REPRESENTATIVES OF FINANCIAL SERVICE PROVIDERS MUST BE HONEST AND HAVE INTEGRITY OR FACE BEING DISBARRED INDUSTRY-WIDE

By Francisco Khoza Tuesday, June 23, 2015
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On 1 June 2015 the Supreme Court of Appeal (SCA) delivered a judgment in the Financial Services Board vs PGE Barthram and Discovery Life Limited case, emphasizing that representatives of financial services providers (Reps) must be honest and people of integrity or face being disbarred from ever working in the financial services industry. With its decision, the SCA has enhanced the protection of the investing public from dealing with Reps who are dishonest and lack integrity.

Reps are employed by financial services providers to market and sell their financial products (e.g. insurance policies, unit trusts) to the public. In terms of the Financial Advisory and Intermediary Services Act 2002 (FAIS) a financial services provider is required to ensure that its Reps are competent to act and comply with the fit and proper requirements (including personal character qualities of honesty and integrity).

Where a financial services provider fails to comply with this requirement, it may be guilty of an offence and be liable on conviction to a fine not exceeding ZAR10 million or to imprisonment not exceeding 10 years or to both such a fine and imprisonment. The case related to Mr PGE Barthram (Barthram) who was employed by Discovery Life Limited (Discovery) to market and sell its products and policies, and to provide advice and intermediary services in relation to the products and policies provided by Discovery.

Discovery conducts its business as financial services provider under FAIS. As a financial services provider, Discovery is required to uphold the qualities of honesty and integrity. Consequently, any person employed by Discovery to render financial services is also required to act with integrity and honesty. As an employee of Discovery, Barthram was obliged to uphold the personal character qualities of honesty and integrity.

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