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Insurer debars multiple award winning adviser

27 January 2014 Jonathan Faurie
Jonathan Faurie, FAnews Journalist

Jonathan Faurie, FAnews Journalist

After a recent social tragedy, a top Government official confidently stated that South Africa has lost its moral compass. While many within the crowd enthusiastically agreed with this sentiment, there are more than a few people who would ask the question: have you only just arrived at this realisation?

And this does not just apply to the violent crimes, which receive major media attention. Since the birth of South Africa’s democracy 20 years ago, two of the unwelcome realities that South Africans have to live with are rampant fraud and corruption. While corruption from government officials is unacceptable there is not a great level of trust offered to Government by the public. But what happens when trust is broken in a relationship which is based solely on trust?

Committing an unthinkable crime

The relationship between a policyholder and their broker/adviser has always been seen as one of absolute trust. This even extended so far that at one point in time, a relationship which went beyond a professional relationship was not unheard of. Therefore, breaking this trust is one of the most unthinkable crimes in the world.

This was the case when Old Mutual took the decision to debar James Stern, who has a résumé which reads like a top honours student. In fact, Stern won Broker of the Year in 2008, 2009, 2010 and 2011. So it is inconceivable that Stern could be debarred because he did not comply with personal character qualities of honesty and integrity which are pointed out by the Financial Advisory and Intermediary Services Act of 2002.

The duties of a broker/adviser must be governed by a code of conduct which must be drafted in such a manner as to ensure that the clients being rendered financial services will be able to make informed decisions and that their reasonable financial needs regarding financial products, will be appropriately and suitably satisfied.

For these purposes, authorised financial services providers, and their representatives, are obliged by the provisions of the code to act honestly and fairly, and with due skill, care and diligence, in the interests of clients and the integrity of the financial services industry.

Appropriate action

While Old Mutual would not comment in detail on the events leading up to the debarment of Stern, Old Mutual Executive General Manager for Broker Distribution, Lee Nakan, points out that there were discrepancies.

"Stern’s debarment was related to some of his dealings with us while he was a representative of an independent brokerage and before he joined Old Mutual as a mandated agent in late 2012. We found discrepancies in his paperwork in so far as he duplicated customer signatures and altered postal addresses to mislead customers and misrepresent facts to Old Mutual,” says Nakan.

Old Mutual was contacted by three of Stern’s previous clients regarding his wrongful actions. The company then initiated an investigation followed by a hearing. His mandate agreement with Old Mutual was then terminated and the company debarred him. In addition, Old Mutual initiated a process to scrutinize the rest of the business submitted by Stern while acting as an Old Mutual representative.

How much damage has been done?

Giving misappropriated advice to clients for the benefit of personal gain is one thing, but duplicating customer signatures and altering postal addresses to mislead customers and misrepresent facts to Old Mutual, is a far greater misdeed.

Considering the information provided by Nakan, not only did Stern fail to comply with personal character qualities of honesty and integrity which is pointed out by the FAIS Act, his actions could also be constituted as fraud.

How does one recover from this? Nakan points out that the debarment is not permanent and that Stern can approach the Financial Services Board after a year in order to become reinstated. However, has too much damage been done? How can any member of the public trust Stern? How can a product provider now trust Stern? There is no doubt that Old Mutual was unaware of Stern’sactivities until they were pointed out by his previous clients. And Old Mutual acted swiftly and correctly in distancing themselves from him.

Editor’s Thoughts:
Trust is the basis of any good relationship. And while the bond of trust between a broker/adviser and the policyholder is not as sacred as that of the bond of trust with a priest, lawyer or doctor, experience has shown that the public is very unforgiving when it comes to breaking this bond. Perhaps the FSB and Old Mutual are only the start of Sterns punishment? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Note:
While Old Mutual did confirm that Stern won Broker Of The Year with them in 2008, he won his other Broker Of The Year titles at different companies.



Comments

Added by venishree chetty, 13 Sep 2018
Good day

What are the consequences when admin staff and brokers are forging client signatures and altering clients cover amount and premiums without clients consent.
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Added by Zahid, 02 Jun 2015
I was a broker lured to OM for a sign on bonus. It became clear very soon that I was meant to churn the risk book of my previous insurer. Replacement of polices was encouraged, openly. I resigned after 6 months , as I could not work in that sort of environment.The bonus had to be repayed.
There are always 2 sides to a story. An "award winning broker" would not forge a signature or alter adresses on a proposal.
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Added by Johan, 30 Jan 2014
I say to the comment from Johan Liebenberg:
Give that man a Bell's !!!
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Added by Lucille, 27 Jan 2014
I will never trust this guy again if I were to judge whether he should be able to work in the finance world again. Once a fraud always a fraud. This I have seen many times in my life in the financial industry.
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Added by Arthur Argent, 27 Jan 2014
What Richard Stearn did hurts not only his customers, who have confided in him, but the Industry in which he has worked.
For one to win Broker of the year for four years in a row....you have to be a special person. What does he say?
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Added by Kobus, 27 Jan 2014
I do not know if this is before or after the fact,but this is on internet.
INTRODUCTION TO QUANTUM INVESTMENTS (PTY) LTD

Quantum Investments (Pty) Ltd is a private company, providing financial advisory services.
We specialize in investment management, business management and tax structuring.
Quantum Investments is an Authorised Financial Services Provider in terms of the
Financial Advisory & Intermediary Services Act. Our FSP licence number is 25664.
The directors of the company are Messrs JR Stern, RA Drinkwater & PN Pitsiladi.


1. CONTACT DETAILS

Information Officer: James Stern (Managing Director)
Email address:

Postal Address:
james@quantuminvestments.co.za

PO Box 63758, Greenacres 6057

Physical Address: Office No 9, Brookes on the Bay
Corner of Beach Road & Brookes Hill Drive
Summerstrand, Port Elizabeth

Telephone Number: (041) 584 0074
Fax Number: (041) 584 0016

Auditors & Company Secretary: PKF (PE) Incorporated

Company Email Address: info@quantuminvestments.co.za
Website: www.quantuminvestments.co.za
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Added by Johan Liebenberg, 27 Jan 2014
The proof of the ongoing debate from insurers; for them Award winning advisers means money spinning advisers not honest guys who provide average business. Old Mutual should take part of the blame because they judge 'award winning advisers' by commission generated and lapse percentage, a very wrong way to try and squeeze more business out of an adviser.
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Added by AZ, 27 Jan 2014
As iemand hierdie soort onetiese praktyke bedryf het, word dit nie uitgewis net omdat hy/sy 'n tyd lank van die rol geskrap is nie. Dit is algemeen bekend dat diesulkes onder ander FSP's se lisensies steeds in die bedryf voortgaan. Dit is ook nie vreemd dat direkteure van onwettige skemas waarvan beleggers geld verloor het, ook net weer in 'n ander vorm van besigheid in die bedryf opduik nie. Vrot appels moet PERMANENT as FSP's van die rol geskrap bly !!
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Added by Leagle, 27 Jan 2014
Hats off to Old Mutual for the courage to sack such a money-spinner. Now how about the other brokers that do the same things and even worse.
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Added by Cynical Simon, 27 Jan 2014
One wonders which brokerage he worked for before..
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