FST decision summary: Verne Thomas & AGM Mapsure Risk Management (debarment)

Lee Rossini

Financial Services Tribunal (FST) – Case: FSP 5/2018 Verne Thomas (Applicant) and AGM Mapsure Risk Management (Pty) Ltd (Respondent)

Summary 
Mr Thomas, a former representative of AGM Mapsure Risk Management (Pty) Ltd, was debarred in June 2018. He applied to the Tribunal for a reconsideration of the debarment and for a suspension of the debarment.

Statutory duty
A statutory duty is placed on a financial services provider (an FSP) to debar a representative in their employ from rendering financial services if the FSP is satisfied on the basis of available facts and information that the representative:

• does not meet, or no longer complies with, the requirements referred to in section 13(2)(a) of the Financial Advisory and Intermediary Services Act 37 of 2002 (FAIS Act); or
• has contravened or failed to comply with any provision of the FAIS Act in a material manner.

Section 13(2)(a) provides that an FSP must be satisfied, at all times, that its key individuals and representatives, when rendering a financial service on their behalf, are competent to act and comply with the fit and proper requirements and any other requirements in subsection (1)(b)(ii).

To debar a person, the debarment procedures of an FSP must be lawful, reasonable and procedurally fair. In this regard, section 14(3)(a) states that an FSP, before debarring a person must:

• give adequate notice in writing to the person of the intention to debar, the grounds and reasons for the debarment and any terms attached to the debarment, including in any measures to protect the interests of clients in relation to unconcluded business;
• provide the person with a copy of the FSP’s written policy and procedure governing the debarment process; and
• give the person a reasonable opportunity to make a submission in response.

After the FSP has considered the response of the person, a decision whether to debar or not must be taken. The person must be notified in writing of the decision as well as their rights in terms of Chapter 15 of the Financial Sector Regulation Act 9 of 2017 (FSR Act), as well as any formal requirements in respect of the proceedings for the reconsideration of the decision by the Tribunal.

Section 38 states that a person aggrieved by the decision of an FSP to debar that person in terms of section 14, may apply to have the decision reconsidered by the Tribunal.

Background
Mr Thomas was employed by AGM Mapsure Risk Management (Pty) Ltd (‘the company’) as a director and insurance advisor. Believing Mr Thomas to be in breach of his employment contract and guilty of other transgressions, he was notified by the company on 20 June to attend a hearing on the 22 June to consider the allegations of misconduct against him.

On 20 June, the company also notified its compliance company to remove Mr Thomas from its licence at the Financial Services Conduction Authority (FSCA) as a mandated representative.

Mr Thomas was informed accordingly. He was removed from the FSCA register of representatives on 21 June. Mr Thomas asked for a postponement of the hearing. It was then set down for 25 June. He had also been given notice of resignation at the beginning of the month effective at the end of June.

The hearing on 25 June proceeded without Mr Thomas. He was found guilty and a recommendation was made that the charges were ‘serious enough to warrant summary dismissal and debarment from the FSCA’.
As a result, Mr Thomas was summarily dismissed and informed of this fact and his right to refer a dispute to the CCMA. However, he was not notified of the decision by the company to debar him. Nevertheless, the company notified the FSCA of the debarment on 28 June and the debarment was registered.

Failure by the company to comply with requirements
The company failed to follow the requirements of section 14(3) of the FAIS Act for the following reasons. Mr Thomas was not given notice of the company’s intention to debar him and he was not provided with the procedure governing the debarment process. The Tribunal found that the debarment was procedurally unlawful and unfair and did not comply with the statutory requirements of section 14(3)(a).

Powers of the Tribunal
The decision also dealt with the powers of the Tribunal. Section 234(1) of the FSR Act provides for the proceedings on an application for reconsideration of a decision.

The intention of the company was to debar Mr Thomas, however, it had failed to follow the procedural rights set out in section 14(3)(a). The Tribunal cannot act as a decision-maker (with regard to the debarment) if these rights have not been complied with. On this basis, the Tribunal set aside the decision to debar Mr Thomas and remitted the matter back to the company for further consideration.

Key takeaways
The formalities, as stated in section 14(3), must be integrated into the debarment procedures of an FSP.
A person who is debarred has procedural rights and these must be taken into consideration and given effect to by the FSP. Depending on the facts of the case, if these rights are ignored by the FSP, the debarred person can apply to have the decision reconsidered by the FST.

Read the full FST decision