Notice of Intention to Debar: What Financial Advisors Must Do

Receiving a Notice of Intention to Debar can have serious consequences for any financial advisor or representative operating under the Financial Advisory and Intermediary Services Act (FAIS).

A debarment can prevent a representative from rendering financial services and may significantly affect their ability to continue working in the financial services industry.

For this reason, financial advisors who receive a notice of intention to debar should treat the matter with urgency and ensure that they understand both the process and their rights before responding.

What Is a Notice of Intention to Debar?

Under the FAIS, a Financial Service Provider (FSP) is required to debar a representative who no longer meets the fit and proper requirements, or who has been found to have engaged in conduct that renders them unsuitable to provide financial services.

Before a debarment can take place, the FSP must follow a procedurally fair process.

This typically begins with a notice of intention to debar, which informs the representative that the FSP is considering debarment and provides an opportunity to respond.

The notice will usually set out:

• the reasons why debarment is being considered

• the alleged conduct or regulatory concerns

• the proposed basis for the debarment

• the opportunity to make written representations within a specified period

The response to this notice can be an important part of the process.

Consequences of a FAIS Debarment

A FAIS debarment can have significant professional and regulatory consequences.

Once a representative has been debarred:

• they may no longer render financial services as a representative

• the debarment must be recorded on the FSCA register

• the individual may face difficulty obtaining employment within the financial services industry

• other regulatory consequences may arise depending on the circumstances

In some situations, a debarment can affect a person’s ability to be appointed by another financial services provider.

For this reason, financial advisors should approach the process carefully from the outset.

The Debarment Process Under the FAIS Act

While the specific procedures may vary between financial service providers, the FAIS debarment process generally involves several steps.

1. Notification of Intended Debarment

The representative is notified that the FSP intends to consider a debarment and is given details of the allegations or regulatory concerns.

2. Opportunity to Respond

The representative is normally given an opportunity to submit written representations explaining why debarment should not occur.

In some cases, further information or documentation may be requested.

3. Decision by the Financial Services Provider

After considering the information available, the FSP may decide whether or not to proceed with the debarment.

If the FSP decides to proceed, the debarment must be reported to the Financial Sector Conduct Authority (FSCA).

4. Recording of the Debarment

The FSCA records the debarment on the register of debarred representatives, which is accessible to the industry.

Procedural Fairness in Debarment Proceedings

The FAIS Act requires that debarment processes must be lawful, reasonable and procedurally fair.

This generally means that:

• the representative must be properly informed of the allegations

• the representative must be given an opportunity to respond

• the FSP must consider the matter objectively before making a decision

Where these requirements are not followed, the debarment may potentially be challenged or set aside. However, each case depends on its specific facts.

Responding to a Notice of Intention to Debar

Financial advisors sometimes underestimate the importance of their response to a notice of intention to debar.

The response may influence:

• whether the debarment proceeds

• how the allegations are interpreted

• whether further regulatory issues arise

Key considerations often include:

• understanding the basis of the proposed debarment

• reviewing the relevant facts and documentation

• considering whether the procedural requirements have been followed

• determining the most appropriate way to respond

In some cases, the issues raised in the notice may be more complex than they initially appear.

Challenging a Debarment

If a debarment has already taken place, certain legal remedies may be available depending on the circumstances.

In appropriate cases, decisions may be challenged through mechanisms such as:

• proceedings before the Financial Services Tribunal

• judicial review proceedings before the courts

• other regulatory remedies provided under financial sector legislation

The appropriate course of action will depend on the specific facts of the matter.

Legal Assistance With FAIS Debarment Matters

Debarment proceedings can have serious consequences for financial advisors and representatives.

Understanding the legal framework, procedural requirements, and potential remedies is often important when responding to a notice of intention to debar.

At Barter McKellar, we advise financial advisors, financial institutions and financial service providers on regulatory matters involving the FAIS and the FSCA, including:

• responding to notices of intention to debar

• challenging debarment decisions

• regulatory investigations

• Financial Services Tribunal proceedings

• judicial review of regulatory decisions

If you have received a notice of intention to debar and are unsure how to respond, obtaining legal advice at an early stage may be important.

For assistance with debarment proceedings or regulatory disputes involving the FSCA, contact Barter McKellar.