From CompliNEWS | Financial Service Intelligence Watch
Mpho Caroline Masebe v Standard Bank (when and under what circumstances a person becomes a representative subject to debarment)
Financial Services Tribunal (‘FST’ or ‘Tribunal’)
The following matter was handed down by the FST on 30 May 2023:
- Mpho Caroline Masebe (Applicant) and Standard Bank (Respondent) – (case number: FSP49/22)
Reconsideration application – ‘Representative’ as defined in Financial Advisory and Intermediary Services Act 37 of 2002 – When and under what circumstances a person becomes a representative subject to debarment.
Standard Bank debarred Ms Masebe on the basis that she had – during the bank’s recruitment process to appoint her as a financial planner – withheld material information which she was obliged to disclose and that she had made a false declaration. Standard Bank discovered during Ms Masebe’s on-boarding period that she had withheld information pertaining to her previous employment and dismissal by Standard Bank and that she failed to disclose her ‘REDS’ listing. Ms Masebe applied for reconsideration of the debarment decision.
Whether the debarment was justified in the circumstances.
Facts of the matter
Standard Bank offered Ms Masebe employment as an Executive Financial Planner commencing on 1 June 2022. As part of the recruitment process, Ms Masebe had been required to complete a ‘Honesty, Integrity and Good Standing Declaration’. In April 2022 Ms Masebe completed the document and confirmed that she had not previously been removed from any office of trust for dishonesty and that she had never previously ‘been refused a registration, approval, authorisation or license to carry out a trade, business of profession or had that registration, approval, authorisation or license suspended, revoked, withdrawn or terminated by a regulatory authority.’
In May 2022, Ms Masebe was informed by a written offer of employment that as a financial adviser, it was required of her to comply with the fit and proper requirements contemplated in terms of the Financial Advisory and lntermediary Services Act 37 of 2002 (‘FAIS Act’) – including personal character qualities of honesty and integrity, and the competence and operational ability to fulfil the responsibilities imposed by the Act.
Standard Bank later discovered that Ms Masebe had withheld information pertaining to the fact that she was previously employed by Standard Bank as a teller but was dismissed in 2016 for dishonesty and listed on the REDs System (ie ‘Register for Employees’ Dishonesty System’) – a system utilised by banks in the Republic for ensuring that employees who have been found guilty of dishonesty are precluded from obtaining employment within the banking system whilst they are listed on REDs. A REDs listing is valid for a period of five years.
Ms Masebe’s curriculum vitae, which was submitted during the course of the recruitment process, did not contain any information pertaining to her previous employment with and dismissal by Standard Bank. The discovery of the withheld information occurred during ‘Ms Masebe’s on-boarding’ – presumably, part of the process of uploading and registering Ms Masebe as a financial planner on Standard Bank’s system. Following the discovery of the discrepancy between the non-disclosure and the incorrect information in the Declaration and curriculum vitae and what Standard Bank had discovered during the on-boarding process, the applicant was invited to provide a written explanation. In her response she admitted having been previously employed and then dismissed by Standard Bank following a dishonesty finding. Although she initially stated that she did not recall all the details giving rise to the dismissal, she did in fact set out the reasons but contended that the listing on the REDs System was unknown to her and in any event had expired. Standard Bank did not accept Ms Masebe’s explanation and suspended her. A disciplinary hearing was held on 24 June 2022, and Ms Masebe was notified in August 2022 that following the disciplinary hearing, she had been found guilty of dishonesty for failing to make a material disclosure. Ms Masebe was dismissed on 24 July 2022 (although the letter informing her of the dismissal was dated 5 August 2022) and she was informed that as a result of the finding against her, she would be listed on REDs and would also be debarred. Standard Bank formally notified Ms Masebe on 23 August 2022 that she had been debarred. The debarment at the Financial Sector Conduct Authority was effected on the same date.
Ms Masebe applied for reconsideration of the debarment decision.
The FST considered that:
Section 2 of the General Code of Conduct requires a financial services provider at all times to render financial services honestly, fairly and with due skill, care and diligence in the interests of clients and the integrity of the financial services industry.
Section 8(1) read with section 7(1) of the Determination of Fit and Proper Requirements for Financial Service Providers and their representatives, 2017 require that the representative must be a person who:
- has personal character qualities of honesty and integrity
- is in good standing
- is competent
- continues professional development
- possesses operational ability and financial soundness.
Under the FAIS Act, an individual will be regarded as a ‘representative’ when the following conditions are present:
- The person must act in terms of a contract or mandate granted by the FSP to act on its behalf.
- She must be registered as such in a register retained by the authorised FSP, which register is to be updated on a regular basis and available to the Financial Services Conduct Authority for inspection purposes.
- The register must contain the representative’s names, business address, the categories of competence and finally whether she provides the financial services as an employee or a mandatory.
The allegations relating to Ms Masebe’s non-disclosure of crucial information were made on 28 April 2022 and discovered during the period that she was being on-boarded. Ms Masebe was debarred in August 2022 and the debarment was based wholly on the results of the disciplinary hearing.
The FST found that:
- Ms Masebe’s 2016 listing on the REDs is of no moment as it had expired the year before her recruitment.
- There is no indication that during the period when it was discovered that Ms Masebe had withheld information pertaining to her previous employment and dismissal by Standard Bank, she was in fact registered as a representative of Standard Bank. Nor is there any indication that she was engaged in rendering financial services to clients on behalf of Standard Bank at the time.
- The fact that a person is employed by a bank does not necessarily translate to that person being a ‘representative’ of the bank as contemplated in the FAIS Act.
- The appointment as a ‘representative’ of an FSP is a deliberate process which comes into effect following a proper engagement. The individual must be appointed or given a mandate to the effect that she is a representative of the FSP and her details must be maintained in a register as required under s 13.
- It is clear that although Ms Masebe was offered a position as an Executive Financial Planner, which offer was accepted, the process to onboard and register her as such was not yet complete – what was completed was the process to employ her. The discovery of Ms Masebe withholding information occurred early in the process and although she was appointed in May 2022, it would appear that she was almost immediately suspended and the matter was referred to Standard Bank’s disciplinary process. This led to a suspension of the process that would have led to Ms Masebe progressing to an appointment as a representative of Standard Bank.
- This Tribunal has on several occasions opined that labour relations issues do not constitute sufficient cause for debarment. A debarment must stand on its own and must be as a result of non-compliance with the provisions of the FAIS Act and the General Code of Conduct.
- On the evidence, at all material times, Ms Masebe was not a ‘representative’ as defined under the FAIS but an employee of Standard Bank. The debarment effected on 23 August 2022 was incorrect.
Conclusion and Order
Ms Masebe’s debarment is set aside.
Financial Advisory and lntermediary Services Act 37 of 2002 – ss 13(2)(a), 13(3), 13(4); 14(3)(a)(i) General Code of Conduct for Authorised Financial Services Providers and Representatives – s 2 Determination of Fit and Proper Requirements for Financial Service Providers – ss 7(1); 8(1) Financial Sector Regulation Act 9 of 2017 – s 230
Pension Funds Act 24 of 1956 – ss 30A(1); 37D(1)(b)(ii), 37D(1)(b)(ii)(aa),37D(1)(b)(ii)(bb).