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Madubung v Clientele Life (FSP 1/2024) [2024] ZAFST 9 (19 March 2024)

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IN THE FINANCIAL SERVICES TRIBUNAL

 

CASE No: FSP 1/2024

 

In the matter between:

 

KELLY PONTSHO MADUBUNG                                    Applicant

 

and

 

CLIENTELE LIFE                                                            Respondent

 

Tribunal Panel:            Judge LTC Harms (Chair), KO Magano

 

Summary: Reconsideration of the debarment in terms of section 230 of FSR-Debarment in terms of section 14 of FAIS Act-fit and proper requirement- Representatives are required to render financial services honestly, fairly, with integrity, due skill, and diligence, and in the interest of clients at all times.

 

DECISION

 

Introduction

 

1.  The applicant, Ms Kelly Pontsho Madubung, approached this Tribunal in terms of section 230 of the Financial Sector Regulation Act 9 of 2017 ("the FSR Act"), challenging the respondent's decision to debar her ("the application").

 

2.  The respondent, Clientele Life Assurance Company Limited, is an authorized Financial Services Provider ("FSP') and the decision maker.

 

Background Facts

 

3.  The respondent employed the applicant as a Telesales Consultant. By virtue of her role as a Telesales consultant, she is a representative in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002 ("the FAIS Acf').

 

4.  On 18 October 2023, the applicant called a client to sell that client a Legal Benefit Policy. During that call, the client made it clear to the applicant that he was not interested in taking out a Legal Benefit Policy. However, the client requested that the applicant call later. There was no further interaction between the client and the applicant.

 

5.  On 20 October 2023, the applicant activated a policy without the client's consent. She used the client's profile which was already in the system to activate the policy. Her conduct breached the respondent's protocol and policies.

 

6.  On 5 December 2023, the respondent issued the applicant with a notice of disciplinary hearing and notified her of its intention to debar her. At the same hearing, the respondent sought to deal with the disciplinary and debarment issues.

 

7.  The charge against the applicant was that she engaged in a seriously dishonest practice. The dishonest practice referred to herein is the applicant's conduct of activating a policy without the client's consent. The basis for the intended debarment was that the applicant no longer met the requirements of a fit and proper person.

 

8.  The applicant admitted to using the client's details to activate the policy without the client's permission, thereby breaching the respondent's policies and protocol. The reason for her conduct is that she was pressured and desperate for a sale.

 

9.  On 12 December 2023, the chairperson of the disciplinary hearing found the applicant guilty of the charge leveled against her. According to the chairperson, the applicant was dishonest in activating a policy using a client's profile without permission. The applicant was familiar with the respondent's protocols and was aware that she did not follow them.

 

10.  The chairperson also decided to debar the applicant because of her dishonesty and failure to meet the requirements of a fit and proper person.

 

11.  On 13 December 2023, the respondent served the applicant with a notice of summary dismissal from the respondent's service with immediate effect, as a result of her being found guilty of the charges against her. The respondent also debarred the applicant.

 

Grounds for the Reconsideration Application

 

12.  The applicant does not challenge the reason for her debarment.

However, she pleads for leniency as she feels the debarment is too harsh. According to the applicant, the decision to debar her is disproportionate and unfair because she is, among other things, a first­ time offender. She also relies on her previous exceptional performance as one of the grounds for reconsideration. The applicant explains that she was under severe pressure at the time of the incident, which affected her judgment.

 

13.  The parties have waived their rights to a formal hearing. Consequently, this application for reconsideration will be decided on the record before the Tribunal.

 

The Relevant Legal Principles

 

14. 

The provisions of the FAIS Act govern the debarment of FSPs, representatives, and key individuals. The Supreme Court of Appeal in Associated Portfolio Solutions and Ano v Sasson and Others[1] helpfully summarised the most relevant provisions of the Act as follows:

 

"[22] The Act decrees a close supervisory responsibility by FSPs over their representatives. In terms of section 13(1)(b)(i), no person may act as a representative of an authorised FSP unless, prior to the rendering of a financial service, he or she provides to clients' confirmation certified by the FSP, that the FSP accepts responsibility for the activities of the representative performed within the scope of or within the course of implementing a service contract with the FSP. Section 13(a) prescribes that a representative must meet the 'fit and proper' requirement. In terms of section 13(2) (a) an authorised FSP must, at all times, be satisfied that its representatives and key individuals are competent to act and that they comply with the fit and proper requirement. FSPs are charged with the duty to take reasonable steps to ensure that representatives comply with any applicable code of conduct and applicable laws in the conduct of business.

 

[23]  Under section 14 of the FAIS, the FSPs bear the duty to debar representatives, who do not meet the fit and proper requirement. Section 14(1)(a) provides that an FSP must debar its representative and key individual if satisfied that he or she (the representative and key individual} does not meet, or no longer complies with the requirements set in section 13(2)(a), or has contravened any provision of the Act in a material way.

 

[24]  Once debarment has been effected, the FSP must immediately withdraw any authority that may still exist for the person to act on its behalf, remove the name of the debarred person from the register of representatives, immediately take steps to ensure that the debarment does not prejudice the interests of clients, notify the FSB of the debarment within five days, and provide the authority with the reasons for the disbarment. A (previously) debarred person may only carry on business or render financial services to clients or act as a representative or a key individual of an authorised provider if he or she complies with the requirement set in section 13(1)(b)(ii) of the FAIS Act."

 

15.  Section 14 (1) of the FAIS Act, 2002 provides that:

 

''An authorized financial services provider must debar a person from rendering financial services who is or was, as the case may be a representative of the financial services provider if the financial services provider is satisfied on the basis of available facts and information that the person does not meet, or no longer complies with, the requirements referred to in section 13 (2) (a) of the FAIS Act, 2002 or have contravened or failed to comply with any provisions of this Act in a material manner."

 

Analysis and Conclusions

 

16.  The applicant does not dispute that she knew the respondent's policies and protocols. At the time of activating this policy, the applicant was aware that her conduct was wrong. Despite her knowledge of the wrongfulness of her conduct, she proceeded to activate the policy without having concluded a sale with the client.

 

17.  It is clear from the record that the applicant wanted to create an impression that she concluded a sale and reached her target, but she did not. This conduct is serious enough to impugn her character of honesty and integrity because she acted with the intention to mislead the respondent. It also compromised her integrity.

 

18.  She also failed to act in the client's best interest because she used the client's details for her own benefit without due regard to the potential consequences of her actions to the client. This conduct has the potential to cause reputational risks for the respondent.

 

19.  The applicant's conduct demonstrates dishonesty and lack of integrity.

She cannot be trusted to render financial services honestly, fairly, with integrity, and with due skill and diligence, especially when under pressure to meet sales targets.

 

20.  We note the applicant's submission that she is a first-time offender. The difficulty she faces is that as a representative, she must render financial services honestly, fairly, with integrity, with due skill and diligence, and

in the interest of clients at all times. Therefore, the submission that she is a first-time offender does not assist her.

 

21.  There are no valid reasons why the Tribunal should overturn the respondent's decision to debar the applicant. The applicant no longer meets the fit and proper requirements; on that basis, the respondent is obliged to debar her in terms of the FAIS Act.

 

22.  Thus, the following order is issued:

 

1) The application to set aside the debarment of the applicant is dismissed.

 

Signed on behalf of the Tribunal

 

KDMAGANO