In order for a representative to be debarred, there must be non-compliance by the representative or the key individual of the financial services provider with, amongst other things, the “fit and proper” requirements of the FAIS Act.

The fit and proper requirements are measured against a number of categories including those of personal character qualities of honesty and integrity.

The Code of Conduct for Authorised Financial Services Providers and Representative’s requires a financial services provider at all times to render financial services honestly, fairly, with due skill and diligence in the interest of client and the integrity of the financial services industry.

In respect of the honesty and integrity requirement, the enquiry is whether the representative’s misconduct was material and serious enough to taint those character traits.

In this recent determination of the Financial Services Tribunal, the Tribunal referred to the appeal board decision of 2003 in Hamilton Smith & Company v The Registrar of Financial Markets which held:

“To determine where a person is ‘of good character and integrity’ involves a moral judgment. In arriving at that judgment it is necessary to have regard to the manner in which the person concerned has conducted themselves not only in their private life but also in their dealings with those with whom they have come into contact professionally or in the course of their business. A distinction is sometimes drawn in this context between ‘character’ and ‘reputation’.”

 The Tribunal summarised the concept of “honest and integrity” as follows:

  • The dictionary meaning of integrity is “soundness of moral principle; the character of uncorrupted virtue, especially in relation to truth and fair dealing; uprightness, honesty, sincerity.
  • A person’s “character” is what they in fact are, whereas their “reputation” is what other people think the person is.
  • The determination of whether a person is of sound character involves a moral judgment. In arriving at that judgment it is necessary to consider the person’s manner of conduct, not only in respect of their private life but also their business dealings. For purposes of the FAIS Act the emphasis will be on the latter.
  • The quality of a person must be judged by the person’s acts and motives, meaning behaviour and the mental and emotional situations accompanying the behaviour.
  • Character cannot always be estimated by one act or one class of act. As much about a person as is known will form the evidence from which the inference of good or bad character is drawn.”

The Tribunal said that in determining “honesty and integrity” it is necessary to know as much as possible about the person.

On the facts the Tribunal found that the representative was dishonest in her dealing with her employer as well as her clients. She committed forgery, fraud, was dishonest and her conduct was unbecoming of a financial services provider in the industry.

The Tribunal also held that it was not required that an in-person debarment hearing be conducted.  The fundamental requirement is that the debarment process must be fair. The representative must be given the opportunity to respond and to have consideration given to the allegations levelled against the representative together with the relevant information. The financial services provider is entitled to proceed with the decision to debar the representative if the representative fails to respond to the allegations.