Regular readers will know that I have expressed my frustrations in the past with people who approached the Financial Sector Tribunal for leniency despite being blatantly dishonest. A recent decision by the Tribunal had a different slant, but the same result.
A young man, after making a human error, followed the wrong path to try and rectify it, and then added to his woes, with the best of intentions, by going further down the slippery slope.
In brief: the applicant was approached by two clients to assist with the dematerialisation of their share certificates. This is a process by which share certificates are, in effect, replaced by electronic ones. He actually forgot to do so. Two years later, when the clients requested that he sells shares to generate R15 000, he was unable to do so, and paid the clients out of his own pocket.
Interestingly, in a number of appeals to the old FSB Appeal Board, the matter of sincere regret for misdemeanours were considered as strong grounds for mitigation. The lack thereof, obviously, would be treated as aggravating circumstances.
In the case under discussion, the appellant asked that the debarment be set aside for a number of reasons, based mainly on the fact that he had made a mistake, and every action taken by him was to rectify the mistake, and not to cause harm or loss to the clients.
The basis of the transgression is summarised as follows in the Tribunal determination:
- He failed to carry out instructions from his clients for more than a year.
- He lied to his clients and said that he had opened a share trading account when he had not done so.
- He created a fake/false bank statement, which apparently reflected the affairs of the non-existent share trading account.
- He paid the clients out of his own pocket/account to create the impression that the clients had a share trading account.
Applicable legal principles
The tribunal listed a number of considerations which had to borne in mind by the employer when deciding on the fate of its employee, including the following.
Section 14(1) of the FAIS Act provides that an authorised financial services provider must debar a person from rendering financial services who “(iv) has contravened or failed to comply with any provision of this Act in a material manner”.
The Supreme Court of Appeal has held in this regard in Financial Services Board v Barthram and Another 2018 (1) SA 139 (SCA} at para 15 that: “Section 13(2)(a) and (b}, as also section 14(1) and (2), are couched in peremptory terms. Failing compliance with those provisions, the FSP itself is liable to sanction.”
In terms of section 7(1) of Board Notice 194 of 2017 the fit and proper requirements relating to honesty, integrity and good standing apply to all FSPs, key individuals and representatives. At all relevant times the applicant was a representative of the FSP and as such these requirements applied to him.
The applicant did not deny and in fact he admitted that what he did was “completely wrong”:
“I know that my actions were unethical and completely wrong. It was done out of embarrassment and because I wanted to put the client in the best position possible.”
In his appeal, the respondent noted that he has lost everything – his job, his income, his clients, friends and colleagues. He further stated that he has not had an income or the ability to work for more than 12 months.
I was so embarrassed about my lack of service and I then proceeded to pay the client from my personal account. I NEVER wanted to get this money back and never wanted reimbursement from the client.
In dismissing the application for reconsideration, the Tribunal referred the applicant to the Guidance Note in terms of the FAIS Act, 37 of 2002, published on 18 December 2017, in respect of the reappointment of debarred representatives.
I would suggest that, in this instance, a strong case can be made for applying for reappointment in the industry.
Please click here to read the full Tribunal ruling.