From CompliNEWS | Financial Service Intelligence Watch
Moagi v Clientele: Sales agent induced unemployed customer to buy a product that she could not afford
Financial Services Tribunal (‘FST’ or ‘the Tribunal’)
The following matter was handed down by the FST on 21 November 2024:
• Moagi v Clientele Life Assurance Company Ltd (case number: FSP62/2024)
Fast facts
Sales agent induced unemployed customer to buy a product that she could not afford – She only wanted assistance with the app – Challenges debarment.
Summary
Background
Mr S Moagi (applicant) challenges his debarment from Clientele Life Assurance Company Ltd (respondent). The dispute arises from the applicant’s conduct as a sales agent, which was found to be dishonest and in violation of professional standards. The matter was brought before the Financial Services Tribunal under section 230 of the Financial Sector Regulation Act. Clientele Life Assurance Company Ltd is a registered Financial Services Provider under the Financial Advisory and Intermediary Services (FAIS) Act. The applicant had previously completed an induction training programme and passed a readiness assessment, demonstrating initial competence in understanding the company’s sales methodology and ethical requirements. Despite this training, the applicant was later accused of misconduct that led to his debarment.
The issue
The primary legal issues in this case are:
- whether the debarment process complied with the requirements of section 14(3) of the FAIS Act, specifically:
- providing adequate written notice
- sharing the debarment policy
- offering a reasonable opportunity to respond
- determining if the debarment was lawful, reasonable, and procedurally fair as required by section 14(2) of the FAIS Act
- assessing whether the applicant met the fit and proper requirements of honesty and integrity mandated by the FAIS Act
- evaluating the substantive grounds for debarment based on the applicant’s alleged misconduct during a client interaction.
Facts of the matter
- The Applicant completed his readiness assessment in September 2022 and was consequently fully apprised of the sales methodology, the respondent’s ethos, and section 2 of the FAIS General Code of Conduct (the Code), which requires that ‘A provider must at all times render financial services honestly, fairly, with due skill, care, and diligence and in the interest of clients and the integrity of the financial services industry’. Furthermore, the Code requires representatives to provide financial services that are:
- factually correct
- in plain language
- not confusing or misleading, and
- must allow the client the time to make an informed decision.
- On 14 August 2024, the applicant spoke with a client who required assistance with the Clientele app.
- The Applicant took it upon himself to enquire what had happened to an investment she had held with the respondent since 2022.
- During this discussion and by false pretences, the applicant lured the client into agreeing to activate a new Clientele Wealth Plan.
- This activation was against the background of the client advising the applicant that she had no money and no employment.
- It would appear that the applicant used the pretence that the client would receive payment of funds she had previously saved with the respondent, whereas, in fact, she was taking out a new product which would cost her money in terms of additional premium.
- The client cancelled the new product on the same day whereafter the respondent performed an investigation.
- The applicant was suspended with immediate effect on 13 September 2024. On the same day, the applicant was served with a Notice of a Disciplinary Hearing incorporating a debarment hearing.
- A debarment hearing was held on 18 September 2024, and the applicant admitted all of the facts alleged by the respondent.
- After hearing evidence, the chairperson of the debarment hearing found the applicant guilty of dishonest conduct and found that he no longer met the fit and proper requirement of honesty and integrity required by the FAIS Act.
Findings
The FST considered:
- In determining whether the debarment was conducted substantively and procedurally fairly, the jurisdictional factors in terms of the FAIS Act must be present.
- Section 14(3)(a)(i)–(iii) of the FAIS Act reads as follows:(3) A financial services provider must before debarring a person–
- give adequate notice in writing to the person stating its intention to debar the person, the grounds and reasons for the debarment, and any terms attached to the debarment, including, in relation to unconcluded business, any measures stipulated for the protection of the interests of clients;
- provide the person with a copy of the financial services provider’s written policy and procedure governing the debarment process; and
- give the person a reasonable opportunity to make a submission in response.
The FST held:
- The FST dismissed the applicant’s application for reconsideration.
- The Tribunal found no grounds to interfere with the Respondent’s decision to debar the applicant.
- Despite the applicant’s claim that he ‘did not mean’ for the events to unfold as they did, the Tribunal determined that the debarment was both procedurally and substantively fair.
- The applicant was afforded all necessary notices, attended the debarment hearing, and ultimately admitted to the facts alleged by the respondent.
The law
- Financial Sector Regulation Act 9 of 2017
- Financial Advisory and Intermediary Services Act 37 of 2002 (FAIS Act)
Other References
• Guidance Notice 1 of 2019 of the FAIS Act