Wrongful Debarment of Financial Advisors: Legal Remedies

Debarment can have serious consequences for financial advisors and representatives operating under the Financial Advisory and Intermediary Services Act (FAIS).

Once a person has been debarred by a Financial Service Provider (FSP), they may no longer render financial services as a representative and the debarment is recorded on the Financial Sector Conduct Authority (FSCA) register of debarred representatives.

While the FAIS Act requires financial service providers to debar representatives who no longer meet the fit and proper requirements, disputes frequently arise where a representative believes the debarment was unlawful, unfair or procedurally defective.

In such cases, legal remedies may be available.

What Is a FAIS Debarment?

Under the FAIS, a financial services provider must debar a representative if the representative:

• no longer meets the fit and proper requirements

• has engaged in conduct that renders them unsuitable to provide financial services

• has materially breached regulatory obligations

Debarment is intended to protect the financial services industry and consumers by preventing unsuitable individuals from acting as financial advisors.

However, the debarment process must comply with strict procedural requirements.

When Can a Debarment Be Considered Wrongful?

A debarment may be challenged where the process followed by the financial services provider does not comply with the requirements of the FAIS.

Issues may arise in circumstances such as:

• the representative was not given proper notice of the proposed debarment

• the representative was not given a fair opportunity to respond

• the FSP relied on incorrect or incomplete information

• the conduct relied upon does not fall within the legal grounds for debarment

• the process followed was procedurally unfair

Each situation depends on the specific facts and the regulatory framework governing the debarment.

Consequences of Debarment for Financial Advisors

A FAIS debarment can significantly affect a person’s ability to continue working in the financial services industry.

Once a representative has been debarred:

• the debarment is recorded on the FSCA register

• the individual may not render financial services as a representative

• future employment opportunities within the financial sector may be affected

• additional regulatory implications may arise depending on the circumstances

Because of these consequences, financial advisors sometimes seek legal advice when they believe a debarment has been imposed incorrectly or unfairly.

Legal Remedies for Wrongful Debarment

Where a debarment is believed to be unlawful or procedurally defective, certain legal remedies may be available.

These may include:

Financial Services Tribunal Proceedings

In some cases, decisions relating to regulatory action can be reconsidered by the Financial Services Tribunal.

The Tribunal may review aspects of the regulatory decision-making process and determine whether the decision should stand.

Judicial Review Proceedings

Where appropriate, decisions may also be challenged through judicial review proceedings before the courts, particularly where issues of procedural fairness or legality arise.

Regulatory Remedies

Depending on the circumstances, there may also be regulatory mechanisms available under financial sector legislation to address disputes involving debarment.

The appropriate remedy will depend on the facts of the matter and the legal framework involved.

Responding to Debarment Disputes

Financial advisors sometimes attempt to address debarment disputes informally with their former financial services provider.

However, debarment matters can involve complex regulatory and administrative law considerations.

Issues often arise regarding:

• whether the statutory grounds for debarment were satisfied

• whether the correct procedural steps were followed

• whether the evidence relied upon supports the decision taken

A careful assessment of the relevant documents and regulatory framework is often required.

Legal Assistance With Debarment Disputes

Debarment proceedings can have lasting consequences for financial advisors and financial services professionals.

Addressing these issues often requires an understanding of the FAIS, FSCA regulatory framework, and administrative law principles governing regulatory decision-making.

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

• disputes relating to FAIS debarment

• challenging regulatory decisions

• Financial Services Tribunal proceedings

• FSCA investigations and enforcement actions

• judicial review of regulatory decisions

If you believe that you have been wrongfully debarred or are facing a debarment process, obtaining legal advice on your available options may be important.

For assistance with debarment disputes or FSCA regulatory matters, contact Barter McKellar.