Debarments in terms of FAIS

From the 1st of April 2018 (I'm sure you are quire tired of this date by now) the FSCA has changed the debarment process and rules a bit. In the past an FSP could debar the person themselves or could refer it to the FSB (now FSCA) to investigate and debar the person. The debarment was done under section 14A of the Act if the FSB did the conducted the investigation and debarment but that section is new removed by the Financial Sector Regulation Act 9 of 2017. This means that the responsibility rests with the FSP to debar any Key Individual or Representative that:

1. Does not meet the fit and proper requirements; and
2. has contravened or failed to comply with the provisions of the FAIS Act in a material manner.

The FSCA might only double check the reasons for debarment after it is done by the FSP. It is interesting to note that an FSP can do this if the person was a representative of the FSP at the time that the reasons for debarment occurred. Thus, it would seem, one can debar a person even if the person has left the FSP. This might open a can of worms where scores are to be settled and revenge is exacted but this may further be clarified once a guidance document is published.

At the time of writing this there is no guidance document on the process but it will be published in the near future as the FSCA stated on their website. The new forms for submitting the debarment to the FSCA can be found here.

For the full procedure according to the FAIS ACT you can read the extract from the amended FAIS Act below:

(1)
(a)     An authorised financial services provider must debar a person from rendering financial services who is or was, as the case may be-
 
(i)      a representative of the financial services provider; or
 
(ii)     a key individual of such representative,
 
if the financial services provider is satisfied on the basis of available facts and information that the person-
 
(iii)    does not meet, or no longer complies with, the requirements referred to in section 13(2)(a); or
 
(iv)    has contravened or failed to comply with any provision of this Act in a material manner;
 
(b)     The reasons for a debarment in terms of paragraph (a) must have occurred and become known to the financial services provider while the person was a representative of the provider.
 
(2)
(a)     Before effecting a debarment in terms of subsection (1), the provider must ensure that the debarment process is lawful, reasonable and procedurally fair.
 
(b)     If a provider is unable to locate a person in order to deliver a document or information under subsection (3), after taking all reasonable steps to do so, including dissemination through electronic means where possible, delivering the document or information to the person’s last known e-mail or physical business or residential address will be sufficient.
 
(3)     A financial services provider must-
 
(a)     before debarring a person-
 
(i)      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;
 
(ii)     provide the person with a copy of the financial services provider’s written policy and procedure governing the debarment process; and
 
(iii)    give the person a reasonable opportunity to make a submission in response;
 
(b)     consider any response provided in terms of paragraph (a)(iii), and then take a decision in terms of subsection (1); and
 
(c)     immediately notify the person in writing of-
 
(i)      the financial services provider’s decision;
 
(ii)     the persons’ rights in terms of Chapter 15 of the Financial Sector Regulation Act; and
 
(iii)    any formal requirements in respect of proceedings for the reconsideration of the decision by the Tribunal.
 
(4)     Where the debarment has been effected as contemplated in subsection (1), the financial services provider must-
 
(a)     immediately withdraw any authority which may still exist for the person to act on behalf of the financial services provider;
 
(b)     where applicable, remove the name of the debarred person from the register referred to in section 13(3);
 
(c)     immediately take steps to ensure that the debarment does not prejudice the interest of clients of the debarred person, and that any unconcluded business of the debarred person is properly attended to;
 
(d)     in the form and manner determined by the Authority, notify the Authority within five days of the debarment; and
 
(e)     provide the Authority with the grounds and reasons for the debarment in the format that the Authority may require within 15 days of the debarment.
 
(5)     A debarment in terms of subsection (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.
 
(6)     For the purposes of debarring a person as contemplated in subsection (1), the financial services provider must have regard to information regarding the conduct of the person that is furnished by the Authority, the Ombud or any other interested person.
 
(7)     The Authority may, for the purposes of record keeping, require any information, including the information referred to in subsection (4)(d) and (e), to enable the Authority to maintain and continuously update a central register of all persons debarred in terms of subsection (1), and that register must be published on the web site of the Authority, or by means of any other appropriate public media.
 
(8)     A debarment effected in terms of this section must be dealt with by the Authority as contemplated by this section.
 
(9)     A person debarred in terms of subsection (1) may not render financial services or act as a representative or key individual of a representative of any financial services provider, unless the person has complied with the requirements referred to in section 13(1)(b)(ii) for the reappointment of a debarred person as a representative or key individual of a representative.

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