What are a representative’s rights on debarment?
01 October 2012
Paul Rabenowitz, LightBulb Learning and Training
Section 22 of the Constitution states that every citizen has the right to choose their trade, occupation or profession freely… However, the practice of any profession may be regulated by law. The FAIS Act regulates the profession of financial services advisors.
The debarment of a representative has grave consequences and can put an end to a career in financial services. Whilst on the positive side it creates an enhanced financial services sector by removing those who are ill-equipped – or those who lack the honesty and integrity required to operate in such an important industry – it creates hardships for those who have been treated unfairly.
A profession apart
The financial services profession is unique in that it is perhaps the only profession where an employer can prevent a person from practicing their profession.
The FAIS Act makes two provisions for a representative to be debarred . In terms of section 14(1) of the Act a representative may be debarred if:
1) They no longer comply with the fit and proper requirements (honesty and integrity and competence); or
2) They have contravened or failed to comply with any provision of the Act in a material manner.
What rights does a debarred representative have? The answer to this question depends on who debars you. There are two types of debarment under the FAIS Act. The first is debarment under section 14, where you are debarred by an FSP. And the second occurs under section 14A, when you are debarred by the Financial Services Board (FSB). We can consider the representatives rights in each of these cases.
Debarment by an FSP
If a representative is an employee, the CCMA has no jurisdiction when it comes to reversing debarments. Is it then possible to lodge an appeal against the FSP-initiated debarment with the FSB? Section 39 of the FAIS Act states:
Any person who feels aggrieved by any decision by the registrar or the Ombud under this Act which affects that person, may appeal to the board of appeal established by section 26 (1) of the Financial Services Board Act, in respect of which appeal the said section 26 applies with the necessary changes.
BUT: If an FSP has debarred a representative, the decision is not made by the Registrar or Ombud and thus an appeal cannot be lodged to the FSB Board of Appeal. Therefore a representative who has been debarred by an FSP has no right of recourse or appeal to the FSB.
The act of debarment will however constitute an "administrative action” under The Promotion of Administrative Justice Act 3 of 2000 (PAJA). A representative who is debarred by an FSP will therefore have to initiate action in the courts in order to have the decision to debar reviewed.
Debarment by the FSB
If a person has been debarred by the FSB under section 14A of the FAIS Act, then an appeal to the FSB Board of Appeal may be made in terms of section 39 of the FAIS Act. The decision to debar by the FSB will also qualify as an "administrative action” under PAJA and a person may institute action in the courts for a review of the decision under PAJA.
It seems strange that the FAIS Act makes no provision for an appeal when an FSP decides to debar a representative. Due to the seriousness of debarment it is recommended that FSPs exercise caution and diligence in exercising this power. They should take care to comply with the provisions of PAJA and also implement a disciplinary process along the same lines afforded employees under the Labour Relations Act 66 of 1995.