FST case summary involving Thomas and AGM Mapsure Risk Management Consultants (Pty) Limited

By Shamaa Sheik

The following matter was heard in the Financial Services Tribunal on 25 June 2019:

• Verne Thomas (Applicant) and AGM Mapsure Risk Management Consultants (Pty) Limited (Respondent) – case number: FSP 3/2019

Fast facts
Determination of Fit and Proper Requirements, 2017 – read with s 8(1) of FAIS Act – compliance with 'fit and proper' requirements
Financial Advisory and Intermediary Services Act – s 14 – debarment – requirements to debar – procedural fairness – bias
Financial Sector Regulation Act – s 230 – applications for reconsideration of decisions

Summary

Background
This was an application for reconsideration in terms of s 230 of the Financial Sector Regulation Act 9 of 2017 (FSRA). The applicant sought to have the decision of the respondent to debar him dismissed.

The background to this matter is briefly that the respondent operated under a separate legal entity, as a consultancy (Consultancy). The applicant was appointed as a director and insurance advisor of the Consultancy since March 2014. A document summarising the arrangement between the parties was signed citing certain conditions such as direct conflicts of interest, among others.

This was the second occasion on which the matter was brought to the Tribunal. In this instance, the applicant sought reconsideration of the decision to debar him on the following grounds:

• that the respondent still failed to comply with s 14 of the Financial Advisory and Intermediary Services Act 37 of 2002 (FAIS Act),
• that the debarment had been time barred,
• that the respondent was biased, and
• that the respondent failed to comply with the peremptory provisions of s 14(2)(a) of the FAIS Act which required the respondent to ensure that the debarment process was lawful, reasonable and procedurally fair.

The complaint before the Tribunal

(a) Whether the debarment was out of time

In making a finding on this issue, s 14 that provides for the debarment of representatives, was unpacked in considerable detail and applied to the present facts. In particular, reference was made to s 14(5):

'A debarment in terms of section (1) that is undertaken in respect of a person who no longer is a representative of the financial services provider must be commenced not longer than six months from the date that the person ceased to be a representative of the financial services provider.'

In this matter the applicant was removed as a representative in June 2018. After the matter was remitted to the respondent, the respondent served a valid Notice of Debarment (Notice) on the applicant in November 2018 within six months. The debarment hearing was then set down for early December 2018, which was also within the period the applicant complained had been exceeded.

The Tribunal was not persuaded by the applicant’s interpretation of s 14(5) as the fact that the respondent served a valid Notice which marked the commencement of the procedural steps for debarment, was not appreciated by the applicant. The Tribunal also noted that even on its own interpretation, the applicant failed to show that any delay was occasioned by a fault on the part of the respondent.

(b) Whether there was bias

The applicant argued that the respondent was biased in its decision to debar him. He claimed bias on two grounds:

• First, that the respondent had initially convened a process to be presided over by an independent chairperson but that the respondent later abandoned such process without good cause and instead assumed control of the process and thereafter conducted proceedings in a biased and partial manner.
• Secondly, that the respondent failed to consider his written submissions before arriving at the decision to debar him.

The Tribunal highlighted that when the applicant was served with the Notice, he was given the option to elect to proceed by way of an enquiry on the merits which would be presided over by an independent chairperson or he could make written submissions and submit same to the respondent. The applicant did not make an election within the stipulated five day notice period and had instead chose to make written submissions instead.

The rules relating to bias states that-

• a mere apprehension of bias, no matter how strongly and genuinely it was felt, is not sufficient
• It must be objectively verified, and it must be reasonable in the circumstances.

The Tribunal found that the respondent acted within its rights to dismiss the independent chairperson once the applicant had chosen not to proceed with the leading of oral evidence. The withdrawal of the independent chairperson was prompted by the applicant’s election and was seen as a consequence that the applicant anticipated. As such, it was found that it did not amount to a display of bias.

The removal of the independent chairperson alone did not cast doubt on the respondent’s impartiality. The FSP’s conduct was reasonable in light of what the Notice stipulated.

Tribunal’s findings

When the respondent removed the applicant as its representative, it was on the basis that it had clear evidence that the applicant shared clients lists with outsiders who were also the respondent’s competitors. The applicant also referred clients to a number of competitors and operated in certain areas when he was not certified to do so.

The applicant believed that he was entitled to deal with the business of the Consultancy in the manner that he did adding that he was allowed to conduct business with third parties. He also claimed that he was facilitating business between clients and third parties to whom business was being referred in an effort to find alternative employment.

The Tribunal moved to determine whether the applicant was fit and proper against the requirements of s 8(1) of FAIS read with the 2017 Determination of Fit and Proper requirements. The definition of intermediary services was also highlighted:

' "intermediary service" means, … any act other than the furnishing of advice, performed by a person for or on behalf of a client or product supplier—

(a) the result of which is that a client may enter into, offers to enter into or enters into any transaction in respect of a financial product with a product supplier …'

In light of this context, the Tribunal found that that the applicant gave various clients guidance and recommended products when referring them to third parties. This act was a breach of the FAIS Act because in rendering such advice, the applicant also acted as an intermediary. As the applicant had received a commission for referrals it was a clear indication that he provided advice and intermediary service.

The Tribunal was certain that applicant had breached the requirements of the FAIS Act relating to honesty and integrity. He was also found to be in breach of the FAIS Act in respect of his conduct.

The applicant accordingly no longer met the fit and proper requirements and consequently fell short of the standard required of him as a representative.

Order
The application was dismissed and no order as to costs was made.

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The law

• Financial Advisory and Intermediary Services Act 37 of 2002 – ss 1; 8(1); 14; 14(2)-(3); 14(5)
• Determination of Fit and Proper Requirements, 2017
• Financial Sector Regulation Act 9 of 2017 – s 230

Case references

• Raswiswi v CCMA & others [2011] 9 BLLR 911 (LC)
• South African Commercial Catering and Allied Workers Union and Others v Irvin & Johnson Ltd (Seafoods Division Fish Processing) 2000 (3) SA 705 (CC)

Full text of the FST Decision