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FAIS-Ombud-Settlements

Withdrawal of debarment by FSP – Tribunal consent poses questions

“Unless debarment procedures are fair, reasonable and lawful, decisions taken to debar persons can be, and will be, overturned on technical grounds following an application to the Tribunal to reconsider any such decision”, Alan Holton shared last year. His comment was related to the changes in the debarment process, following the replacement of the entire section of the regulations relating to debarments.

In the last few months the Financial Services Tribunal issued a number of rulings, instructing FSPs to reconsider their decisions to debar in the light of appeals against failure by the FSP to follow the prescribed process.

What were the changes in the debarment process?

On 1 April 2018, the debarment process under the FAIS Act was amended by the FSR Act 9 of 2017. In terms of section 14(3) of the FAIS Act, a FSP must, before debarring a person, take specific steps. The amended legislation definitely ensures reduced scope for abuse, with clear guidelines and a channel for appeals.

In terms of section 39 of the FAIS Act any person aggrieved by a decision of an FSP, including electing to debar a person in terms of section 14, may now also apply for the reconsideration of the decision to the Financial Services Tribunal.

Of particular significance is the ruling that due process should be followed, particularly as far as the debarment hearing is concerned. It was also noted that a disciplinary hearing could not be used to effect the debarment. That has to be a different process.

This, of course, is very difficult when the representative concerned elects to resign when informed of the pending hearing, notice of which should be given well in advance.

Debarment appeals increased

As a result of the fact that a representative now has a right to appeal against a debarment decision, led to an increase in debarment cases that reached the Tribunal over the last few months.

In many of these cases the matter was remitted back to the FSP for further consideration based on the fact that the FSP failed to comply with section 14 of the FAIS Act and in so doing failed to ensure that the debarment process was lawful, reasonable and procedurally fair. Click here read the Moonstone article titled Tribunal Debarment decisions – Why the increase?

Consent order for reconsideration application

In the latest case related to debarments, an application by a representative for a review of the decision to debar him was upheld, and the FSP agreed to withdraw the debarment.

The De Meyer case made the media last year when he resigned from his employer to join an independent broking house. The FSP then filed an urgent application in the Johannesburg High Court in September 2018, asking the court to prohibit the adviser from “contacting, enticing or soliciting away” any of the clients listed in five annexures accompanying its notice of motion. The annexures contained detailed personal information of some 1 000 clients. The court refused to entertain the employer’s application.

Unfortunately, the consent order signed by all three parties does not provide any detail as to how they arrived at consensus. What is clear, though, is that the new section 14 is going to result in a fairer outcome for representatives, and a lot more red tape for employers.

We are aware of one case where the rep actually admitted guilt, yet the FSP was ordered to redo the whole process.

Pity, too, the poor Tribunal, who has to hear cases where transgressors, in what has become the norm, regard themselves as being above the law.

Click here to access the Financial Service Tribunal Decisions.

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