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SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

THE FINANCIAL SERVICES TRIBUNAL

 

Case N2: FSP4/2023

 

 

In the matter between:

 

KARABO FREDDY SIMON THOLO                                     Applicant

 

and

 

OLD MUTUAL LIFE ASSURANCE COMPAY (SA) LTD       Respondent

 

 

Summary: Sec 14 of the Financial Advisory and Intermediary Services Act 37 of 2002 - Debarment process - Sec 14(2)(a) - the process must be lawful, reasonable and procedural fair - sec 14(3)(a)(i) - Adequate notice to debar stating grounds and reasons - Failure to comply - no reasons or facts on notice of intention to debar

 

 

DECISION

 

 

INTRODUCTION

 

1.          The Applicant, Karabo Freddy Simon Tholo, applies for reconsideration of a decision to debar him by Old Mutual Life Assurance Company (SA) Limited, the Respondent, taken on 30 September 2022 ("the Debarment Decision"). This application is based on section 230 of the Financial Sector Regulation Act, 9 of 2017 ("the FSR Act").

 

2.          The debarment of the Applicant is premised on section 14 of the Financial Advisory and Intermediary Services Act, 37 of 2002 ("the FAIS Act").

 

3.          The decision of the Respondent is based on the grounds of lack of honesty, integrity and good standing. The synopsis of the facts as

 obtained from the record, is that the Applicant was found guilty of misconduct in a disciplinary enquiry and the charges relate to unauthorised five new policies and disputed signatures on those policies.

 

4.          The parties waived their right to formal oral hearing by the Tribunal and agreed that the matter be decided on documents submitted.

BACKGROUND

 

Disciplinary Enquiry

 

5.          The Applicant was employed by the Respondent as a financial advisor on 1 September 2015 and his position was subject to the provisions of the FAIS Act. He remained in the employ of the Respondent till the termination of his employment on or about 18 August 2022.

 

6.          On or about 15 July 2022 the Respondent preferred about six charges against the Applicant. It was alleged that the Applicant committed acts of misconduct.

 

7.          According to the charge sheet, it is recorded that the Applicant breached policy and procedure in that he failed to ensure that Mr Malesela Velly Kekana ("the Client") signed the applications and that the Client indeed requested the policies.

 

8.          The policies in question are the following: (i) Application policy number [….] , submitted on 30 March 2021; (ii) Application policy number [….] , submitted on 20 April 2021; (iii) Application policy number [….] , submitted on 25 May 2021; (iv) Application policy number [….] , submitted on 20 July 2021; and (v) Application policy number [….] , submitted on 10 February 2022. The charge sheet stated that the Respondent considers the conduct of the Applicant to be constituting a serious breach of conditions of employment.

 

9.          After having had a disciplinary enquiry, the Respondent summarily dismissed the Applicant on 18 August 2022. The Applicant lodged an internal appeal which was unsuccessful. The initial findings were confirmed.

 

10.      The aforementioned processes marked the end of the disciplinary enquiry processes.

 

Debarment Enquiry

 

11.      On 15 September 2022 the Respondent commenced a debarment process. A Notice of Intention to Debar the Applicant was issued and sent to the Applicant ("the Intention to Debar").

 

12.      The Intention to Debar invited the Applicant to a debarment hearing and it also stated, amongst other things, the following:

 

"The purpose of the Hearing is to investigate the following allegation(s):

 

1.                  Section 2 of the General Code of Conduct to the Financial Advisory and Intermediary Act, in that you failed to at all times render financial service honestly, fairly, with due skill, care and diligence and in the interest of the client and the integrity of the financial service industry.

 

2.                  Part JI (Personal Character Qualities of Honesty and Integrity) of the determination of Fit and Proper Requirements to the Financial Advisory and Intermediary Act in that you, as a question of actions mentioned in paragraph 1 above, did not conform to the honesty and Integrity requirements.

 

At this hearing you will be given the opportunity to state your case, call relevant witnesses and present evidence  "

 

13.      The debarment hearing was scheduled for hearing on 21 September 2022. The debarment hearing could not proceed on the scheduled date due to connectivity problems that the Applicant encountered. The debarment hearing was adjourned to 22 September 2022. On this day the Applicant indicated to the chairperson that the debarment hearing may proceed without him. After having been asked, the Applicant indicated the he is aware of the consequences.

 

14.      Subsequent to the debarment hearing, it appears that the Applicant was debarred and a notice to that effect was issued on 30 September 2022, referred to herein as the Debarment Decision.

 

15.      This decision did not deal with the evidence which was during the disciplinary enquiry for the reason that will become apparent later.

 

GROUNDS OF DEBARMENT

 

16.      On or about 13 January 2023 the Applicant lodged an application for reconsideration of the Debarment Decision. In his application he stated, amongst other things, that when he was pursuing his career with Metropolitan, he was surprise about the fact that the Respondent has sanctioned him with debarment.

 

17.      According to Applicant, he was of the view that he cannot be charged with debarment as the signature expert confirmed that there was no forgery on client signature.

 

18.      Further, the Applicant stated that he did not have the debarment letter and the human resource division of the Respondent do not have the debarment letter.

 

19.      On or about 17 January 2023 the Applicant lodged an application to have the Debarment Decision suspended in pending this decision. That application for suspension is in terms section 231 of the FSR Act.

 

20.      The Respondent, in turn, submitted an affidavit opposing the application for suspension of the Debarment Decision and stated in respect of the application for reconsideration that it will deal with it separately.

 

21.      The Respondent stated, amongst other things, that the Applicant ought to be precluded from acting as a representative of an FSP based on his decision to issue five policies in the name of the Client who did not instruct him to do so. The same policies, according to the Respondent, were not signed by the Client.

 

22.      The Deputy Chairperson of the Tribunal considered the application on the Applicant to suspend the Debarment Decision and on 3 February 2022 issued the following ruling:

 

"The debarment is suspended pending the finalization of the reconsideration application. The notice of intention to debar (OM2) does not appear to have complied with sec 14(3)(a)(i) of the FAIS Act"

 

23.      The Respondent did not deliver an opposition to the application for reconsideration, save for the response to the Applicant's application for suspension of the Debarment Decision.

 

LEGISLATIVE FRAMEWORK

 

Statutory provisions

 

24.      Debarment processes are regulated by, amongst other things, section 14 of the FAIS Act. More specifically, section 14(3)(a)(i) of the FAIS Act stated the following:

 

"(3) A financial services provider must­

 

(a) before debarring a person-

 

(i)                  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;

 

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

 

(iii)               give the person a reasonable opportunity to make a submission in response;" (own emphasis)

 

25.      Section 14(2)(a) of the FAIS Act provides that before effecting a debarment in terms of subsection 1, the provider must ensure that the debarment process is lawful, reasonable and procedurally fair.

 

26.      In the case of Heatherdale Farms (Pty) Ltd and Others v Deputy Minister of Agriculture and Another[1] where Colman J held:

 

"It is clear on the authorities that a person who is entitled to the benefit of the audi alteram partem rule need not be afforded all the facilities which are allowed to a litigant in a judicial trial. He need not be given an oral hearing, or allowed representation by an attorney or counsel; he need not be given an opportunity to cross-examine; and he is not entitled to discovery of documents. But on the other hand (and for this no authority is needed) a mere pretence of giving the person concerned a hearing would clearly not be a compliance with the Rule. For in my view will it suffice if he is given such a right to make representations as in the circumstances does not constitute a fair and adequate opportunity of meeting the case against him. What would follow from the last-mentioned proposition is, firstly, that the person concerned must be given a reasonable time in which to assemble the relevant information and to prepare and put forward his representations; secondly he must be put in possession of such information as will render his right to make representations a real, and not an illusory one." (own emphasis)

 

27.      The legal framework stated herein above give expression to, amongst other things, the principle that a person is entitled to be given such information to enable him to meet his case.

 

28.      The FAIS Act requires the Applicant to be given the grounds and reasons for debarment. The content of the notice of intention to debar will usually contains or make reference to the reasons or factual basis. It is on the factual basis that the Applicant will be required to make representations, whether orally or in writing.

 

Adequate Notice in writing

 

29.      Guidance Notice 1 of 2019 (FAIS) ("Guidance Notice") provides guidance on the debarment process in terms of section 14 of the FAIS Act. This Guidance Notice is accessible from the website of the Financial Sector Conduct Authority ("the Authority"). The purpose is to guide every party concerned about matters of debarment process.

 

30.      The Guidance Notice states, amongst other things, that FSPs are required to give adequate notice to the person affected by the debarment process. Adequate notice should, inter alia, states (i) the intention of the FSP to debar the person concerned; (ii) the grounds and the reasons of the debarment; and (iii) any terms attached to the debarment.

 

31.      Of particular interest in this matter is that the Guidance Notice states that grounds refer to, amongst other things, failure to comply with the provisions of the FAIS Act and the reasons mean the facts that inform the violation.

 

32.      The Respondent's Intention to Debar quoted in paragraph 12 herein above is devoid of reasons or facts which inform the grounds (factors violated). On perusal of the Intention to Debar, the Applicant is left to guess on what factual allegations preferred against him. It is our view that the Respondent's notice of intention to debar, as it reads, would not enable the Applicant to formulate a response. In other word he was not placed in possession of information to enable him to make representation. Therefore, the Respondent's Intention to Debar is not complying with section 14(3)(a)(i) of the FAIS Act.

 

33.      It will be unfair to the Applicant to turn a blind eye to the glaring absence of reasons (facts) upon which the debarment process is found. It is noted that 'adequate notice' will depends on the circumstances of each case. The view in this matter is that the Applicant was not provided with adequate notice with all the relevant facts for him to respond. The process followed by the Respondent was unlawful, unreasonable and procedurally unfair to the Applicant.

 

34.      However, the allegations which emerged during the disciplinary enquiry of the Applicant are serious enough and need to be attended with the urgency they deserve. The Respondent is required to take appropriate steps to ensure that the debarment process is lawful, reasonable and procedurally fair. Allegations or reasons need to be placed before the Applicant and the latter be afforded an opportunity to contest.

 

35.      The Respondent will need to be more observant of its debarment process especially where a representative is not having legal expertise at his disposal. Matters of this nature have serious consequences on the person affected.

 

CONCLUSION

 

36.      The Respondent's notice of intention to debar the Applicant is not in compliance with section 14(3)(a)(i) of the FAIS Act for the reason that it is devoid of facts upon which the debarment process is based.

 

37.      Therefore, the debarment process is unlawful, unfair and unprocedural.

 

The Respondent need to take appropriate step in law to enable the allegations which emerged during the disciplinary enquiry of the Applicant to be tested.

 

38.      The Application for reconsideration is successful.

 

ORDER:

 

The Debarment Decision dated 30 September 2022 is set aside and the matter is referred back to Respondent for further reconsideration.

 

 

Signed on 27 April 2023

 

Adv W Ndinisa (Member) and LTC Harms (Deputy Chair)

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