FST case summary involving Magagula and Financial Sector Conduct Authority
By Shamaa Sheik
The following matter was heard in the Financial Sector Tribunal on 5 December 2019:
- Roy Calvin Magagula (Applicant) and Financial Sector Conduct Authority (Respondent) – case number: A9/2019 - [Date of decision – 25 February 2020]
Fast facts
Financial Advisory and Intermediary Services Act 37 of 2002 – fit and proper requirements – General Code of Conduct
Financial Sector Regulation Act 9 of 2017 – s 230 – application for reconsideration of decision – debarment
Summary
Background
An application was brought before the Tribunal for a reconsideration of the Financial Sector Conduct Authority’s (FSCA) decision to debar the applicant as a financial service representative (FSR).
The Applicant was previously disbarred for a period of 1 year, and in June 2019, he lodged his application for reconsideration of the Debarment Order.
In March 2017, the applicant had added on a funeral policy to a client’s life cover policy without the client’s consent. It was recorded that the client, Ms Nkwane, did not require funeral cover and that the applicant added it on of his own accord.
In May 2017, Ms Nkwane had laid a formal complaint against the applicant which was lodged with Sanlam. The Applicant claimed that Ms Nkwane had confirmed the funeral cover by signing for same on the requisite forms. However, the outcome of a forensic investigation by Sanlam confirmed that on comparison of the signatures on both policies, they were not effected by the same person.
The Sanlam forensic team then alleged that the Applicant -
- made a fraudulent misrepresentation to Sanlam by submitting a policy application with forged signatures of Ms Nkwane; and
- was in contravention of the FAIS General Code of Conduct in that he failed to render financial services honestly, fairly with due skill, care and diligence, and in the interest of Ms Nkwane.
Sanlam promptly recommended that the Applicant be debarred and the matter was referred to the FSCA.
In February 2019, the FSCA then issued a letter to the Applicant informing him of its intention to debar him. The letter cited the FSCA’s reasons to debar him among other formalities. The Applicant denied all allegations levelled against him including the findings of the Sanlam forensic team.
Grounds for reconsideration
The Applicant asked the Tribunal to reconsider the Debarment Order on the following basis, that -
- he was not afforded an opportunity to adequately deal with the allegations raised by Ms Nkwane;
- it was not clear when the interview between Sanlam and Ms Nkwane was done, and if it was done before the decision to disbar;
- he should have been provided with the records of the interview between Sanlam and Ms Nkwane;
- there was no evidence provided by the FSCA or the complainant; and
- there was no proof that he forged Ms Nkwane’s signature.
Issues for determination
The Applicant requested the Tribunal to determine the following issues:
- Whether the FSCA followed due process in arriving at the Debarment Order.
- Whether the FSCA was justified to find that the Applicant submitted two policies on behalf of the Ms Nkwane to Sanlam without her knowledge or consent.
The Tribunal sought to analyse the issues for determine from a procedural and substantive perspective as follows:
Procedural aspect of the matter
The Applicant submitted that he was not afforded an opportunity to deal with the allegations levelled against him; however, the records of the matter indicated the contrary. This was evidenced by his lengthy response to the Intention to Debar letter sent to him in February 2019.
The Tribunal found that there was no merit to the Applicant’s contention or demand that interview records between Sanlam and Ms Nkwane be made available to him before a decision to debar him was made.
Substantive aspect of the matter
The FSCA maintained that the Applicant had acted dishonestly by submitting two policies to Sanlam under the pretext that the said policy application forms were signed and authorised by Ms Nkwane. The FSCA also referred to the affidavit of Ms Nkwane where she stated that the Applicant agreed with her that none of the policies would be processed until the life cover quotation was received. The FSCA relied heavily on the affidavit of Ms Nkwane and on the Sanlam forensic team’s report in making its finding against the Applicant.
Findings
The Tribunal found that although the Applicant simply disputed that he forged Ms Nkwane’s signature but failed to produce evidence to the contrary. As a result, the Tribunal relied on the evidence by the Sanlam forensic team and the affidavit of Ms Nkwane.
The Applicant was found to have contravened core provisions of the Financial Advisory and Intermediary Services Act by failing to comply with the fit and proper requirements.
Order
The decision of the FSCA was upheld.
The Tribunal dismissed the application for reconsideration of the debarment as the Applicant failed to challenge the period of same.
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The law
- Financial Sector Regulation Act 9 of 2017 – ss 1; 58; 167(1); Schedule 2
- Financial Advisory and Intermediary Services Act 37 of 2002 – ss 7(1); 8A; 8(1)
- General Code of Conduct for Authorised Financial Services Providers and their Representatives – ss 2; 3(1)(d)
- Financial Sector Regulation Act 9 of 2017 – s 154(1)(a)
Case referenced
- S v Gentle 2005 (1) SACR 420 (SCA)