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THE FINANCIAL SERVICES TRIBUNAL

 

Case No. A34/2023

 

In the matter between:

 

LANCELIN PILLAY	Applicant
And
FINANCIAL SECTOR CONDUCT AUTHORITY	Respondent

 

Tribunal Panel: Judge C Pretorius, Adv Goedhart SC, Adv Le Roux SC

 

Appearance for the applicant:           In Person

 

Appearance for the first respondent:         Mr B Bredenkamp

 

Date of hearing:           13 June 2024

 

Date of decision:             24 July 2024

 

Summary: Application for Reconsideration in terms of section 230 of the Financial Sector Regulation Act, 9 of 2017 of debarment on grounds of dishonesty by the Financial Sector Conduct Authority in terms of section 153(a) of the Financial Sector Regulation Act, 9 of 2017 – application for reconsideration dismissed.

 

DECISION

 

INTRODUCTION

 

1.           On 4 October 2023 the respondent issued a debarment order against the applicant in terms of Section 153(1)(a) of the Financial Sector Regulation Act, 9 of 2017 (“the FSR Act”). In terms of the debarment order, the applicant is prohibited for a period of 10 years from:

 

1.1.           providing, or being involved in the provision of, any financial products or financial services to financial customers; and

 

1.2.           acting as a key person of any financial institution.

 

2.           The applicant lodged an application for a reconsideration of the debarment order in terms of Section 230 of the FSR Act on 9 October 2023.

 

3.           The applicant’s application to introduce further evidence was granted by the Tribunal in terms of section 232(5)(a) of the FSR Act on 15 February 2024. On 10 May 2024, the Chairperson of the Tribunal issued orders in terms of section 232(5)((a) for Messrs Thulani Innocent Dludla (“Mr Dludla”), Skumbuzo Goodman Langa (“Mr Langa”) and Bernie Naidoo, being the witnesses whose evidence the applicant wished to introduce, to appear before the Tribunal. The hearing, which was initially due to proceed as an in-person hearing, was then converted to a virtual hearing to accommodate the calling of these witnesses by the applicant. Ultimately, none of these witnesses were called by the applicant. The applicant called Mr Nickolan Naidoo as a witness.

 

4.           The respondent brought an application to introduce further evidence by way of a supplemented record. The respondent’s application was not granted.

 

BACKGROUND

 

5.           The debarment order was issued following a report received by the respondent from Sanlam Life Insurance Limited (“Sanlam”) dated 25 April 2023. The applicant had been employed as an advisor from 16 December 2019 to 27 May 2022. The conduct pertaining to the applicant occurred during his employment with Sanlam.

 

6.           The respondent notified the applicant on 22 May 2023 of its intention to debar him. The applicant was afforded an opportunity to respond to the notice of intention to debar which he did on 23 May 2023.[1]

 

7.           The respondent found that the applicant had:

 

7.1.           misrepresented fraudulent material information to Sanlam that clients applied for long term insurance policies whilst this was not the case;

 

7.2.           forged signatures;

 

7.3.           knowingly and intentionally submitted forged and reproduced signatures of the authorised managers; and

 

7.4.           failed to render financial services honestly and in the interests of clients and the integrity of the financial services industry.

 

8.           The facts informing the findings made by the respondent as appears from the Sanlam report are as follows:

 

8.1.           sixty six “Declaration by Authorised Manager to use auto new business (“ANB”)” forms were submitted by the applicant which contained forged and reproduced signatures of two authorised managers. These forms are known as NUB005AE forms;[2]

 

8.2.           no premiums were received on high commission policies. A total of 54 policies had lapsed from the inception date;

 

8.3.           there were differences in clients’ signatures on policy applications;

 

8.4.           four Nedbank accounts were represented as being those of six clients;

 

8.5.           three of the applicant’s accounts were represented as being those of six clients;

 

8.6.           the same celphone number was used on different clients’ policy applications. In some cases, the celphone number provided could not be linked to the client.

 

9.           Those clients who could be traced confirmed that they had not taken out policies. Mr Langa advised that he does not know the applicant and Mr Dludla confirmed that he only took out one policy, not eight policies.

 

10.           The applicant received an amount of R284 512,54 in respect of the unauthorised policies and in September 2022, it was found that the applicant’s commission debt was an amount of R495 718,56.

 

11.           Based on the aforegoing, the respondent concluded that the applicant contravened the financial sector laws in a material manner in that he had contravened Section 8A of the Financial Advisory and Intermediary Services Act, 37 of 2002 (“the FAIS Act”) [3]read with Section 8(1) of Board Notice 194 of 2017: determination of fit and proper requirements for financial services providers (“BN194”)[4] and Section 2 of the General for Authorised Financial Services and Representatives (“the General Code”)[5] and Section 3(1)(d) of the General Code.[6]

 

GROUNDS OF RECONSIDERATION

 

12.           The applicant’s grounds for reconsideration are that: [7]

 

12.1.             he was not given a fair opportunity to state his case, as he was not provided with all of the evidence and the facts presented to the FSCA;

 

12.2.             the clients who stated that they did not know the applicant well were not provided with sufficient information when called by Sanlam and the applicant was able to procure statements to this effect;

 

12.3.             the manager, Mr RR, had provided him with a pre-signed ANB declaration to submit business as and when needed as he was situated in Durban and it would not suit his schedule to sign off the applicant’s business. He averred that the correspondence between him and Mr RR was on his email account at Lonfin Group Sanlam, but these emails were cleared out when he left their employment. He did however have a Gmail and a WhatsApp conversation evidencing the conversation between the applicant and Mr RR. He also averred that Mr RR had changed his signature;

 

12.4.             he had left the employment of Sanlam in February 2022 (his letter of resignation is dated 27 May 2022)[8] and it was over a year since he was employed by the Lonfin Group Sanlam.

 

DISCUSSION

 

The first ground of reconsideration

 

13.           Turning to the grounds of reconsideration, the respondent was afforded the opportunity to respond to the notice of intention to debar dated 22 May 2023. The notice of intention to debar set out in detail the specific allegations against the applicant as appears from the Sanlam forensic report.

 

14.           During the course of his employment with Sanlam he had been questioned by Sanlam on the issues set out in the notice of intention to debar and he had responded thereto. The applicant submitted four responses to the respondent between the period 23 May 2023 and 23 June 2023. Following receipt of the notice of intention to debar him on 22 May 2023, the applicant responded twice on 23 May 2023 without asking for more information. He was therefore aware of the nature and ambit of the allegations against him and was afforded ample opportunity to respond thereto.

 

15.           The applicant applied to introduce further evidence after the respondent lodged the record on 8 November 2023, and he was successful in that application. This Tribunal afforded the applicant a further opportunity to present evidence in support of his reconsideration application. As was explained in Niemiec:[9]

 

“The Tribunal can consider the merits of the PA’s decision afresh – including all the submissions the applicants say they would or could have made, given the opportunity, and those they say were given short shrift by the PA. Therefore, any procedural fairness concerns the applicants may have regarding the PA’s process can be cured by a full and fair hearing on appeal to the Tribunal.”

 

16.           Thus, the applicant had at least five opportunities to respond to the allegations and address the evidence against him. The Tribunal finds no merit in the first ground of reconsideration.

 

The second ground of reconsideration

 

17.           In regard to the second ground for reconsideration, the applicant obtained affidavits from Messrs Dludla and Langa which contradicted the information which they had provided to the Sanlam investigator. Although the Tribunal issued orders in terms of section 232(5)(a) of the FSR Act to secure their attendance at the virtual hearing at the instance of the applicant, ultimately they were not called as witnesses. Given that the evidence on record of these two witnesses is contradictory and therefore not dispositive of the reconsideration, and given that they were not called to testify, the Tribunal has disregarded the complaints and the evidence on record pertaining to these two witnesses.

 

18.           On the evidence before it, the Tribunal agrees with the respondent’s submission that it is improbable that a reasonable provider would have been able to write such a high number of policies over this period of 17 months. The improbability is underscored by the high inception lapse rate.

 

The third ground of reconsideration

 

19.           As far as the third ground is concerned, the applicant’s explanations on record with regard to the forged signatures of Mr RR on the NUB005AE forms are contradictory.

 

20.           On 20 October 2021, the applicant advised the Sanlam investigator that:

 

“Previously we were not requested to submit Managers ANB declaration. I had submitted ANB declarations signed by myself and attached them as we were not aware of the process. February 2021 I was then made aware of how I should work via my SSA and since I have requested manager approval by Ricardo and Mannie for cases.”[10]

 

21.           On the applicant’s own version, he was aware from February 2021 that he had to obtain approval from his managers for cases.

 

22.           The WhatsApp conversation of 12 October 2021 reflects that Mr RR had taken issue with the fact that the applicant’s e-sign reflected his signature as Govender.[11] It also reflects that, far from permitting the applicant to sign on Mr RR’s behalf or that Mr RR was not required to authorise the new business, the WhatsApp conversation reflects that Mr RR required a full case to sign off as well as the client’s bank statements and contact details to verify the case. The applicant responded by saying that he had sent it off using his Gmail account.[12]

 

23.           Thus, the WhatsApp conversation submitted by the applicant does not support his version before this Tribunal regarding the NUB005AE forms. Rather, it undermines the applicant’s version. It demonstrates that already in October 2021, Mr RR had noted a concern about inception lapses.

 

24.           In response to the inquiries by Sanlam, Mr RR had informed Sanlam that he had detected issues with the applicant’s business, being a significant increase in his commission and roll-over effect as he needed to cover for lapses. Mr RR indicated that this was of great concern, and that he had requested that all cases be checked and that verification calls be made to clients.[13]

 

25.           The WhatsApp messages relied upon by the applicant corroborate Mr RR’s version and indicate that Mr RR wanted to see the applicant’s business, sign off on it and even contact clients to verify their business with the applicant.

 

26.           The signature of Mr RR, as confirmed by him to the Sanlam investigator, is patently different from what was submitted on the NUB005AE forms as Mr RR’s signature. There would be no motivation for Mr RR to deliberately amend his signature, whilst there would have been a motive for the applicant to circumvent the procedure which required him to present a full case file and bank statements and contact details of the clients, under circumstances where it was found that he had provided incorrect bank account details for some clients and had even gone as far as providing his own bank account number for six clients.

 

27.           The applicant does not deny that there was a high lapse rate of policies and that he has a debt to Sanlam in respect of the lapsed policies. He had, by his own admission, stopped writing that line of business.

 

28.           In regard to the bank accounts, the applicant had provided details of his bank accounts to the respondent in an effort to demonstrate that the bank accounts with number 202****951, 203****065 and 204****753 as provided on the client application forms, with reference to what is set out in the Sanlam report, did not belong to him. In his first reply of 23 May 2023 to the respondent he contended that he “currently” does not own any Nedbank accounts except for a credit card and a personal account into which his salary was paid being 201****809.[14] The bank account details he then provided reflected a list of five accounts.[15] The list of five accounts does not reflect the personal account 201****809 for which he provided a confirmation of account letter with no bank statement.[16] The list also does not reflect his credit account number for which he provided bank statements.[17] Consequently, under circumstances where the Sanlam report provided direct evidence that the Nedbank account numbers 202****951, 203****065 and 204****753 were held in the applicant’s name, the applicant has provided is a bare denial and a list of incomplete bank accounts numbers on his own version.

 

29.           The applicant averred that the Lonfin email had been tampered with, but he evidently also used his Gmail account for business purposes as appears from the WhatsApp conversation, but this was not provided.

 

30.           Even if it were to be accepted that the applicant had signed up at least 30 new clients over a period of 3 to 6 months as testified to by Mr Naidoo, and that this may have resulted in some confusion with contact numbers, it does not explain how the applicant’s own bank details would have appeared on the clients’ application forms. Mr Naidoo’s evidence does not assist the applicant with the specific grounds of complaint against him.

 

31.           The Tribunal finds that the third ground of reconsideration does not avail the applicant. Forging of managers’ signatures[18] in order to circumvent proper vetting of the new business applications are serious acts of dishonesty, and the applicant’s explanations were contradictory and unconvincing.

 

Fourth Ground

 

32.           Sanlam’s investigations were commenced whilst the applicant was still an employee of Sanlam. He resigned shortly after a further investigation request was submitted by Mr MK in April 2022. Mr MK was then advised that the applicant was already the subject of a forensic investigation. Sanlam’s investigation thus falls within the period contemplated by section 14(5) of FAIS and it is of no consequence that it was completed after the applicant had already left Sanlam’s employment.

 

33.           Sanlam acted in accordance with its duties under FAIS and brought the complaints to the respondent’s attention.

 

34.           Paragraph 8(2) of BN194 provides that in determining whether a person complies with the fit and proper requirements relating to honesty, integrity and good standing, the respondent may refer to “any information” in possession of the respondent or brought to the attention of the respondent.

 

CONCLUSION

 

35.           The Tribunal finds no grounds to interfere with the respondent’s decision to debar the applicant. The complaints against the applicant are of a very serious nature and were not capable of being explained away by the applicant.

 

SANCTION

 

36.           In terms of Section 153(6) of the FSR Act:

 

“The responsible authority that made a debarment order may, by order and on application by the debarred natural person—

 

(a)           reduce the period of the debarment order; or

 

(b)           revoke the debarment order.”

 

37.           This Tribunal’s powers are circumscribed by the provisions of Section 234(1) of the FSR Act.[19]

 

38.           The applicant did not request a reconsideration of the period of debarment in the alternative.

 

39.           Whilst there is no basis to interfere with the respondent’s findings, the applicant retains the right to approach the respondent for a reconsideration of the period of debarment as provided for in Section 153(6) of the FSR Act with due regard to his personal circumstances.

 

ORDER

 

40.           In the result, the following order is made:

 

40.1.         The application for reconsideration is dismissed.

 

Signed on behalf of the Tribunal on the 24^th day of July 2024.

 

GM Goedhart SC

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