From CompliNEWS | Financial Service Intelligence Watch
Determination involving Nthabiseng Mathafeni and Liberty Group Limited (Procedural fairness – fit and proper requirements)
Financial Services Tribunal (‘FST’ or ‘Tribunal)
The following matter was handed down by the Financial Services Tribunal on 17 January 2023:
• Nthabiseng Mathafeni (Applicant) and Liberty Group Limited (Respondent) – (case number: FSP 13/2022)
Fast facts
Reconsideration application – Debarment of financial services representative – Procedural fairness – Fit and proper requirements.
Summary
Background
Ms Mathafeni was debarred by Liberty Group Limited (Liberty) on the basis that she no longer complied with the fit and proper requirements of honesty and integrity.
The issue
Whether or not Ms Mathafeni’s debarment should be set aside on procedural and/or substantive grounds.
Facts of the matter
Ms Mathafeni was employed by Liberty Group limited as financial services representative (FSR) from 1 March 2016. In July 2021, Liberty’s Group Forensic Services (‘GFS’), received a request to investigate allegations of fraud made by two clients, Ms Mpungose and Ms Gumede.
In relation to a 2020 policy, Ms Mpungose stated that she did not give anyone authority to deduct or open another policy for her daughter, because she was already covered on an existing policy as an extended member. Ms Gumede noticed an unknown deduction on her payslip and disputed the policy to which the deduction related.
GFS investigated and discovered, amongst others:
- Both disputed policies were initiated by Ms Mathafeni.
- There were no application forms for the disputed policies because of the Covid-19 pandemic and lockdown.
- Discrepancies in Ms Mpungose’s physical and email addresses.
- Ms Mpungose’s nett and gross salaries were overstated.
- Ms Mathafeni called Ms Mpungose on 18 November 2020 and they had a 28-minute conversation and on 19 November 2020 Ms Mpungose requested that
her daughter be added as an extended member on the existing product (the burial plan).
- Commission of R545,35 was paid to Ms Mathafane’s account on 21 November 2021.
- An address (later confirmed not to be that of Ms Gumede) was used for Mr Gumede on the disputed policy and there were irregularities with payslip
information.
- Ms Mathafane had called Ms Gumede’s number on 19 October 2020 and the call lasted six seconds.
- Ms Mathafane received commission of R1 906,79 in respect of the policy disputed by Ms Gumede.
- GFS conducted a telephonic interview with Ms Mathafane in August 2021 where she was informed of the allegations made against her and was afforded and
opportunity to respond. She advised, amongst others:
- She could not understand how Ms Gumede could not have knowledge of the policy as she also helped Ms Gumede with her cash-back bonus.
- The clients were not truthful as she did talk to them over the phone and they initiated the policies.
- Regarding the discrepancies in salaries, Ms Gumede provided an estimation as they could not have access to her payslip as it was lockdown and Ms
Mpungose’s salary slip used was a bonus payslip.
- As regards the discrepancies in addresses, they could not pick up some of the addresses due to the system used as the areas are remote.
GFS concluded that the disputed policies were initiated without the clients’ knowledge and consent, and the information provided to Liberty was false and inconsistent with the information received from clients and their respective credit history.
Thereafter, a notice of formal enquiry was initiated by Liberty in January 2022 (Notice of Inquiry), titled ‘Documentary Process’. The process is provided for in the terms of the Guidelines for Corrective Action (the Guidelines). It contained the following information:
- The allegations and legal basis for the charges
- Liberty’s evidence supporting the allegations
- an invitation to Ms Mathafeni to provide additional information to the charges, to supplement her statement
- advice to Ms Mathafeni that the procedure for the documentary enquiry was contained in the Guidelines which were attached, and
- a statement warning Ms Mathafeni that should she be found guilty of any or all of the charges, it may result in debarment.
The adjudicator found that Ms Mathafeni had gone to great lengths to carry out the fraudulent conduct, and displayed intentions to mislead and/or be dishonest. Liberty thereafter issued the Notice of Outcome of the Corrective Inquiry following the recommendations of the adjudicator and debarred Ms Mathafeni for not complying with fit and proper requirement of honesty and integrity.
Ms Mathafeni applied to the FST for reconsideration of the debarment decision and raised procedural and substantive grounds. She contended that:
- Liberty has a duty to explain what debarment is, and the Liberty official did not properly explain the consequences of debarment to her.
- She was dismissed without a disciplinary hearing and was not given an opportunity to give her side of the story under the Labour Relations Act 66 of 1995 (the
LRA)
- Ms Mathafeni also raised substantive points and disputed the truthfulness of the clients.
Findings
The FST considered:
- The FAIS Act requirements regarding a lawful, reasonable and procedurally fair debarment process.
- The Notice of Inquiry clearly stated the possible consequences of being found guilty of any or all of the charges may result in being debarred.
- The honesty and integrity requirements for representatives in s 8 of the Fit and Proper Requirements.
- The requirement in s 2 of the General Code of Conduct that a provider must at all times render financial services honestly, fairly and with due skill, care and
diligence, and in the interest of clients and the integrity of the financial services industry.
- The grounds of reconsideration challenged the inconsistency of the adjudicator’s report and the GFS report in matching of identity numbers and cell phone numbers used, and the differences in the residential addresses of the clients and the discrepancies in salaries were explained.
- Ms Mathafeni does not explain why she did not follow the instructions of Ms Mpungose contained in a letter dated 19 November 2020 when she instructed the advisors to include her daughter in her old policy as an extended member.
- The contents of the clients’ affidavits wherein the clients denied having given authorisation for or having knowledge of the disputed policies.
The FST found that:
- Nothing in the process could have prevented Ms Mathafeni from seeking clarity on the consequences debarment.
- The documentary enquiry procedure as covered in the Guidelines is not inimical to the rights provided for in ss 14(2) and 14(3) of the FAIS Act. This is in
accordance with the audi alteram partem maxim, which is a fundamental principle of administrative justice and a component of the right to just administrative action in s 33 of the Constitution.
- Ms Mathafeni had more than one opportunity to put her version before the decision made by Liberty. The documentary inquiry procedure which led to the debarment cannot be faulted.
- The failure of Ms Mathafeni to explain her disregard of Ms Mpungose’s 19 November 2020 letter does not assist her. On this point alone, no reason can be found to interfere with Liberty’s decision.
- The FST was not persuaded by the submissions of Ms Mathafeni disputing the clients’ truthfulness.
- Liberty’s version that the clients did not consent or authorise the initiation of the disputed policies was not discredited.
Conclusion and Order
The application for reconsideration was dismissed.
The law
- Constitution of the Republic of South Africa, 1996 – s 33
- Financial Advisory and Intermediary Services Act 37 of 2002 – ss 13(2)(a)(i); 14(2) and (3)
- General Code of Conduct for Authorised Financial Services Providers and Representatives, 2003 – s 2
- Determination of Fit and Proper Requirements, 2017 (Fit and Proper Requirements) – s 8
- Financial Sector Regulation Act 9 of 2017 – s 230
- Labour Relations Act 66 of 1995
Cases considered
• Financial Services Board v Bartram and Another 2018 (1) SA 139 (SCA)
Read the Full text of the FST Decision here:
Notes
The Financial Services Tribunal (FST) is an independent body established in South Africa to provide an alternative means of dispute resolution for consumers of financial services. The FST is responsible for resolving disputes between consumers and financial services providers, such as banks, insurance companies, and other financial institutions.
The FST was created to provide consumers with an efficient, cost-effective and impartial alternative to going to court. It was established in terms of the Financial Sector Regulation Act 9 of 2017, and it is responsible for hearing and determining disputes between consumers and financial services providers.
The FST is made up of a panel of experts, including legal practitioners, financial services professionals, and representatives of consumer organizations, who are appointed by the Minister of Finance. The FST is responsible for hearing and determining disputes that are brought before it, and it has the power to make binding decisions.
The FST is an alternative to court proceedings, and it’s a relatively faster and cheaper option for consumers to resolve disputes with financial services providers. It can also help to provide clarity to the industry on legal and regulatory matters, as well as provide guidance on how to handle disputes in future.