The Financial Services Tribunal (FST) has – once again – advised employers to refrain from using debarment proceedings to satisfy contractual or other grievances.
In a decision handed down on 25 January, the FST said the case was one of many where FSPs use labour disputes to debar representatives.
“FSPs may, subject to contract, terminate an agreement with the representative and key individual without debarring him/her, where the reason for the termination of the contract does not constitute grounds for debarment. Debarment proceedings should not be used for ulterior purposes,” the chairperson of the FST panel, MG Mashaba, said.
WesBank disbarred the representative, “MI”, on 3 April 2023, citing disciplinary hearing convictions and failure to meet the Fit and Proper Requirements.
However, after hearing MI’s application for reconsideration against WesBank’s decision, the FST ruled that the debarment was not justified.
Series of events
MI, employed by WesBank, worked at Tom Campher Motors in Aukland Park, a Volvo dealership, since 2018. Appointed as a financial and insurance marketer (F&I), he managed finance and insurance matters for customers on the dealership floor.
His duties included validating client documents, confirming customer income and affordability, performing “know your client” (KYC) procedures, giving final approval for invoicing by the respondent, and ensuring payout to the dealership for completed deals. The vehicle financier’s compliance department instructed MI that he could facilitate the sale of value-added products but that he could not provide financial advice.
The employee-employer relationship began to crumble, when – following a single transaction on 11 February 2022 – WesBank drafted a charge sheet against MI on 27 June 2022. Charge 1 was for refusing a legitimate instruction, and charge 2 was for dishonesty.
After the disciplinary hearing on 8 July 2022, MI was found guilty of all the charges, dismissed (on 26 July 2022), and subsequently debarred.
In settlement at the CCMA on 6 June 2023, WesBank agreed to remove MI from the Register of Employees Dishonesty System (REDS) database and withdraw its notice of intention to debar dated 29 August 2022. What was “bemusing”, Mashaba said, was that the 3 April 2023 debarment preceded the settlement.
“Furthermore, there is a paradox in the respondent’s case in that on the one hand it agreed to remove the applicant’s name from the REDS database by 13 June 2023 but yet debarred him for non-adherence to the principle of honesty, integrity and good standing,” Mashaba said.
Because the settlement agreement had been “overtaken by events”, the FST was required to determine, irrespective of the agreement, whether MI’s debarment was procedurally and substantially fair.
The nitty gritty
On 23 September 2021, WesBank told MI that all financial and insurance marketers had to be dually mandated when selling dealer value-added products, and the bank was conducting an exercise to enforce this requirement. Once MI provided the necessary documents, it was found that the dealership’s FAIS licence had lapsed since 7 September 2011. MI was promptly advised to halt the sale of dealer value-added products immediately until the dealership’s FSP licence was renewed.
During February 2022, an existing dealership customer traded in a vehicle and purchased a new one. The customer instructed MI to add the same value-added products to the new vehicle that were previously added to the one being traded in.
MI followed through with the customer’s request. However, WesBank’s Monitoring Centre of Excellence uncovered this transaction during a monitoring session on 8 March 2022. This led to the first charge: refusal to carry out a legitimate and fair instruction from a superior.
For charge 2, WesBank claimed that MI dishonestly continued to sign the dealer record of advice (ROA) using WesBank’s FSP number. He allegedly used WesBank’s FSP number for dealer products, even though WesBank was not the product owner.
WesBank accused MI of conducting sales, advising clients, and producing ROAs signed by him. This, WesBank argued, “inadvertently” allowed the dealership to present itself as an FSP when its licence was expired.
There were concerns raised about commission payments from insurance underwriters to the dealership and from the dealership to financial and insurance marketers. WesBank suggested that the use of its FSP licence number might have enabled this activity in the dealership’s agreements with insurance underwriters.
What is interesting to note is that while MI was found guilty of both charges following the disciplinary hearing, during the debarment proceedings the first charge was no longer about refusing to execute a legitimate, fair instruction. Instead, WesBank altered it to “do not meet and/or not comply with the requirements of section 13(2) of the FAIS Act, specifically, the Fit and Proper requirement of honesty and integrity in Board Notice 194 of 2017 because you are dishonest”.
However, during the disciplinary hearing, Mashaba noted, MI was never called upon to answer the charge of not meeting or complying with the Fit and Proper Requirements.
In his defence
MI testified that he discovered the dealership’s FAIS licence had expired in September 2011, seven years before he became the F&I manager in 2018. He argued that he only found out about the expired licence on 21 October 2021, after submitting documentation related to value-added products to the respondent. Therefore, he claimed, he could not be held responsible for insubordination because neither he nor WesBank (or the dealership) were aware of the expired licence.
MI stated that from October 2021 to March 2022, despite awareness of the lapsed licence by his line manager, compliance, risk administrator, and business assurance specialist for five months, there was no effort to guide or advise him on the correct processes or mitigate risks.
Regarding the second charge of dishonesty for signing the dealership’s ROA with WesBank’s FSP number, he asserted he was not aware that the FSP number belonged to WesBank and not the dealership.
According to MI, he simply printed the ROA – an automated document that still reflected WesBank’s FSP number – from the Signo system. He said he could not alter the record of advice and was, in any event, not permitted to change the record of advice.
He further claimed to have only facilitated the administrative process without making recommendations or offering advice, stating that salespeople provided customer information and product choices, and he finalised the documentation for submission to WesBank.
Analysis of the facts
In his ruling, Mashaba said the evidence presented to the Tribunal did not support the conclusion that MI gave advice to customers nor was there an element of dishonesty when MI assisted a returning customer to sign the ROA.
He added that the second charge of dishonesty was “contradictory” in that it states that MI “inadvertently” enabled the dealership to represent itself as an FSP.
“Inadvertently means without intention or accidentally. It, therefore, cannot be correct that the applicant acted dishonestly when the applicant, nor the respondent, was aware that the dealership’s FSP licence had lapsed nor that the FSP licence reflected in the documentation was that of the respondent and not the dealership,” Mashaba said.
Referencing the CCMA settlement agreement, Mashaba stated it was evident from the agreement that the debarment proceedings against the applicant were unnecessary and should not have been initiated in the first place.
“The application for reconsideration is granted and the applicant’s debarment is set aside,” Mashaba said.
I too as an sale consultant for the failure to meet the Fit and Proper Requirements later last year but after the fact I just realised that the sales manager went to far to get me derbarred, how do i go about it for my for count claims against the company too. I have proof
Many thanks to the FST for doing something about this, I once went through the same thing, where my FSP held my commission, unlawfully, against my will, and an absolute breach of contract, simple because I outperformed everyone in the region. When I started fighting for my money, they started investigating me claiming my business was fraudulent and whatsoever.
The matter was heard by the CCMA, and I was not pleased with their outcome because, they claimed they didn’t have jurisdiction to hear the matter and referred me to the Magistrate’s Court. I was not debarred because the allegations made against me were false.
My point is that, they brought up debarment when I started fighting for my labour rights.