THE FINANCIAL SERVICES TRIBUNAL

Case Number: FSP1/2023

In the matter between:

NICOLE LOUISE CAPLE	Applicant

and

 SCOTT-KOHLER CC t/a RISK SURE INSURANCE 
BROKERS	First Respondent

THE FINANCIAL SECTOR CONDUCT AUTHORITY	Second Respondent

Tribunal Panel: 	L. T. C. Harms ; Mahabeer SC

For the applicant: 	Theyagaraj Chetty Attorneys

For the first respondent: 	Scott-Kohler CC t/a Risk Sure Insurance Brokers

Summary: Reconsideration of decision to debar

DECISION

1.	The applicant applies for reconsideration of the decision by the first respondent ("Risk Sure") to debar her. The application is made in terms of section 230(1) of the Financial Services Regulatory Act, 2017.

2.	 The parties waived their right to a hearing. This is the decision of the Tribunal.

THE FACTS

3.	On 8 October 2019, the applicant was employed by Risk Sure, a Financial Services Provider ("FSP'') as a Personal Lines Representative. A written contract was concluded between the parties.

4.	Material to the dispute are the following terms of the employment contract as captured in a letter of appointment:-

"14.  CONFIDENT/Al/TY: 
All information of a confidential nature acquired by you in the course of your employment with the FSP shall not be disclosed to any person/company/organisation/competitor during or after termination of such employment. 'Confidential information' shall be deemed to include but not limited to:-
(a)	the FSP's documents, trade secrets, products, new developments, business methods, strategies and technologies;
(b)	the identity of the FSP's clients and/or customers

15.   PROTECTION OF INFORMATION SYSTEMS:
You hereby confirm that you understand the FSP's email and internet policy, and agree to abide by this policy. A copy of this policy is available from your immediate manager".

5.	 On 26 August 2022, the applicant submitted a letter of resignation to the members of Risk Sure, wherein she stated:-

"I herewith tender my resignation my last working day to be 23rd September. I have been offered a position that is financially worthwhile and in the current economical climate we find ourselves, I need to do this for my family. I would like to thank Risksure (sic) for the opportunity to re-enter the insurance industry and wish you every success in the future".

6.	Later that same day, the members of Risk Sure replied as follows:-

"John and I accept your resignation.

We have discussed the matter and see no necessity for you to work in your month's notice-it would simply be counter-productive being that you have made a decision to depart. Your September commission will be paid to you on the 30th of September, once we receive your spreadsheet and have had the opportunity to reconcile what commission Risk Sure has received.

We therefore ask that you hand your laptop and office key to Katelyn at 3.00 p.m. at which time you may leave the premises with your personal belongings. Should we need to further discuss any aspect of this matter with you we will duly make the necessary contact.

We wish you well in your future endeavours".

7.	The applicant handed in her work laptop computer, also on the same day.

7.	 On 31 August 2022, Risk Sure served on the applicant via email a Notice of Intention to Debar in terms of section 14(1) of the Financial Advisory and Intermediary Services Act, 2002 {the "FAIS"). The notice states:-

"On behalf  of Scott-Kohler CC t/a  Risk Sure Insurance Brokers (hereinafter referred to as the FSP), I hereby, in my capacity of Key Individual, notify you of the intention to debar you for actions and inactions taken by you during your employ with the FSP, bearing in mind that you are still employed by the FSP until the 23rd of September in accordance with your resignation albeit you have not been required to work in your notice period.

We have sufficient evidence to hand to prove that you have acted without honesty or integrity towards the FSP and its clients, that you have violated not only our trust, and internal processes and procedures but also breached POP/A by sharing clients' information with SW Insurance Brokers without due authority from clients.

We invite you to meet with us to discuss so that we may provide you with the evidence aforementioned. Should we not hear back from you within the next 48 hours, we will duly go ahead with the debarment, providing such evidence to the Authority for a full investigation".

8.	Later that afternoon, Risk Sure forwarded to the applicant its Debarment Policy and Procedure Manual.

9.	On 2 November 2022, Risk Sure sent a further notice to the applicant, specifying three grounds for the proposed debarment:-

 "FIRST GROUND FOR DEBARMENT:

In terms of section 14{1}{iv) of the FAIS Act you have contravened or failed to comply with section 3{3) of the Code of Conduct in a material way. {A provider may not disclose any confidential information acquired orobtained from a client or, subject to section 4(1), a product supplier in regard to such client or supplier, unless the written consent of the client or product supplier, as the case may be, has been obtained beforehand or disclosure of the information is required in the public interest or any law).

Reason: You wilfully disclosed confidential client information to another FSP without prior written consent from the client.

SECOND GROUND FOR DEBARMENT

In terms of section 14{1}{iii) of the FAIS Act, you do not meet, or no longer comply with, the honesty and the integrity requirements of section 8{1)(a) of the determination of fit and proper requirements. Reason:

1.	Filching of company documents (including):-
(a)  All actions taken by you reflect a total disregard for the principles of honesty and integrity;
(b)  On the 25th and 26th August, whilst in the employ of Scott­ Kohler CC, you illegally filched/extracted from the FSP's network intellectual property owned by the FSP and then deleted evidence of such believing it would be undetected. Your intentions were self-serving and they demonstrate lack of honesty and integrity which is the foundation upon which our industry is built;
(c)  Your conduct on the 30th and 31st August, whilst we considered you to be on Garden leave, and prior to your new Employment contract taking effect, you submitted confidential client information of clients whose portfolios remained under the licence of FSP 10868 to SW Brokers. The dishonesty and lack of integrity of your actions clear (sic) and renders you a danger to the FSP's clients and the industry at large. Any verbal discussion that took place with any client certainly does not qualify under POP/A but more importantly, given the dates of the transactions, being 30th and 31st August, your new employment contract (which was later withdrawn by SW Brokers on recommendation from the FSP's Compliance Officer) placed you in the position of sharing such information outside of such employment contract, whilst you remain under our FSP licence.

THIRD GROUND FOR DEBARMENT: 

As per section 153(1)(c) of the Financial Sector Regulation Act ... which provides for debarment by the FSCA: 

By your actions you have attempted or conspired with, aided, abetted, induced, incited or procured another person to contravene a financial sector law in a material way ...

Reason: You provided filched (illegally obtained) confidential company owned information, without any expressed written permission from the client SW Brokers. By procuring the services of SW Brokers to use such unauthorised documents, you induced SW Brokers into contravening a financial sector law. You wilfully disclosed confidential client information to another FSP without written authority from the respective clients and the responding FSP, namely SW Brokers duly accepted such in advance of your employment contract signed with them signed 1-9-2022 and shared such confidential client information with an insurer, namely ONE, thereby causing both contravene a financial sector law.

OPPORTUNITY TO RESPOND: 

You are invited to make a submission in response to these allegations either in writing or orally.

Such submission is to be received by our offices by close of business on Thursday the 10th November 2022, following which we shall consider any such response and take a final decision".

The Debarment Policy and Procedure Manual was once again shared by Risk Sure with the applicant.

10.	The applicant timeously made written submissions.

11.	Risk Sure proceeded with the debarment, which debarment was noted by the second respondent on 14 December 2022. The debarment triggered the present application.

THE GROUNDS FOR THE APPLICATION TO RECONSIDER

12.	The applicant challenges the decision to debar her on the basis that her employment with Risk Sure was terminated with immediate effect, by mutual consent, on 26 August 2022, and so whatever happened or was discovered by Risk Sure thereafter did not constitute grounds for debarment in terms of the Risk Sure Debarment Policy and the FAIS Act. As will be seen, this is the mainstay to the applicant's case.

13.	The applicant contends that the debarment process was not lawful, reasonable and procedurally fair.

14.	In response to the allegation that the applicant had extracted confidential client information in order to transfer their business to her new employer, the applicant provided eight documents purportedly constituting consent from the clients for the applicant to share their information. These documents are either undated or dated 6 or 7 September 2022. The applicant submits in her application that:-

"31.  It is correct that the applicant after her employment was terminated contacted the clients on the 29 August 2022 and with their permission/oral consent provided the clients' details to SW Brokers. The applicant has since obtained written consents from all the clients concerned and submitted the written consents to the first respondent ...".

15.	With regard to the transfer of confidential information from the work laptop computer, the applicant submits that she always utilised her personal email (gmail) account. She does not contradict evidence of the extraction and transfer of client information which was produced by the applicant but complains that the search of her personal email account was unlawful.

16.	Finally, the applicant complains that no hearing took place and that an independent adjudicator ought to have determined the debarment.

LEGAL FRAMEWORK

17.	
17.1	As mentioned, Risk Sure's decision to debar the applicant is founded in FAIS.

17.2	Section 2 of the General Code of Conduct published in terms of FAIS requires a financial services provider at all times to 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.

17.3	Section 8(1) read with section 7(1) of the Determination of Fit and Proper Requirements for Financial Service Providers and their representatives, 2017 states among other things that the representative must be a person who:-

17.3.1	has personal character qualities of honesty and integrity;

17.3.2	is in good standing;

17.3.3	is competent;

17.3.4	continues professional development;

17.3.5	has operational ability;

17.3.6	has financial soundness.

18.	It is significant to note that in terms of the FAIS:-

18.1	a "representative" is "any person, including a person employed or mandated by the first mentioned person, who renders a financial service to a client for or on behalf of a financial services provider, in terms of conditions of employment orany other mandate ...";

18.2	the debarment process is provided for under section 14 of the Act and, inter alia, an authorised services provider must debar a person from rendering financial services who inter a/ia has contravened or failed to comply with any provision of the Act in a material manner;

18.3	the debarment process additionally requires adequate notice in writing to the person stating the 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 and must further give the person a reasonable opportunity to make a submission in response.

ANALYSIS

19.	Regarding the procedural fairness and correctness of the debarment:-

19.1	We accept on the facts that the applicant was invited to meet with the representatives/members of Risk Sure and did not do so.

19.2	 Both of the Risk Sure emails dated 31 August 2022 recorded invitations for the applicant to meet with them to "offer her an opportunity to explain and respond before taking action".

19.3	The second Notice of Intention to Debar set out the third invitation for the applicant to advance written or oral submissions.

19.4	The notices comply with section 14 of FAIS and accordingly, the ground that the debarment process was undertaken in a procedurally flawed manner is incorrect.

19.5	The next attack against the debarment process is that Risk Sure as the aggrieved FSP ought not to have determined the debarment. The applicant raises this belatedly in her application and provides no substance to the argument. In our view, nothing sinister, irregular or improper arises from the decision being made by Risk Sure - indeed, it complies fully with the FAIS Act.

19.6	We conclude that the debarment process followed by Risk Sure was correct and fair.

20.	.

20.1	Turning to the merits, the applicant argues strenuously that her employment with Risk Sure was terminated with immediate effect on 26 August 2022.

20.2	On a plain reading of the resignation letter and the reply from Risk Sure it is self-evident that it was agreed by both parties that the applicant would continue being employed by Risk Sure until 23 September 2022, the date nominated by the applicant. Risk Sure accepted this in the tender of commission for the month of September being paid at the end of that month and in the notice of intention to debar dated 31 August 2022. Why then the applicant would be entitled to receive commission when her employment with Risk Sure had ended a month earlier is not explained. The only conclusion to be drawn therefore is that the applicant accepted the tender as a consequence of remaining employed by Risk Sure until 23 September 2022.

20.3	Once it is accepted that the applicant's employment with Risk Sure continued until 23 September 2022, the argument that she was entitled to disclose information to the prospective new employer (SW Brokers) before that date is unsustainable. The applicant, in providing Risk Sure client information to a competitor (SW Brokers) whilst still employed by Risk Sure, breached the express written terms of the contract of employment. This is relevant to the present enquiry because between August and the first week in September the actions of the applicant, a representative under the FAIS, caused Risk Sure clients to consent to activities which were impermissible in law. This is a material breach of her obligations in terms of the Act.

20.4	Next is whether the applicant conducted herself in a grossly dishonest manner or failed to show integrity and competence in extracting the client information and other systems through her use of the work laptop computer, and whether this amounts to a failure
 to adhere to the Determination of Fit and Proper Requirements as required of a representative under the FAIS Act.

20.5	The Determination of the Fit and Proper Requirements are central to the standard to which representatives of an FSP are held. We find that the applicant's conduct in soliciting existing business from Risk Sure to introduce to her new employer and in accessing confidential client information held by Risk Sure in order to further her own interests through SW Brokers evidence a lack of honesty and integrity. These qualities, as alluded to, are imperative to the financial services industry. The applicant thus breached the General Code of Conduct and the Determination of Fit and Proper Requirements as contemplated under the FAIS.

20.6	Finally, the applicant's complaint that the evidence of improper conduct was uncovered through an unlawful search of her private email account overlooks the reality that the account was the one she chose to use on her work laptop and as the account in the course and scope of employment, and that the information that the employer accessed was not personal or confidential. She knew, when she handed the laptop to her employer, that the employer could and would access the information on the computer. The search was, accordingly, not unlawful and a natural consequence of her own actions.

21.	We find in all the circumstances the grounds for the debarment to be unassailable.

22.	 Accordingly, the application for reconsideration must be dismissed.

ORDER

23.	The application for reconsideration is dismissed.

L. T. C. Harms 
Mahabeer SC
(on behalf of the panel)

24 April 2023