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THE FINANCIAL SERVICES TRIBUNAL

 

Case No: FSP45/2023

 

In the matter between:

 

SEHLOTJI ABRAM MATHABATHA                                APPLICANT

 

and

 

DISCOVERY CONNECT DISTRIBUTION SERVICES

LIMITED (DCDS)                                                             RESPONDENT

 

Summary: Fairness of Debarment

 

 

DECISION

 

 

A.     INTRODUCTION

 

1.       The Applicant brings this application in terms of Section 230 of the Financial Sector Regulation Act 9 of 2017 ("the FSR Act").

 

2.       The Respondent is a registered Financial Services Provider as contemplated in the Financial Advisory and Intermediary Act 37 of 2002 ("FAIS Act").

 

3.       The parties have agreed that this matter can be decided on the papers filed, and this is that decision.

 

B.     THE FACTS

 

4.       The Respondent employed the Applicant as a representative.

 

5.       While the Respondent still employed the Applicant, it initiated an investigation into "suspected unethical behaviour pertaining to the manipulation of client risk profiles related to their driver's licence type and excess amounts based in the activated premiums".

 

6.       At the inception of this investigation, the Respondent sent a communication to all its representatives, the gravamen of which was that they should identify any discrepancies with regard to client's risk profiles and immediately bring this to the attention of the Respondent. The Applicant failed to communicate any discrepancies to the Respondent during this period or at any other time.

 

7.       The outcome of the investigation revealed inter alia that:

 

7.1    The Applicant had manipulated a total of 105 quotes and sales.

7.2    The Applicant had manipulated driver's licence type and excess amounts on the system to reduce clients' premiums from July 2022 to November 2022.

7.3    The Applicant's misconduct led to reduced premiums and incorrect risk profiles being allocated to client profiles.

7.4    In the most egregious instance, the Applicant reduced a client's premium by 77% of the premium that should have been charged. The effect of this manipulation could have resulted in the repudiation of claims and significant reputational risk to the Respondent.

 

8.       Following the outcome of the investigation, the Applicant was suspended, and the Respondent instituted debarment proceedings in relation to the Applicant's apparent failure to maintain his FAIS fit and proper requirements in terms of honesty and integrity. In this regard, the Applicant was served with a notice of intention to debar (including the Respondent's relevant policies), a notice to attend a hearing and a copy of the investigation report on 22 November 2022. The Applicant resigned in December 2022. Despite this resignation, the Respondent continued with the debarment proceedings.

 

9.       The Respondent held a hearing in accordance with its debarment policy and process. The Applicant was afforded ample opportunity to present his evidence at the hearing, and the chairperson afforded him two postponements to collect and present his evidence. The chairperson ultimately recommended that the Respondent debar the Applicant.

 

10.   The Applicant challenges the decision of the chairperson on the basis that the chairperson inter alia:

 

10.1     Failed to conduct a fair hearing in that he was not "invested in finding out the truth".

10.2     Failed to consider the totality of the evidence and concentrated only on 4 out of the 105 quotes.

10.3     "Consistently made-up dates and figures to mislead the FSCA".

10.4     Had an "agenda to push" and was going to find the Applicant guilty at all costs.

 

11.   The Respondent opposes this application for reconsideration on the basis that:

 

11.1     The chairperson made his decision based on the information and evidence presented by the Applicant and the Respondent at the hearing.

11.2     All of the evidence to be led by the Respondent at the hearing was provided to the Applicant when he was served with the notice of intention to debar.

11.3     The Applicant's rights to call witnesses and challenge the Respondent's intention to debar were fully set out in the Respondent's debarment policy, which had been provided to the Applicant.

11.4     Furthermore, the debarment policy indicated that the Respondent was required to commence debarment proceedings as soon as the jurisdictional facts were established, requiring it to do so.

 

12.   In short, the Respondent maintains that it had a duty in terms of section 14(1) of the FAIS Act to debar the Applicant when it became apparent that he no longer complied with the fit and proper requirements as set out in the FAIS Act or had breached any material provisions of the aforesaid Act. His resignation did not affect this obligation.

 

C.     LEGAL FRAMEWORK

 

13.   Section 14(1)(a) of the FAIS Act provides the following:

 

"14. Debarment of representatives – (1)(a) An authorised financial services provider must debar a person from rendering financial services who is or was, as the case may be –

(i)      a representative of the financial services provider; or

(ii)     a key individual of such representative,

if the financial services provider is satisfied on the basis of available facts and information that the person –

(iii)   does not meet, or no longer complies with, the requirements referred to in section 13(2)(a); or

(iv)   has contravened or failed to comply with any provision of this Act in a material manner." (Emphasis added)

 

14.   Section 13(2)(a) of the FAIS Act provides that an authorised financial services provider must at all times be satisfied that the provider's representatives, and the key individuals of such representative, are, when rendering a financial service on behalf of the provider, competent to act, and comply with (i) the fit and proper requirements; and (ii) any other requirements contemplated in subsection 1(b)(ii).

 

15.   Section 13(1)(b)(iA) of the FAIS Act provides that a person may not act as a representative of an authorised financial services provider, unless such person meets the fit and proper requirements.

 

16.   In terms of section 6A(2)(a) of the FAIS Act, fit and proper requirements include, inter alia, appropriate standards relating to personal character qualities of honesty and integrity.

 

17.   Section 14(3)(a) provides that a financial services provider must, before debarring a person:

 

17.1     give adequate notice in writing to the person stating its intention to debar the person, the grounds and reasons for the debarment and any

terms attached to the debarment, including, in relation to unconcluded business, any measures stipulated for the protection of the interests of clients;

17.2     provide the person with a copy of the financial services provider's written policy and procedure governing the debarment process; and

17.3     give the person a reasonable opportunity to make a submission in response.

 

18.   Section 14(3)(c) provides that the financial services provider must immediately notify the person in writing of:

 

18.1     its decision;

18.2     the person's rights in terms of Chapter 15 of the FSR Act; and

18.3     any formal requirements in respect of proceedings for the reconsideration of the decision by the Tribunal.

 

D.     DISCUSSION

 

19.   It is unclear what substantive evidence the Applicant wants the Tribunal to consider in this application. He has not seriously challenged the investigation's merits and the debarment process's outcome. Instead, he has challenged the decision to debar him because it was procedurally unfair, and he appears to attack the integrity of the independent chairperson. From the record filed, it would appear that the Respondent conducted the process in terms of its policy and that the Applicant was afforded all of the required opportunities to challenge the evidence against him. He failed to do so. In the circumstances, I consider the process to have been conducted fairly.

 

20.   The evidence shows that the Applicant manipulated policy information to reduce client premiums. This is dishonest and obviously offends the fit and proper requirements with regard to honesty and integrity.

 

21.   In the premises, the Tribunal can find no grounds to interfere with the Respondent's decision to debar the Applicant.

 

ORDER: The application for reconsideration is dismissed.

 

 

Signed on 9 October 2023

 

PJV Veldhuizen (member)

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