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Fraudulent commission gets financial provider’s representative debarred!

13 March 2021 Fairbridges Wertheim Becker

The financial advisory services sector is regulated by the Financial Advisory and Intermediaries Services Act 37 of 2007 (“FAIS”). Section 14 of FAIS states that an authorised financial services provider must ensure that any representative of the provider who no longer complies with the requirements referred to in FAIS is prohibited by such provider from rendering any financial service. This is done by withdrawal of any authority to act on behalf of the provider, and that the representative’s name, and the names of the key individuals of the provider, are removed from the register of the financial services provider

The above statutory provision was recently applied by The Financial Services Tribunal (“the Tribunal”) in the application for reconsideration brought by Nikita Govindsamy (“Govindsamy”), the erstwhile manager at Outsurance Insurance Company Limited (“Outsurance”) against decision to disbar her as a financial representative. Dissatisfied about the gavel that was pounded by Outsurance, Govindsamy brought an application before the Tribunal for a reconsideration of the decision. 

Outsurance has an incentive for staff who recommend prospective employees who meet the specified job requirements and as a result, are employed by Outsurance. The staff are paid a commission. 

What transpired is that Govindsamy recommended a certain employee for payment of staff commission for the referral of a prospective employee’s curriculum vitae. However, in the disciplinary proceedings, the concerned employee clearing his conscience testified that he was directed by Govindsamy to state that he was responsible for the referral of the prospective employee notwithstanding the fact that he had nothing to do with the prospective employee. The concerned employee further testified that Govindsamy induced him by stating that they were going to equally share the ill-gotten commission. The concerned employee confessed that he acted as directed by Govindsamy and received the commission to which he divided with Govindsamy. 

Based on the concerned employee’s testimony, the Tribunal was satisfied that Govindsamy had intentionally manipulated the Outsurance staff referral system. As a result, the Tribunal found that due to her conduct, Govindsamy no longer complied with the fit and proper requirements and that she was rightly debarred. 

The case should serve as a cautionary tale to financial service providers and their representatives that they should, at all times, conduct themselves in a manner that is fit and proper as required by section 6A(2)(a) of FAIS. This requirement extends to conduct relating to compliance with internal company rules and regulations not necessarily related to their work with clients. Failure to conduct themselves with honesty and integrity may lead to adverse consequences such as disbarment.

Zinhle Mokoena, associate, Fairbridges Wertheim Becker
Nokulunga Bulo, candidate attorney, Fairbridges Wertheim Becker

 

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