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THE FINANCIAL SERVICES TRIBUNAL

 

Case No: FSP22/2023

 

In the matter between:

 

ITUMELENG SEFUME                                            Applicant

 

And

 

TELESURE INVESTMENT HOLDINGS (PTY) LTD OBO 1LIFE

INSURANCE LIMITED                                             Respondent

 

Tribunal Panel: Judge L Harms, KO Magano

 

Summary: Application for reconsideration of the decision of the FSP to debar the applicant.

 

 

DECISION

 

 

A.      INTRODUCTION

 

1.      The applicant applies for the reconsideration of his debarment in terms of section 230 of the Financial Sector Regulation Act 9 of 2017 ("FSR Act'). The respondent debarred the applicant as a representative in terms of section 14(1) of the Financial Advisory and Intermediary Services Act 37 of 2002 ("FA/S Acf”).

 

2.      In addition to the reconsideration application, the applicant seeks condonation for the late filing of his application for reconsideration.

 

3.      The respondent does not oppose the condonation application but is resisting the reconsideration application. The parties have waived their rights to a formal hearing.

 

4.      The issues before us are twofold:

 

4.1.     The first issue is whether we should condone the late filing of the reconsideration application.

4.2.     The second issue is whether the respondent was correct to debar the applicant because he no longer meets the requirements of fit and proper as required by section 14(1) of the FAIS Act. The applicant resigned before a disciplinary hearing could be conducted to determine whether he was guilty of misconduct, but the respondent proceeded to determine his fitness and propriety in terms of its debarment policy and the Act.

4.3.     The question before us is whether the applicant is no longer a fit and proper person to render financial services within the framework of the FAIS Act.

 

B.      CONDONATION APPLICATION

 

i)      Background facts relevant to the condonation application

 

5.       The facts of this case and the parties' respective versions relevant to the condonation are recorded in the papers filed on their behalf. There is no need to burden this ruling with a repetition of the factual background. It is sufficient to record the following chronology of events:

 

5.1.      On 07 March 2023, the respondent decided to debar the applicant in terms of section 14(1) of the FAIS Act.

 

5.2.      On 24 March 2023, the respondent communicated its decision to proceed with his debarment by sending an email to the applicant at his given email address. In this email, the respondent informed the applicant that if he does not agree with its decision to debar him, he must refer the matter to the Tribunal.

 

5.3.      There appears to be confusion about the dates regarding the communication of the respondent's decision to debar the applicant. The respondent communicated its decision in an email dated 24 March 2023, but the letter confirming the decision is dated 7 March 2023. The Tribunal accepts that the decision to debar the applicant was taken on 24 March 2023, as confirmed by the respondent in its papers.

 

5.4.      On 09 May 2023, the applicant approached the Tribunal with an application for a reconsideration of his debarment.

 

ii)            Legal principles

 

6.       In terms of section 230(2) of the FSR Act, an application for reconsideration must be made: ... within 60 days after the applicant was notified of the decision, or such longer period as may on good cause be allowed." (Emphasis added)

 

7.       The first question we must answer before considering the merits of the condonation application is whether the application for reconsideration is late. We turn to answer this question.

 

8.       There is no dies non in this Tribunal. If one calculates the 60-day period referred to in section 230(2)(b) of the FSR Act and the respondent's correspondence addressed to the applicant, he had until 25 May 2023 to file this application for reconsideration. The applicant filed his application on 09 May 2023.

 

9.       There was no need for the applicant to bring this application for condonation because he launched the reconsideration application within the required time frame as set out in section 230(2)(b), read with the respondent's email of 24 March 2023.

 

10.   We now turn to deal with the merits of the reconsideration application.

 

C.      BACKGROUND OF THE MATERIAL FACTS

 

11.   The applicant was employed as a Sales Consultant of the respondent, and he was registered as a financial services representative of the respondent in terms of the FAIS Act.

 

12.   On 31 August 2022, the applicant was notified and scheduled to attend a disciplinary hearing to be held on 06 September 2022 as a result of four charges of dishonesty.

 

13.   The four dishonesty charges against the applicant included finalising an upsell without acceptance from the client, two charges of cancelling the client's existing funeral policies and failing to inform them that they no longer have cover and finalising an upsell without noting that the client has diabetes and high blood pressure on the policy.

 

14.   On 3 September 2022, in response to the notice to attend the hearing, the applicant submitted his immediate resignation and indicated therein that a formal hearing would, therefore, not be necessary.

 

15.   The respondent terminated his employment with effect from 3 September 2022 and proceeded to refer the matter to the Compliance Department for consideration of debarment in line with its Debarment policy.

 

16.   On 3 November 2022, the applicant was notified that the respondent intends taking debarment steps against him and requested him to provide reasons why he should not be debarred.

 

17.   The applicant's response in the submission as to why he should not be debarred was the following:

 

"Firstly, I would like to apologise for my role as a Former 1 Life representative in the cases brought against me. It was never my intention to harm the clients nor the company, and my actions were never meant to be malicious against the company it was truly a mistake on my end.

 

In none of the above cases was I being malicious it was all honest mistakes on my end, and I wasn't looking to benefit in any way, as even when I asked my Manager Jane after getting paid for my leave days only and not the commission she did explain the reasons why my commission wasn't paid, and I understood it clearly, and I never questioned any further so please reconsider as the effects of me being debarred are big as I would affect my ability to continue working in the financial industry as a result it would affect my ability to provide for my family. I have only worked in sales and the financial industry. I have no other job experience so as you can imagine, this would affect me deeply. So, if the reason for this was because I requested withdrawal of my benefits from the company then I would like to cancel my request of withdrawal of my benefits (provident and Retirement funds)."

 

18.   The respondent informed the applicant that its Debarment Committee considered his representations but felt that the sanction of a debarment is warranted. The respondent maintains that the actions of the applicant in rendering the financial service were grossly dishonest and lacked integrity and that the applicant had shown the intent to commit such offences repeatedly, which would ultimately be to the applicant's benefit and had the potential to significantly prejudice customers.

 

19.   The effect of the debarment is that the applicant is prohibited from rendering financial services to clients and can only be employed by a financial services provider if he has served out a period of time and is re­ appointed by another service provider.

 

D.      LEGAL FRAMEWORK AND ANALYSIS

 

20.   Section 14(1)(a) of the FAIS Act reads as follows:

 

"An authorised financial services provider must debar a person from rendering financial services which 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."

 

21.   Section 13(2)(a) stipulates that an authorised financial services provider must: "all relevant times. be satisfied that the provider's representatives and the key individuals of such representatives are, when rendering a financial service on behalf of the provider, competent to act and comply with:

 

(i) The fit and proper requirements ... '

 

22.   That leads to sec 6A(2) which states that the fit and proper requirements relate inter alia to the "personal character qualities of honesty and integrity".

 

23.   In its guideline on the debarment process dated 5 November 2013, the FSCA stated that the debarment under section 14(1) of the FAIS Act should not be used as a punishment to satisfy the provider's contractual or other grievances unrelated to fitness or competency requirements. Rather, it is a regulatory instrument aimed at protecting the public and ridding the financial services industry of dishonest and incompetent financial intermediaries. A representative must be debarred for reasons related to the rendering of financial services.

 

24.   The applicant failed to render the financial services honestly by finalising an upsell without acceptance from the client and cancelling the client's existing funeral policies and failing to inform them that they no longer have cover, and finalising an upsell without noting that the client has diabetes and high blood pressure on the policy.

 

The applicant has availed the opportunity to face the charges of dishonesty, but he elected to avoid taking responsibility for his actions by resigning with immediate effect. If he had hoped that his act would be the end of the matter, he was mistaken as the respondent was obliged to consider if he still was a fit and proper person to render financial services to clients.

 

The fit and proper requirements arc set out in the publication under 6A of the FAIS Act.

 

25.   The applicant pleads that it was all honest mistakes and he did not derive any financial benefit, however, there is no evidence to support his stance that he made an honest mistake. The applicant was aware (or ought to have been aware) that his conduct was wrong and could cause harm to the clients or the respondent, but he nevertheless reconciled himself with the consequences of his conduct by, inter a/ia, finalising upsell policies without clients' acceptance, cancelling clients' existing funeral policies and failing to inform them that they no longer have cover and finalising upsell policies without noting that the client has diabetes and high blood pressure. He only rectified his "honest mistakes" after they were brought to his attention by his manager. The fact that he did not derive any financial benefit does not make him a fit and proper person as required by the FAIS Act.

 

26.   As a financial services provider, the applicant was obliged to adhere to the FAIS Act and the respondent's policies which required him to, at all times, render financial services honestly, fairly, with integrity, with due skill and diligence and in the interest of clients. The applicant's conduct was dishonest, lacked integrity and was not in the interest of the clients. An "honest mistake" also indicates that he did not handle the clients' affairs with due care and skill. Therefore, he no longer complied with the requirements of fit and proper because his conduct compromised his honesty and integrity, and this makes him a risk to the public.

 

27.   The financial services environment is highly regulated, and only persons who are fit and proper are allowed to render financial services to the investing public. The use of the word "must" in sections 13(2)(a) and 14(1) of the FAIS Act indicates that the respondent had a legal obligation to act in the manner prescribed in those sections. We, therefore, find that the debarment was rational, reasonable and justifiable.

 

28.   The basis of the application for reconsideration is that debarment is too harsh. But debarment is not a punishment in the ordinary sense of the word. It is the consequence of someone failing to comply with the fit and proper requirements of FAIS. Hewetson v Law Society of the Free State [2020] 3 All SA 15 (SCA); 2020 (5) SA 86 (SCA).

 

E.      ORDER

 

29.   The following order is made:

 

29.1.      The application for reconsideration is dismissed.

 

 

SIGNED AT PRETORIA ON THIS 12 DAY OF JULY 2023.

KD MAGANO

(On behalf of the panel)

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