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THE FINANCIAL SERVICES TRIBUNAL

 

Case No: FSP25/2024

 

In the matter between:
STHABILE MAPHUMULO	APPLICANT
and
CREDICO FINANCIAL SERVICES (PTY) LTD	RESPONDENT

 

Tribunal Panel:     Judge FD Kgomo (Chairperson), Prof M Sigwadi & Adv SM Maritz

 

Appearance for the Applicant:        In person - (Ms S Maphumulo)

 

Appearance for the Respondent:    Mr Senzo Mkhize and Ms Amogelang Moreeng

 

Date of Virtual hearing:                  21 October 2024

 

Date of decision:                            20 November 2024

 

Summary: Application for reconsideration in terms of section 230 of the FSR Act of the decision of the Respondent to debar the Applicant in terms of section 14 of the FAIS Act due to alleged non-compliance with fit and proper requirements, especially with the requirement of honesty and integrity. Lack of jurisdiction to debar established.

 

DECISION

 

INTRODUCTION

 

1.                  The Applicant seeks reconsideration in terms of section 230 of the Financial Sector Regulation Act, 9 of 2017 (“the FSR Act”) of a decision taken by the Respondent, Credico Financial Services (Pty) Ltd (“Credico” or “the FSP” or ”the Respondent”) to debar her in terms of section 14(1)(a) of the Financial Advisory and Intermediary Services Act, 37 of 2002 (“the FAIS Act”) on the grounds that she no longer meets the fit and proper requirements for a representative in terms of the FAIS Act.

 

2.                  Credico, the former employer of the Applicant, debarred her on 2 April 2024.

 

3.                  The Applicant challenges the debarment on procedural grounds. In her grounds for reconsideration, the Applicant states that the debarment was unlawful, unreasonable and procedurally unfair. Particularly the Applicant argues that she did not receive any communication or documentation of the debarment. She states that she only became aware of the debarment from another company that employed her after she left Credico.

 

THE PARTIES

 

4.                  The Respondent, an insurance broker, is a registered Financial Services Provider (“FSP”) as defined in section 1 of the FAIS Act.

 

5.                  The Applicant was employed as a financial services representative of the Respondent, until the termination of her employment in August 2022.

 

FACTUAL BACKGROUND & CHRONOLOGY OF EVENTS

 

6.                  On 28 February 2024, the Respondent received an escalated complaint from Mr S Mtati (“Mr M” or “the client”) against the Applicant. On 6 March 2024, IUA (Policy Administrator) provided to the Respondent (Intermediary) an email with attachments that included three Record of Disclosure documents and a signature specimen relating to the complaint.

 

7.                  The essence of the client’s complaint was that the Applicant had issued insurance policies in his name without his knowledge and consent. The client further stated that he never engaged in any conversation with the Applicant nor signed any related documents.

 

8.                  The client denied any interaction with the Applicant concerning policy introductions or assistance with enrolled policies. The Respondent asserts that the signature analysis confirmed the Applicant forged the client’s signature on the policy applications.

 

9.                  The Respondent further alleges that the Applicant failed to inform the client about additional benefits, as the client had not recollection of such interactions.

 

10.              No relevant recordings of the sales were found on the Respondent’s portal.

 

11.     Following its investigation in March 2024, the Respondent concluded that the Applicant was guilty of the alleged misconduct, warranting the initiation of a debarment hearing.

 

12.     On 08 March 2024, the Respondent sent the Applicant an email notifying her of her potential debarment in terms of section 14(1) of the FAIS Act. The communication included a letter of debarment, notice to attend a debarment hearing, and the Respondent’s debarment policy and procedures. The Respondent proceeded to debar the Applicant on 02 April 2024. The reasons for the Applicant’s debarment were recorded in the database of the Financial Sector Conduct Authority (“FSCA”) as follows: she “does not comply with personal character qualities of honesty, and integrity”.

 

13.              As pointed out above the Applicant denies having received the notification and documentation that preceded her debarment. The Respondent argues that the Applicant must have received the notice of intention to debar as it was sent to her last known address, although no proof of receipt of the notice by the Applicant was found in the record, and that it has followed the correct debarment procedure.

 

14.              The Tribunal notes that the Applicant left the Respondent’s employment in August 2022 and the debarment proceeding commenced in March 2024. This is about eighteen (18) months after the Applicant has left the employment of the Respondent. This necessitates a consideration of the provisions of section 14(1)(a) and (b) of the FAIS Act, which provides a legislative framework for a debarment process. Section 14(1)(a) and (b) provides:

 

“14(1)

 

(a)                      An authorised financial services provider must debar a person from rendering financial services who is or was the case may be-

 

(i)     a representative of the financial services provider; or

 

(ii)   ...

 

(iii)  does not meet, or no longer complies with the requirements referred to in section 13(2)(s); or

 

(iv)  ...

 

(b)                                   The reasons for a debarment in terms of paragraph (a) must have occurred and become known to the financial services provider while the person was a representative of the provider.”

[Own emphasis]

 

15.              Section 14(1(b) read with section 14(5) of the FAIS Act provides that an FSP retains the obligation to debar a person who no longer is a representative of that FSP, provided that (a) the reason for a debarment must have occurred and became known to the FSP while the person was still a representative of the FSP, and (b) the debarment must commence no longer than 6 (six) months from the date the person ceased to be a representative of the FSP. Both requirements must be fulfilled before an FSP, such as the Respondent, has the necessary jurisdiction to debar its former representative, such as the Applicant.

 

16.              When applying the above principles to the facts, the Applicant’s alleged misconduct only became known to the Respondent, after the Applicant ceased to be its representative, in February 2024. The debarment proceedings were initiated in March 2024, which is 18 months after the Applicant’s employment ended in August 2022. This is beyond the prescribed six-month period allowed for initiating such proceedings. Therefore, the Respondent lacked the necessary jurisdiction to debar the Applicant (FSP may not debar the representative), and the debarment must be set aside.

 

17.              For reasons stated above, the merits are consequently irrelevant and a futile exercise to examine.

 

18.              In terms of section 234(1) of the FSR Act the Tribunal is competent, inter alia, to make the following order:

 

“234(1). In proceedings on an application for reconsideration of a decision the Tribunal may, by order—

 

(a)               Set the decision aside and remit the matter to the decision-maker for further consideration.”

 

19.              After careful consideration, the Tribunal has decided not to remit the proceedings to the Respondent, as such an order would be brutum fulmen – unenforceable and void – due to the Respondent’s lack of jurisdiction.

 

20.              Thus, the debarment stands to be set aside.

 

ORDER

 

Accordingly, the following order is made:

 

The Applicant’s reconsideration application is granted, and the debarment is set aside.

 

Signed on behalf of the Tribunal Panel on 20 November 2024.

 

Prof/Dr M Sigwadi

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