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THE FINANCIAL SERVICES TRIBUNAL

 

CASE NO.: FSP51/2023

 

In the matter between:
ROELOF PETRUS GERHARDUS SCHOEMAN	Applicant
and
SANLAM DEVELOPING MARKETS (INDIVIDUAL LIFE)	First Respondent
SANLAM DEVELOPING MARKETS (INDIVIDUAL LIEF)	Second Respondent
DEBARMENT COMMITTEE

 

DECISION

 

Debarment of representative, section 14 of the FAIS Act – application for reconsideration, section 230 of the FSR Act – procedural fairness - notice of intention to debar to disclose reasons for debarment – annexing investigation report without reference to reasons for debarment relied on not compliant with section 14(3)(a)(i) – use of electronic signature on policy documents not prohibited – dispute that signature of client copied and pasted – section 7(2) of the General Code not applicable – contravention of FSCA Communication 12 of 2021 not shown – debarment set aside

 

Tribunal:                     Judge C Pretorius S Mahabeer SC PR Long

 

Representatives:         Mr Rudolf for the Applicant

 

Ms L D Isparta for the Respondents

 

Date of decision:         24 July 2024

 

INTRODUCTION

 

1.                      On 24 July 2023, the respondents debarred the applicant as a representative in terms of section 14(1) of the Financial Advisory and Intermediary Services Act, 2002 (‘the FAIS Act’). In their reasons for debarring the applicant, the respondents allege that the applicant contravened the FAIS Act and lacks honesty, integrity and good standing.

 

2.                      The applicant challenges the debarment and applies for the reconsideration of his debarment in terms of section 230 of the Financial Sector Regulation Act 9 of 2017 (‘FSR Act’).

 

FACTUAL BACKGROUND

 

3.                      The applicant was employed by the first respondent from April 2015 - at the time of the debarment proceedings as a senior financial advisor.

 

4.                      On or about 22 July 2021, the applicant attended the premises of John Taolo Gaetsewe District Municipality where he presented various insurance products to several of his longstanding clients and assisted some of them with obtaining refunds on their policies. During this attendance, the applicant met Ms Molopi (‘the client’) who asked him to review her existing policies.

 

5.                      The client was paying premiums of approximately R1750.00 per month for all her policies. The client also complained that the cover in respect of those policies was low. The applicant offered the client a quote which would result in savings for the client. The quote was in the amount of approximately R1520.00 for additional comprehensive cover.

 

6.                      According to the applicant, he recorded the conversation with the client, where he detailed the premiums and the benefits in terms of the first respondent’s ‘Telephonic Spot Check Requirements’. He explained to her that the premiums would be deducted from her pay slip and inquired whether she consented to it being so deducted and to Sanlam issuing the policies. The client accepted the terms of the policies, the premiums and consented to the policies being issued.

 

7.                      The applicant forwarded the recording to Ms Vosloo, a sales manager of the first respondent, on 22 July 2021. Ms Volsoo countersigned the policies on 23 July 2021.

 

8.                      The applicant explains that at the time when the policies were issued, the hard copies of the policies were not available, and he was required to make use of electronic versions of the policies. This is not disputed. The applicant explains further that he made use of a PDF version of the policies and that the client signed the policies electronically on his iPad. Furthermore, the software which the applicant used and of which the first respondent was aware, would populate the client’s details and signature where required. This, according to the applicant, was all done in the presence of the client.

 

9.                      According to the applicant, he sent a cancellation letter to the client’s employer in respect of her existing policies as the client informed him that she wanted the premiums in respect of the new policies to be deducted from 14 September 2021.

 

10.                  During September 2021, however, the applicant received WhatsApp messages from the client complaining that both the premiums in respect of her existing policies and the new policies were deducted from her salary. The existing policies were not cancelled.

 

11.                  The applicant called the client and “was met by her crying that she does not have food in her house or money in her bank account due to the double deduction. She then begged me to refund her R1750.00 until the refund can be organized by her employer payroll of which she would pay me back.” According to the applicant, the client was distraught as a result of the ‘double deduction’ and he felt compelled to help her. The applicant then proceeded to make payment into the bank account of the client in the amount of R1750.00 with the reference “Sanlamsky Refund”.

 

12.                  After receiving the ‘refund’, the client cancelled all the policies and requested a refund for five policies on 2 November 2021 and again on 24 November 2021 for eleven policies.

 

13.                  It appears that the cancellation of the policies prompted an investigation by the first respondent’s forensic services.

 

14.                  On 22 May 2022, the investigator made telephonic contact with the client. The client stated that:

 

14.1          She met the applicant during July or August of 2021. In the course of that meeting, the applicant requested to review her policies and offered to consolidate those policies into one policy for a lesser premium.

 

14.2          She “did not sign for new policies with [the applicant]”. Instead, after a few months she noticed deductions from her pay slip whereafter she contacted the applicant and explained to him that premiums were deducted from her salary for policies that she never consented to.

 

14.3          The applicant requested her banking details, and he refunded her by paying the monies into her bank account.

 

14.4          The client did not participate in a voice recording with the applicant.

 

15.                  On or about 17 June 2022, the client submitted a written complaint to the first respondent. In the complaint the client alleged that:-

 

15.1          She met with the applicant ‘on August month end’ during which the applicant informed her that she was paying too much for her premiums on her existing policies.

 

15.2          The applicant informed her that he could assist her with consolidating her existing policies into a single policy and reduce her premiums.

 

15.3          However, after meeting with the applicant and upon reviewing her pay slip, the client noticed that a large sum had been deducted from her salary in respect of the policies.

 

15.4          She called the applicant and requested a refund. In turn, the applicant requested her banking details and proceeded to refund her in the amount of R1750.00.

 

15.5          After receiving the refund, she cancelled the policies alleging that she never agreed to take the policies and that after she reviewed three of the policy documents, she noticed that it was not her signature appended to those policy documents. She also stated, in reference to two other policies, that she did not sign those policies either.

 

16.                  The investigation report claims that a total of eight policies were disputed by the client. The first respondent employed a forensic consultant to examine the client’s signatures in respect of the ‘disputed’ policies which, in terms of the forensic report, were three in total. These signatures were compared to two specimen signatures. Notably, the specimen signatures were appended by the client on hard copy documents whereas the disputed signatures were electronic signatures. The forensic report is silent on this material aspect.

 

17.                  Be that as it may, the finding made by the forensic consultant is that “[t]he disputed signatures were not signed by the person who signed the specimen signatures”.

 

18.                  On 20 June 2023, the first respondent issued a notice of intention to debar to the applicant. Therein, the first respondent claimed that the applicant no longer complies with section 13(2)(a) of the FAIS Act and “contravened or failed to comply with any provision of the” Act.

 

19.                  The notice itself does not disclose the reasons for debarment; instead, the first respondent annexed to the notice the forensic investigation report. The applicant was afforded five days to make written submissions in response to the intended debarment.

 

20.                  As per the forensic report it was found that:-

 

20.1          the applicant forged or allowed the client’s signature to be forged on the policy documents;

 

20.2          the applicant obtained the client’s details when he proposed to check on the client’s existing policies which he then used to complete and submit the policy documents;

 

20.3          the applicant contravened Part 2(2) of the FAIS General Code ‘in that he failed to render financial services honestly, fairly, with due skill, care and diligence’.

 

21.                  The applicant submitted his written response to the notice of intention to debar on 20 July 2023 and a formal debarment enquiry was held on 21 July 2023.

 

22.                  The applicant was debarred on 24 July 2023 and the reasons for debarment were issued on 25 August 2023. The respondents found that:

 

22.1          the policy documents were not signed by the client on the same day when the applicant met with the client;

 

22.2          the date of the recording does not correspond to the signature dates on the policy documents;

 

22.3          the applicant conceded that he obtained the client’s signature which was captured on his iPAd and which he ‘affixed’ to the policy documents;

 

22.4          the applicant deposited monies into the client’s account to refund her for the policies and no mention was made (in the payment reference) that the payment was for food as claimed by the applicant.

 

23.                  Notably, the reasons for debarment make reference to FSCA Communication 12 of 2021 as well as section 7(2) of the General Code which prohibits a provider from requesting a client’s signature on a written or printed document unless all details required to be inserted thereon by the client or on behalf of the client has already been inserted. However, it is not alleged in the reasons for debarment that the applicant in fact contravened those provisions save for the generic contention that the applicant contravened the provisions of the FAIS Act and lacks honesty, integrity and good standing.

 

GROUNDS FOR RECONSIDERATION

 

24.                  In his application for reconsideration the applicant challenges his debarment on both procedural and substantive grounds. In what follows we assess each of these grounds in turn.

 

i.                       The Procedural Issues

 

25.                  Section 14(2)(a) of the FAIS Act requires that an FSP, before effecting a debarment in terms of subsection (1), must ensure that the debarment process is lawful, reasonable and procedurally fair. In terms of section 14(3)(a)(i), an FSPmust, prior to debarring a person, 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.

 

26.                  Guidance Notice 1 of 2019 records that a debarment decision by a FSP constitutes the exercise of administrative action and it is required of FSP’s in exercising their debarment powers to act reasonably, rationally, and fair.[1] What is fair in the particular circumstances will depend on the context of each case.[2]

 

27.                  The applicant complains that the notice of intention to debar did not disclose the reasons for debarment. This is correct. The notice conveys the first respondent’s intention to debar the applicant for his purported contravention of the FAIS Act and that he does not meet the requirements of honesty, integrity and good standing.

 

28.                  The notice also refers to certain documents annexed thereto. These include the respondents’ debarment policy, the forensic investigation reports and ‘applicable annexures’. No mention however is made of how the two documents relate to the debarment, and which of them constitute the reasons for debarment and to what extent. Moreover, the forensic report with its annexures comprises almost two-hundred pages. The annexures to the report total thirty-eight. Which of these constitute ‘applicable annexures’ is not disclosed.

 

29.                  Furthermore, the implied contraventions of the FSCA Communication 12 of 2021 and section 7(2) of the Code of Conduct were not part of the reasons for the intended debarment as should be contained in the notice of intention to debar.

 

30.                  The applicant was therefore left to infer the respondents’ reasons for purposes of his written response. The absence of the reasons for debarment contravened section 14 of the FAIS Act and rendered unfair and improper the debarment proceedings.

 

31.                  More alarming is what transpired during the debarment hearing.

 

32.                  After the applicant made his submissions, he along with his legal representative, were excused from the hearing. What then occurred, in the absence of the applicant, was that the second respondent proceeded to deliberate on the debarment. It transpired, as can be seen from the transcription, that Ms Meth, a member of the second respondent with no voting rights, proceeded to give evidence concerning the applicant. Ms Meth ‘testified’ that the applicant paid the client a further R3500.00 a day before he was suspended by the first respondent. She also gave testimony of a conversation she allegedly had with the applicant “on the record” in terms of which she asked him why he replaced eight of the client’s policies with another eight policies. She proceeded to proffer his alleged response wherein the applicant claimed that the policies made his “production look great”.

 

33.                  None of these very serious allegations were put to the applicant and, if Ms Meth was not a ‘voting member’, it is unclear why she was part of the deliberations and on what basis she stated:

 

‘I mean colleagues, you know just because he is a top earner and a top, you know…if this was a normal advisor from Lusikisiki, would our decision have been any different? I think that is for me key, ya.’

 

34.                  The chairperson of the hearing then proceeded to thank Ms Meth for her input.

 

35.                  Ms Meth’s ‘contribution’ during the deliberations is irregular.

 

ii.                     The Merits

 

36.                  Given the serious nature of the allegations levelled against the applicant and the manner in which the respondents conducted the debarment enquiry and the conclusions reached based on the available evidence, we deem it prudent to assess the merits of the debarment.

 

37.                  Section 14(1)(a) of the FAIS Act provides as follows:

 

“14. Debarment of representatives – (1)(a) 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." (Emphasis added)

 

38.                  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).

 

39.                  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.

 

40.                  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.

 

41.                  Board Notice 194 of 2017 (‘the Board Notice’) was published in Government Gazette No. 41321. Chapter 2 of the Board Notice sets out the fit and proper requirements relating to honesty, integrity, and good standing. In terms of section 8 thereof an FSP must be a person who is honest and has integrity and is of good standing. In turn, section 9 of the Board Notice lists incidents which constitute prima facie evidence that a person is not honest or lacks integrity or good standing.

 

42.                  Section 9(3) of the Board Notice requires that in assessing whether a person meets the requirements of section 8(1)(a), due regard must be given to various factors, namely:-

 

42.1        the seriousness of the person’s conduct, whether by commission or omission, or behaviour and summarising circumstances to that conduct or behaviour that could have a negative impact on a person’s compliance with section 8(1);

 

42.2        the relevance of such conduct or behaviour that has or could potentially have a negative impact on the person’s compliance with section 8(1), to the duties that are or are to be performed, and the responsibilities that are or are to be assumed by that person; and

 

42.3        the passage of time since the occurrence of the conduct or behaviour that had a negative impact on the person's compliance with section 8(1). 20.

 

43.           In Hamilton Smith & Company v The Registrar of Financial Markets[3] the Appeal Board stated that:

 

‘To determine where a person is ‘of good character and integrity’ involves a moral judgment. In arriving at that judgment, it is necessary to have regard to the manner in which the person concerned has conducted himself not only in his private life but also in his dealings with those with whom he has come into contact professionally or in the course of his business. A distinction is sometimes drawn in this context between ‘character’ and ‘reputation’.

 

44.                  The issue is whether the applicant lacks the personal qualities of honesty and integrity. Although not defined in the FAIS Act, this Tribunal has held that the phrase means defect of character, unsoundness of moral principle and corrupted virtue.[4]

 

45.                  Upon cancelling the policies the client did not claim any impropriety by the applicant. The policies were cancelled in October 2021. However, Sanlam continued to deduct the premiums from the applicant’s salary for two months after cancellation. During November 2021 the applicant made two requests for a refund.

 

46.                  It would appear that by May 2022 the client was still not in receipt of a refund. The allegations that the signatures were forged were made for the first time during an alleged telephonic conversation between the client and the investigator for the respondents on 17 May 2022. By June 2022, the client had still not received a full refund in respect of the cancelled policies.

 

47.                  During the debarment hearing neither the investigator nor the client were called as witnesses despite the applicant’s complaint that there were discrepancies in the investigation report. The forensic consultant was also not called as a witness.

 

48.                  Also, during the hearing allegations were also made for the first time that the dates on some of the policies do not correspond with the date on which the applicant met the client nor does the date of the recording correspond with the date on which they met.

 

49.                  Most of the policies record the date of signature as 22 July 2021. However, some of the policies record the date of signature as 18 June 2021. Notably, all the dates appear to be electronically generated. According to the applicant, the date of 18 June 2021 was a system error as he had not ever met the client prior to 22 July 2021.

 

50.                  The respondents had the benefit of interviewing the client for purposes of their investigation, yet they have not established that the applicant met the client prior to that date for purposes of obtaining her information and ‘prepopulating’ the policies prior to 22 July 2021.

 

51.                  Regarding the recording, Ms Vosloo on two occasions confirmed that she received the recording on 22 July 2021 and countersigned the policies on 23 July 2023. The respondents have failed to produce any evidence which suggests otherwise.

 

52.                  Turning to the issue of the signatures, it is common cause that the signatures were in electronic format. This the forensic consultant failed to account for. It is no doubt a material factor which should have featured in his examination of the ‘specimen signatures’ which were handwritten by the client and the ‘disputed signatures’ which were electronic signatures.

 

53.                  Moreover, the implied allegation that the applicant contravened section 7(2) of the General Code, is not supported by the evidence. According to section 7(2) no provider may, in the course of the rendering of a financial service, request any client to sign a written or printed form or document unless all details required to be inserted thereon by the client or on behalf of the client have already been inserted. Accordingly, a provider, including a representative:

 

53.1               may not request a client to sign a blank or partially completed document;

 

53.2               may complete documents on behalf of the client; and

 

53.3               must request a client’s signature only after all the relevant details have been inserted by the client, or on behalf of the client, to enable the client to apply his/her mind to what they are binding themselves to.

 

54.                  There is no evidence that the client signed blank or partially completed policy documents. Moreover, FSCA Communication 12 of 2021 is a guidance note. It states that although a representative can complete documents in relation to the rendering of financial services on the client’s behalf, the representative must request the client’s signature i.e. the client must sign the document (the representative should not be using the client’s electronic signature as if the representative is the client). The representative cannot affix (or paste in) an electronic signature that belongs to the client to the client’s application or other documents.

 

55.                  The respondents employed an expert to confirm that the disputed signatures were not signed by the person who signed the specimen signatures. We have explained why this comparison is problematic. What would have been appropriate is an expert who can establish whether the signatures were copied and pasted by the applicant.

 

56.                  The applicant’s version that the software used populated the policy documents with the client’s signature, where required, is not unconvincing.

 

57.                  Finally, regarding the payment made by the applicant to the client which payment was referenced as a ‘Sanlamsky Refund’ on the client’s bank statement, much is made by the respondents concerning this reference. To the respondents, the payment and corresponding reference constitute an admission that the applicant issued policies to the client without her consent and upon the client becoming aware of his scheme, he refunded her. If the applicant felt sorry for the client when she disclosed her financial situation and this was the motivation for paying the monies to her, he should have used another reference for the payment, according to the respondents.

 

58.                  The version proposed by the respondents is, with respect, untenable and improbable. Technically, the monies paid to the client is a ‘refund’ for the ‘double deduction’ of the Sanlamsky premiums. The applicant refunded the client in respect of the cancelled policies which were deducted from her salary in addition to the new policies. The payment was not for food for the client, although the client’s complaint that she had no food compelled the applicant to refund the client personally until she was able to recover the refund from the first respondent. Notably, the client does not allege that she did not instruct the applicant to cancel her existing policies. Also, the ‘refund’ was not for the premiums deducted in respect of the new policies but for the existing policies which were cancelled.

 

59.                  It is not disputed that the client waited in excess of nine months for a refund of premiums when she decided to cancel all the policies in October 2021 and that the allegations of the forged signatures were (purportedly) only made seven months after she cancelled the policies. Moreover, the client, when cancelling the policies, never cited forgery as a reason for cancellation. It is likely that when the shoe started to pinch, the client claimed that she had never signed the policies in the hope that she would receive her refund sooner.

 

CONCLUSION

 

60.                  The respondents fall short of the prescribed procedural requirements. The debarment proceedings were unfair and improper.

 

61.                  The respondents have not demonstrated that the applicant lacked honesty and integrity in his dealings with the client nor have they shown which provisions of the FAIS Act were contravened by the applicant.

 

62.                  The applicant recorded the engagement with the client which he was not required to do at the time, and he furnished the sales manager, Ms Vosloo, with the recording on the same day. Apart from a bare denial by the client that it is not her voice on the recording, the respondents have not provided any evidence to show that the voice on the recording is not the client’s.

 

63.                  The expert evidence on the signatures does not assist the respondents either. Moreover, there is no evidence that the signatures were copied and pasted as opposed to ‘populated’ by the software employed by the applicant as authorised by the first respondent. The fact that the ‘specimen signatures’ are dissimilar to the ‘disputed signatures’ could very well be attributed to the fact that the latter constitutes electronic signatures and the former not.

 

64.                  Accordingly, we make the following order:

 

ORDER:

 

The application for reconsideration is granted and the applicant’s debarment is set aside.

 

SIGNED at SANDTON on this 24^th day of JULY 2024 on behalf of the Panel.

 

PR LONG

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