Debarment and the signature issue  

29 March 2020, By Kobus Oosthuizen, CFP®

WHAT’S THE MATTER?  
 
Well, come to think of it, does our industry get debarment right? That is a question.

Lofty expectations around personal integrity, client rights and obligations to FSP’s are all considerations the average financial advisor deals with on a daily basis. Do we really deserve all of this and why must our sector carry such a heavy burden? 

Or, on the other hand, should we allow the financial advice terrain to be the playing field for cowboys and crooks as, perceptibly, other areas of commercial life seem to be. Put this in the light of state capture, there are so many good guys around but, in the absence of a firm commitment to honesty for all role players, the bad guys have a field day. Problem is, just who are the bad ones?  

Furthermore, who may judge or, to put it another way, who am I to judge? 

CASE IN POINT 
 
The matter of Sanlam’s handling of the father and son team, David and Lemuel Melvill, that had been doing the rounds for a while now is the perfect case study here. It brings into question the matter of taking a firm stand about what is wrong and punishable and also how to objectively deal with punishment. The appropriateness of punitive actions outside of tried and tested legal precedent and treading carefully in doing so are also up for consideration.

To recap, Lemuel was employed as a representative. He forged a client’s signature on secondary insurance documentation. There was no personal financial gain but, correctly since he had done so, disciplinary action follows. Lemuel is guilty and the independent chairperson recommends he be issued a final warning. Not so says Sanlam, dismisses him and then also debars him.

“We have to”, Sanlam is reported to have said, “follow the prescriptions of section 14 of the FAIS Act. It is in compliance with our regulatory responsibilities”. Also, in a reply to enquiries by Alec Hogg’s radio programme, “On advice from Sanlam’s compliance division, distribution management decided to terminate Lemuel’s contract as his conduct displayed a clear lack of honesty and integrity, and amount to material contravention of the FAIS Act. Given this outcome Sanlam was obliged to debar Lemuel in terms of current legislation with effect 14 March 2018”.

As told by Daily Maverick, this story has a tail. It is that Lemuel’s father, David, who held a Sanlam contract, employed his virtually unemployable son as and administrator and personal assistant – according to him. It appears there is a factual dispute around this and Sanlam then cancels David contract.

Says Sanlam to Daily Maverick, inter alia, “While the FAIS Act places a solemn and onerous responsibility on an insurer with numerous statutory provisions it also requires that we apply the same level of compliance to business engagements with our sales force and financial advisers”.

The enquiry which arises for this saga is – “Was Sanlam between the devil and the deep blue sea here?” What ought they have done because as an FSP they have very onerous responsibilities which they have to fulfil? Yet where does due process and reasonable justice come into play?

You can read the original article and relevant criticism on https://www.dailymaverick.co.za/article/2020-01-13-the-troubling-matter-of-david-vs-sanlam. Before you do so, read section 14 of the FAIS Act a few times first.

A QUESTION OF BONA FIDES 
 
It is hard not to feel empathy for the Melvill’s here, but one should not ignore the plight of the FSP. You cannot play with your licence and a possible backlash from the authorities. There are bigger concomitant responsibilities such as responsibilities to the public, clients and your other representatives. Also, how and when should an FSP act firmly in the pursuit of integrity? Signature fraud is fraud, notwithstanding good intentions the perpetrator might have had. 

Compare this with the male fides of an FSP that, upon realising a representative is about to depart and possibly take some clients along, interrogates all of the representative’s files, find the proverbial falsified signature and now debar the wrongdoer. Was this for the sake of taking a stance against lack of integrity or finding a back-door restraint of trade measure?  

One wonders how many signature cases are out there. More seriously, how many wills are in your portfolio that were not witnessed in the presence of the testators and testatrixes? If it is so simple to trip up with something that might appear so insignificant as a signature – which is patently not insignificant - how easy is it to trip over the many other temptations we are presented with each day?

My conclusion is, let’s not take the concepts of integrity, honestly, justly and ethically lightly. It seems that our financial sector is leading the way in showing how things should be done, or not be done. 

Travel well, but carefully, very carefully.

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