent lawful purpose, or was structured to evade a reporting obligation.
The seven deposits could, viewed in isolation, have raised a question about structuring. But the Tribunal considered the surrounding circumstances and found that the evidence did not establish such a purpose.
It described the transaction as “a clumsy and non-compliant means of overcoming a banking obstacle”, rather than an attempt to defeat a reporting obligation or disguise the origin of the funds.
Sanlam did not complete the fit-and-proper enquiry
The Tribunal found that Sanlam had not actually undertaken the section 14(1) enquiry required before debarment.
Its forensic report identified alleged contraventions and recommended that debarment be considered but made no fit-and-proper finding. Sanlam’s debarment decision likewise did not record that the adviser no longer met a fit-and-proper requirement, identify which requirement he was said to have failed, or give reasons explaining the connection between his conduct and such a finding.
That defect was compounded by the ground on which Sanlam notified the FSCA.
The notification identified honesty and integrity as the sole ground for debarment. Yet the later statement of reasons also referred to competence and compliance, and Sanlam’s heads of argument before the Tribunal abandoned honesty and integrity and defended the debarment on competence and compliance instead.
The Tribunal emphasised that these were not interchangeable concepts.
“Those are different enquiries,” it said, noting that compliance is not itself a fit-and-proper category and that the competence requirements in Board Notice 194 of 2017 concern qualifications, regulatory examinations, experience, product and class-of-business training, and continuing professional development – none of which was implicated in the case.
The Tribunal also noted that dishonesty had never been put to the adviser. The debarment notice referred to alleged contraventions of the General Code of Conduct, FICA, and Rule 4.17, but not to dishonesty, misrepresentation, concealment, or lack of integrity.
It accordingly found that the section 14(1) enquiry had not been undertaken, that the honesty-and-integrity ground was unsupported, and that the FICA findings were unsustainable.
The Tribunal set aside the debarment and declined to send the matter back to Sanlam for reconsideration. It said remittal would simply give Sanlam “a further opportunity to sustain a ground which the record cannot sustain”.
