West-Pro was dishonest about underwriting of funeral policies, tribunal finds

West-Pro was dishonest about underwriting of funeral policies, tribunal finds

The Financial Services Tribunal has upheld the debarment of West-Pro Holdings’ managing director and key individual for falsely claiming that the administrator’s funeral policies were underwritten by Old Mutual. It also upheld the FSCA’s decision to suspend West-Pro’s FSP licence.

In January 2020, the FSCA debarred Ernest Arendse for eight years for no longer satisfying the fit and proper requirements of honesty and integrity.

The FSCA suspended West-Pro’s licence in August 2020 because it no longer had an approved key individual and failed to comply with the FAIS Act by collecting premiums without a mandate from an insurer and failing to pay the premiums over to the underwriter.


Sebomai Cash Funeral Policies transferred its business to West-Pro on 1 June 2019. The agreements stated that Old Mutual would underwrite the funeral policies from that date.

Initially, claims were paid out within the agreed-upon 48 hours, but then there were delays.

At a meeting to discuss the delays, Sebomai’s team noticed that the agreement with West-Pro stated that the underwriter was African Unity Life, not Old Mutual. Arendse said this was a mistake and went to his office to fetch another contract reflecting Old Mutual as the underwriter. The updated contract was signed.

After a week passed without claims being paid, Sebomai’s key individual, JP van Vuuren, contacted Old Mutual, which told him its underwriting agreement with West-Pro ended from 31 May 2019. It provided the termination letter dated 23 April 2019.

In a letter to Sebomai on 4 July, Arendse confirmed the underwriting agreement with Old Mutual had ended on 31 May. He said TransAfrica had agreed to underwrite West-Pro’s business, but only from 1 July 2019.

Sebomai Cash Funeral Policies lodged a complaint with the FAIS Ombud, who referred the matter to the FSCA.

‘Procedural irregularities’

In his application for reconsideration, Arendse said he did not intentionally mispresent that African Unity Life and/or Old Mutual were the underwriters to Sebomai.

He also disputed the debarment on procedural grounds:

  • The debarment notice relied on grounds that were not included in the notice of intention to debar; and
  • The sanction was predetermined in the notice of intention to debar before his representations had been made and considered.

The tribunal agreed it was procedurally irregular for the FSCA to rely in the debarment notice on a ground not foreshadowed in its notice of intention to debar. This was because it had not provided Arendse with an opportunity to make representations in respect of that particular ground before the debarment decision was taken.

However, the tribunal said the FSCA, in the debarment notice, did not abandon its original grounds for debarment – namely, that Arendse no longer satisfied the fit and proper requirements due to misrepresentations and dishonesty surrounding the conclusion of the Sebomai agreement and his dealings and conduct arising therefrom.

The tribunal said the argument that the sanction had been arrived at in a procedurally unfair manner was “directly inconsistent” with section 154 of the Financial Sector Regulation Act.

“It was necessary for compliance with procedural fairness that, in addition to notifying Mr Arendse of the intention to debar him and the intended grounds thereof, he should also have been notified of the proposed sanction so that he could address these in his representations and provide any mitigating information,” the tribunal said.

‘Once-off incident’

Arendse contended that his conduct did not warrant debarment because his transgression was “a once-off incident”, and the FSCA had to establish that “the incident/s occurred over a long period of time and that there were numerous repeated similar incidences. In other words, the incidences complained of created a pattern. There is no such evidence that this once-off incident was repeated and/or that it created a pattern over any period of time.”

To support his argument, Arendse referred to the decision of the Financial Services Board of Appeal in Hamilton Smith & Company vs the Registrar of Financial Markets (2003).

But the tribunal said Hamilton Smith & Company did not apply in Arendse’s case. The question before the appeal board had been whether the appellant was of “good character” and in arriving at an answer it had to examine whether or not, based on the evidence, it could be inferred that the appellant was of good character.

The tribunal said the different versions presented by Arendse in the documents before the tribunal was “dishonest”, and his version of events was “not supported by the objective evidence available”.

Sebomai kept in the dark

The tribunal said Arendse had known by 1 June 2019 that Sebomai’s previous underwriting agreement was of no force and effect and therefore from that date Sebomai’s claims were not underwritten. He also knew that: Old Mutual had terminated its agreement with West-Pro; African Unity Life’s agreement with West Pro had been cancelled in 2018; and no agreement had been secured with TransAfrica.

However, he had not alerted Sebomai to the fact that it was not being underwritten by a long-term insurer. “Instead, Mr Arendse allowed Sebomai to harbour that it was being underwritten by Old Mutual through West-Pro for the months of June 2019 and July 2019. These are not the ways of a frank, forthright and honest individual.”

In his amended application for reconsideration, Arendse said it had always been West-Pro’s intention for TransAfrica to underwrite Sebomai from 1 June 2019 once due diligence and verification was concluded.

However, when TransAfrica had not completed its due diligence and verification process by 1 June 2019 or even by 1 July 2019, Mr Arendse knew no agreement underwriting Sebomai was in place, the tribunal said.

“What Mr Arendse says was his intention is of no consequence, what is of consequence is the outward manifestation of the intention. What manifests is the concealment from Sebomai that TransAfrica had not underwritten Sebomai.”

The tribunal said although Arendse knew by 9 July 2019 that TransAfrica had refused to underwrite Sebomai, there is no evidence that he informed Sebomai of this promptly.

The tribunal dismissed Arendse’s application for his debarment to be reconsidered.

It also dismissed West-Pro’s appeal against the suspension of its licence, because Arendse was its key individual, and no one else had been approved to replace him.


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