Forever debarred: The ineffective framework for reappointment of debarred representatives under the Financial Advisory and Intermediary Services Act

Ayanda Nondwana, Partner, Eversheds-Sutherland (SA) Inc.
Jade Werner, Associate, Eversheds-Sutherland (SA) Inc.

In a precedent setting judgement in Peterson v Old Mutual Insure Ltd and Others [2026] ZAGPJHC 519 (8 May 2026), the Johannesburg High Court has declared the Determination of Requirements for the Reappointment of Debarred Representatives (2003) (“the Determination”) ultra vires and invalid.

Background
The Court was seized with an application for an order uplifting Mr. Peterson’s debarment and permitting his reappointment as a financial services representative in terms of the Financial Advisory and Intermediary Services Act, 2002 (“FAIS Act”).

Mr. Peterson was on 1 November 2016 employed by Old Mutual Insure Ltd (“OMI”) as a sales consultant within the vehicle insurance department of OMI, which is a duly registered financial services provider in terms of the FAIS Act. On 1 July 2017, Mr. Peterson completed the first level regulatory examination, enabling him to render financial services in terms of the FAIS Act. On 26 October 2017, OMI instituted disciplinary proceedings against Mr. Peterson for misconduct relating to dereliction of duty/dishonesty. On 30 October 2017, OMI notified Mr. Peterson in writing that he had been found guilty at the disciplinary hearing of misconduct constituted by gross dereliction of duty/dishonesty involving failure or neglect of duty that has or could have serious consequences for OMI, its employees or other persons, in that, he had deviated from the standard of conduct between 31 July and 13th October 2017 on several client policies by failing to follow correct underwriting guidelines and in so doing, disregarded business rules/practices with an intention of making a sale.

The material facts relied on by OMI in its finding in the disciplinary hearing were that in assessing the risk and accurately determining the premium, Mr. Peterson had captured information incorrectly which resulted in premium prejudice, he had misrepresented and failed to disclose the basic excess applicable to the various clients, he had in many cases provided clients with incorrect premium amounts, and he had also in many cases failed to discuss the initiation fee with clients which resulted in the subsequent cancellation of the policies. Based on the findings of the disciplinary hearing, OMI terminated Mr. Peterson’s employment.

On 16 November 2017, OMI issued Mr. Peterson with a notice of debarment and updated its register and notified the Financial Services Board, which in turn, updated its central register relating to the status of representatives.

Mr. Peterson contended in his affidavit before the Court that it is impossible or impractical to implement the Determination because no financial services provider will employ him as a debarred representative.

The role of section 13 of the FAIS Act
Section 13 of the FAIS Act regulates the appointment of financial services representatives. It establishes that a representative may only act under the authority and oversight of an authorised Financial Services Provider (“FSP”).

Section 13 of the FAIS Act establishes that the oversight of FSP’s over representatives is premised on an existing legal relationship, founded in employment or agency. The FSP is responsible for vetting, appointing, supervising and, where appropriate, debarring its representatives.

Central to the judgement is the interpretation of section 13(1)(b)(ii), which reads:

“ (1) A person may not-

(b) act as a representative of an authorised financial services provider, unless such person-
(ii) if debarred as contemplated in section 14, complies with the requirements determined by the registrar by notice in the Gazette, for the reappointment of a debarred person as a representative;”

The Determination referred to in section 13 were published in the Government Gazette by the Registrar on 8 August 2003.

The fundamental defect
The Court found that the Determination improperly extended the role of FSPs beyond that envisaged under section 13.

The Determination defines reappointment as “the reappointment of any such person as a representative of any authorised financial services provider (whether being the provider which debarred such person or not), in order to act in accordance with the provisions of section 13(1)(b)(i) of the Act”. Section 13(1)(b)(i) provides that representatives may only render financial services under the supervision and control of an FSP.

Accordingly, the Court remarked that the Determination creates a cyclical and self-defeating system whereby a debarred representative cannot find employment with an FSP due to their debarred status and yet is unable to remedy that status through reappointment because such employment is unattainable while the debarment remains in force.

Ultimately, the Court found that the Determination was ultra vires to section 13 of FAIS Act, as it imposed obligations on FSPs that fall outside both the scope and purpose of the empowering provision, thereby underscoring the limits of subordinate legislation.

The Court further held that section 13 of FAIS Act confers oversight authority on FSPs only in relation to representatives with whom it has a relationship governed either by contract or agency. The Determination, however, requires FSPs to exercise oversight in relation to individuals with whom they have no such relationship and, likely, no willingness to engage. In doing so, it effectively expands the role of FSPs beyond what the legislature contemplated.

The Court’s proposed solution
Having identified the flaw, the Court turned to the underlying intention of the legislature. It concluded that section 13(1)(b)(ii) of FAIS Act envisages that reappointment decisions should be made by an independent, extra-curial body, rather than by individual financial services providers.

The Court reasoned that such panel would be appointed by the Registrar in consultation with the Advisory Committee.

Accordingly, the Court did not grant the relief sought by Mr. Peterson, but instead declared the Determination invalid and suspending such declaration until 1 December 2026 to allow the competent authority to correct the defect, i.e. the publication of an amended Determination and the establishment an independent panel for the review and granting of applications for reappointment of representatives under the FAIS Act.

Conclusion
Evidently, the judgement exposes a fundamental misalignment between section 13 of the FAIS Act and the Determination. The declaration of invalidity of the Determination has far reaching implications to the pending reappointment applications of debarred representatives and invariably, the judgment has creates an immediate and practical uncertainty in terms of the regulation of financial services representatives. While the Court’s recommendations provide a clear way forward, the full extent of the prejudice suffered by representatives under the impugned regime has yet to be determined.