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THE FINANCIAL SERVICES TRIBUNAL

 

Case Number: FSP47/2023

 

 

In the matter between:

 

MICHAEL IAN WHITE                                              Applicant

 

and

 

LIBERTY GROUP LIMITED                                      Respondent

 

 

For the Applicant:                         The Applicant appears in person

on the documents filed of record;

 

For the Respondent:                    Mr Jaco Louw on the documents filed of record.

 

Date of Decision:                         6 December 2023.

 

Summary: Application for reconsideration – Debarment is justified in circumstances where the misconduct is serious enough to impugn one’s character traits of “honesty and integrity.”

 

 

DECISION

 

 

1.       The Applicant, Mr Michael Ian White, approached this Tribunal in terms of section 230 of the Financial Sector Regulation Act 9 of 2017 (“the FSR Act”), challenging the decision of the Respondent, dated 12 September 2023, to debar him (“the application”).

 

2.       The Respondent, Liberty Group Limited is an authorised Financial Services Provider (“FSP”) and the decision maker in this matter.

 

3.       The parties have waived their right to a formal hearing and the matter will be decided on the papers and submissions filed of record.

 

RELEVANT BACKGROUND FACTS AND CHRONOLOGY OF EVENTS

 

4.       The Applicant was employed by the Respondent from 1 August 2020 to 3 February 2023, when he resigned his position as a Financial Adviser. By virtue of his role as Financial Adviser he was also a representative in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002 (“the FAIS Act”).

 

5.       On 12 September 2023 the Respondent debarred the Applicant.

 

Respondent’s Version

 

6.       Upon receipt of two complaints, the Respondent’s forensic department investigated the allegations levelled against that the Applicant, that he processed and/or altered two policies without the knowledge or consent of the two respective clients.

 

7.       The Forensic Report dated 22 August 2023 (“the Forensic Report”), indicates that on 21 August 2023 the Respondent’s forensic department contacted the Applicant to afford him an opportunity to respond to their findings and the Applicant elected to waive his right of reply thereto.

 

8.       Accordingly, the findings of the Respondent’s forensic department resulted in the Respondent issuing and serving a “Notice of Formal Inquiry: Documentary Process” dated 24 August 2023 (“Notice of Formal Inquiry”) upon the Applicant, wherein the following two charges were levelled against the Applicant:-

 

“Allegation 1: Gross Dishonesty

 

That during 2022 and 2023 you intentionally made misrepresentations to Liberty, its staff and or its clients and or potential clients by initiating new insurance policies and or amending existing insurance policies for the clients and or potential clients as listed below, without these clients and or potential client’s knowledge or consent and by submitting fraudulent information and by manipulating the electronic signature and debit order system. The purposes of your actions were solely to generate fraudulent commission payments to yourself and in fact payment of R18 567 (Eighteen Thousand Five Hundred and sixty seven Rand) were paid to you of which R11972.00 (Eleven Thousand Nine Hundred and seventy two Rand) is still owed to Liberty.

 

…

“Allegation 2: Non-Compliance with the Provisions of the Liberty Group Financial Adviser Agreement: Breach of Contract:

In that you failed to comply with your Liberty Group contractual responsibilities as set out in your Financial Adviser agreement entered into in July 2020 attached hereto which requires you to act in Liberty’s best interest at all times (see clause 3.1) This agreement also requires you to abide by all laws including the FAIS Act (see 3.2) which requires you to render financial services honestly and fairly at all times. Both clients complained to Liberty as a result of your dishonest action and you failed to render financial service honestly and fairly at all times…”

 

Applicant’s version

 

9.       On 25 August 2023, in response to the Notice of Formal Inquiry, the Applicant addressed an email to the Respondent wherein he admitted to perpetrating both acts of dishonesty and that his conduct was wrongful, by stating that,

 

“In response to the allegations, I accept that I made those mistakes and I take full responsibility for them. It was an utterly idiotic call from my part and I am deeply regretful and I am very sorry. I did reverse the risk policy… …Please could I repay the commission back to Liberty so that we can settle the case? As well as any monies that were layed out by Liberty when refunding the client… …I humbly apologies to Liberty and to the 2 clients for my wrongdoing, I have learned an invaluable lesson about the consequences of my actions and the responsibility I had to my clients…”

 

THE DEBARMENT ENQUIRY

 

10.   In terms of the Respondent’s “Guidelines for Corrective Action and Debarments”, “The Liberty initiator will have the option, at his or her sole discretion, to elect for a direct process or a documentary inquiry… …The procedure for a documentary inquiry shall constitute a process for the exchange of documents only…”

 

11.   The records before the Tribunal indicate that the Applicant resigned on 3 February 2023, before disciplinary action could be implemented against him.

 

12.   The records reflect further that the Respondent embarked on a documentary debarment enquiry process, whereby all the relevant documentation were provided to the Applicant, i.e. the charge sheet, the written statements by the two clients, supporting documentation and the Forensic Report, by attaching such documentation to the Notice of Formal Inquiry in order to enable the Applicant to make written representations.

 

13.   The records reflect further that the Notice of Formal Inquiry duly informed the Applicant that he was afforded a period of five days, after the delivery of the Notice of Formal Inquiry, within which to submit his written representations.

 

14.   As previously mentioned, on 25 August 2023 the Applicant addressed an email to the Respondent wherein he admitted to perpetrating both acts of dishonesty and that his conduct was wrongful.

 

15.   The records reflect further that the Adjudicator that was appointed by the Respondent to chair the debarment enquiry considered the charges as well as the written representations made by the Applicant and Respondent in her deliberations, as reflected in the Adjudicator’s Report dated 30 August 2023 wherein it was found, inter alia, that, “The Financial Adviser’s actions were of a fraudulent nature as well as in breach of his contract and his dishonesty, misrepresentation and fraudulent actions are in direct breach of his fiduciary duty as a financial adviser in the industry.”

 

16.   Thereafter, the Respondent’s Executive Management decided that the appropriate sanction was the debarment of the Applicant, which decision was communicated to the Applicant by a Notice of Debarment dated 12 September 2023 that was delivered to the Applicant by way of email on 12 September 2023 (“the Notice of Debarment”).

 

17.   The Notice of Debarment duly informed the Applicant that he may approach the offices of the Financial Services Tribunal should he feel aggrieved by the debarment.

 

GROUNDS OF RECONSIDERATION

 

18.   The Applicant attacks his debarment on a procedural ground, namely that he was not given an adequate opportunity to respond to the findings of the Respondent’s forensic department when he was contacted by the investigator on 21 August 2023.

 

LEGAL FRAMEWORK AND ANALYSIS

 

19.   The FAIS Act, read with, amongst other things, the General Code of Conduct and the Determination of Fit and Proper Requirements, 2017 (“the Fit and Proper Requirements”), regulate the conduct of FSPs, key individuals and representatives.

 

20.   Section 2 of the General Code of Conduct states that an FSP must at all times render financial services honestly, fairly, and with due skill, care, and diligence in the interests of clients and the integrity of the financial services industry.

 

21.   Section 8(1), read with section 7(1) of the Fit and Proper Requirements, states, amongst other things, that the representative must be a person who is (i) honest and has integrity and (ii) of good standing.

 

22.   FSPs must ensure that their representatives and key individuals are fit and proper persons to be entrusted with providing financial advice to the investing public and thus FSPs are charged with a duty to take reasonable steps to ensure that representatives comply with any applicable code of conduct and applicable laws in the conduct of business.[1]

 

23.   Accordingly, if it is found that a representative has committed an act of dishonesty sufficiently serious to impugn the honesty and integrity of the representative, the FSP must ensure that the representative is debarred in terms of section 14(1) of the FAIS Act.

 

Procedural aspect

 

24.   In respect of debarment processes, section 14(2)(a) of the FAIS Act requires that before effecting a debarment, the provider must ensure that the debarment process is lawful, reasonable, and procedurally fair.

 

25.   The records before the Tribunal indicate that all the relevant documentation, i.e. the charge sheet, the written statements by the two clients, the supporting documentation and the Forensic Report, were all made available to the Applicant at the initial stages of the debarment process.

 

26.   As previously mentioned, the Notice of Formal Inquiry invited the Applicant to make written representations to challenge the allegations levelled against him, and in response thereto, on 25 August 2023 the Applicant admitted to perpetrating both acts of dishonesty and that his conduct was wrongful.

 

27.   There is thus no merit in his complaint that he was not given an adequate opportunity to respond to the findings of the Respondent’s forensic department when he was contacted by the investigator on 21 August 2023. In his present application he again dealt with his side of the facts in detail, and it does not differ from or add to the facts that he had stated in his written representations that were considered by the Respondent’s Adjudicator when concluding that the Applicant was no longer a fit and proper person to act as FSR.

 

CONCLUSION

 

28.   It is the view of the Tribunal that the Applicant did commit serious misconduct, which misconduct impugns his character of honesty and integrity[2]. There is no question about the Applicant’s guilt. The Tribunal is therefore of the view that on the merits the debarment was warranted and justified.

 

29.   As previously stated, the debarment process involving the Applicant was procedurally fair and was justified on the merits. The Applicant was afforded a fair opportunity to make representations during the debarment enquiry, accordingly, the Tribunal cannot find any basis for the grounds of reconsideration, which grounds cannot be sustained.

 

30.   In the circumstances, 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 behalf of the Tribunal on 6 December 2023.

 

 

Adv M. Holland & LTC Harms (Chair)

 

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