THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 554/2019

In the matter between:
ASSOCIATED PORTFOLIO
SOLUTIONS (PTY) LTD

FIRST APPELLANT
PENTAGON FINANCIAL SOLUTIONS
(PRETORIA) (PTY) LTD

SECOND APPELLANT

and

PIETER WILLEM BASSON

FIRST RESPONDENT
REGISTRAR OF FINANCIAL
SERVICE PROVIDERS

SECOND RESPONDENT
MOONSTONE COMPLIANCE (PTY) LTD     THIRD RESPONDENT

Neutral citation: Associated Portfolio Solutions (Pty) Ltd & Another v
Basson & Others (554/2019) [2020] ZASCA 64 (12 June
2020)

Coram:
PONNAN, DAMBUZA and PLASKET JJA and
GORVEN and MATOJANE AJJA
Heard:
07 May 2020
Delivered: This judgment was handed down electronically by circulation to
the parties’ legal representatives by email, publication on the Supreme Court
of Appeal website and release to SAFLII. The date and time for hand-down is
deemed to be 12H00 on 12 June 2020
Summary: Administrative Law – debarment of a representative and key
individual of a financial service provider under the Financial Advisory and
Intermediary Services Act 37 of 2002 an administrative action – relevant facts
established in a preceding disciplinary inquiry for misconduct may be taken
into account in resolving to debar a representative – directors of financial
service provider charged with the responsibility to debar representatives –
some measure of institutional bias present and tolerated in this mode of
regulation.

ORDER

On appeal from: Western Cape Division of the High Court, Cape Town
(Sievers AJ, sitting as court of first instance)
The appeal as to the main application is upheld with costs, such costs,
including those of two counsel, to be paid by the first respondent.
The appeal as to the counter-application is dismissed with costs, such
costs to include those of two counsel.
The order of the high court is set aside and replaced with the following:
‘The application and counter-application are dismissed with costs, such
costs to include those of two counsel’.

JUDGMENT

Dambuza JA (Ponnan, and Plasket JJA and Gorven and Matojane AJJA
concurring)

Introduction
[1] This appeal, with the leave of the court below, is against a judgment of
the Western Cape High Court, Cape Town (Sievers AJ) which set aside the
debarment of the first respondent, Mr Pieter Willem Basson (Mr Basson) by
the appellants and dismissed a counter-application by them, which sought a
range of declaratory orders against the second respondent, the Registrar of
Financial Services Providers (the Registrar).

Background

[2] From the early 2000s Mr Basson, was one of the four founder-
shareholders, directors and employees of the first appellant, Associated
Portfolio Solutions (Pty) Ltd) (APS), a fund management business, and the
second appellant, Pentagon Financial Solutions (Pretoria) (Pty) Ltd
(Pentagon), a financial services provider. The two businesses operated as a
quasi-partnership and Mr Basson was a ‘registered representative’ and a ‘key
individual’ in both of them under the Financial Advisory and Intermediary
Services Act 37 of 2002 (FAIS Act). 1 The other directors were Mr Cornelis
Kruger (also a key individual), Mr Harold Nimmo and Mr Jacob Van
Westhuizen Neethling.

[3] During 2016 there was a falling out between Mr Basson and his fellow
directors. In September of that year Mr Basson stopped coming to work.
Negotiations for his exit from APS and Pentagon were unsuccessful as no
agreement could be reached as to the market value of his shares. Subsequent
thereto, evidence of wrongdoing on his part was brought to the attention of
Mr Kruger. On 7 November 2016 Mr Basson was suspended from his
employment, pending an investigation into the allegations of misconduct that
had been made against him. The investigations culminated in a disciplinary
inquiry in which Mr Basson was charged with ten counts of misconduct.

1 In terms of s1 of the FAIS Act a ‘key individual’ in relation to an authorised financial services provider
means a natural person responsible for managing and overseeing the activities of the authorised financial
services provider. A ‘representative’ means any person who renders a financial service to a client for or on
behalf of the financial services provider, in terms of conditions of employment or any mandatory
agreement, , but excludes a person rendering clerical, technical, administrative, legal accounting or other
service in a subsidiary or subordinate capacity, which service –
(a) Does not require judgment on the part of the latter person; or
(b) Does not lead a client to any specific transaction in respect of a financial product in response
to general inquiries.

[4] On 9 December 2016 Mr Basson instituted proceedings against Mr
Kruger and the other directors in the high court, under s 163 of the Companies
Act 71 of 2008, alleging oppressive and unfair conduct by them. He sought
an order that they be directed to purchase his shares in the quasi-partnership
at a fair value. He alleged that their conduct, in laying unfounded misconduct
charges against him, was motivated by the desire to devalue his shares so as
to acquire them for far less than their fair value. That application was referred
to arbitration.

[5] Whilst the arbitration was pending, the disciplinary enquiry against Mr
Basson proceeded. The charges included: (a) establishing or taking steps to
establish an asset management business in competition with and in breach of
his fiduciary obligations to the quasi-partnership; (b) disclosing confidential
information to third parties with whom he had private business interests,
engaging in discussions with third parties regarding the sale of assets of the
quasi-partnership managed by him (his client book); (c) negligently
communicating false and unrealistic information about a ‘10M’ investment
program; (d) ‘purporting’ to conclude an agreement without authorisation and
without conducting due diligence, for the provision of financial services to
Germix Investments SA and Caleb Foundation; and (e) consistently using the
quasi-partnership’s resources for private and personal business interests in
conflict with his fiduciary duties.

[6] The disciplinary hearing was presided over by Mr Graham Leslie, an
advocate of the Cape Bar. At the end of the hearing Mr Basson was found
guilty of five of the charges. The chairperson recommended his dismissal. He
was of the view that each individual transgression that had been established

was, on its own, sufficiently serious to warrant Mr Basson’s dismissal. The
ruling was delivered on 28 April 2017.

[7] On 2 May 2017, the appellants’ attorneys wrote to the third respondent,
Moonstone Compliance (Pty) Ltd (Moonstone), being the appellants’
compliance officer under the FAIS Act, seeking advice on how to proceed,
now that Mr Basson had been found guilty in the disciplinary enquiry. On the
same day Moonstone advised the appellants’ attorneys that, as a result of Mr
Leslie’s ruling the appellants had ‘very little choice other than to debar [Mr]
Basson as a representative based thereon that he ha[d] contravened the FAIS
Act in a material manner and [did] not exhibit the characteristics of honesty
and integrity’.

[8] On 4 May 2017 the appellants’ attorneys forwarded to Mr Basson
notices of a directors’ meeting of both appellants that was scheduled for 17
May 2017. The notices included proposed resolutions to be considered for the
contemplated debarment of Mr Basson, consequent upon the findings made
against him in the disciplinary process. Save in one respect that is not material
for present purposes, the notices in respect of each of the appellants were
identical.2 In terms thereof, the board of each of the appellants was to consider
resolutions to: (a) remove Mr Basson from each board (resolution 1); (b)
dismiss him from his employment (resolution 2); (c) terminate a mandatory
agreement dated 18 February 2008 between Mr Basson and APS (resolution
3 – this resolution was applicable only in respect of APS); (d) debar Mr
Basson as a representative of each company in terms of s 14(1) of the FAIS

2 Save for one resolution relation to termination of an agreement dated 18 March 2008 which was not
applicable to Pentagon.

Act (resolutions 4 and 3 respectively); and (e) authorise directors to take all
steps necessary to give effect to these resolutions (resolution 5 and 4
respectively). Mr Basson was, in each notice, informed that he could ‘make a
presentation, in person or through a representative, to the meeting before the
resolutions [were] put to the vote, save that no further presentations [could]
be made in respect of resolutions 2 and 5’.3

[9] In a letter dated 17 May 2017, entitled ‘representations to board
meetings held by APS and Pentagon’, Mr Basson’s attorneys made
representations on his behalf in terms of s 71(2)(b) of the Companies Act 71
of 2008’.4 They highlighted the fact that Mr Basson did not accept the results
of the disciplinary proceedings and warned that acceptance thereof by the
boards would lead to legal action. They pointed to what they considered to be
‘material shortcomings’ in the findings of the chairperson, which included
disregarding the ulterior motives of the directors in pursuing the charges, chief
of which was to acquire his shares cheaply. They insisted that the chairperson
had erred in his consideration of the matter and urged the directors to consider
very carefully the implications of accepting the recommendation to ‘dismiss
[their] client’. They alluded to the fact that ‘[Mr Basson’s] income stream as a
professional [was] likely to be destroyed by the adoption of the recommendation to dismiss
him, and the likely accompanying decision to disbar him’, and to the fact that ‘the
damaging consequences to both the company and himself may be irreversible once the
decision to dismiss him [was] taken’.

[10] Neither Mr Basson nor his attorneys attended the meeting of 17 May
2017. The meeting proceeded and the proposed resolutions were all passed.

3 The last resolution in respect of Pentagon was resolution 4.
4 This section prescribes the procedure by which a board may remove a director.

On the same day the appellants (through Mr Kruger) wrote to Mr Basson,
informing him of the outcome of the board meetings. In relation to Resolution
4 (and 3) the letter read:
‘In light of the findings of the disciplinary inquiry, and especially the Chairman’s findings
contained in [certain specified paragraphs] Basson no longer complies with the
requirements referred to in section 13(2)(a) of the FAIS Act and/or has contravened or
failed to comply with the FAIS Act in a material manner, and accordingly the Board
resolves that Pieter Willem Basson be and is hereby prohibited from rendering any new
financial service on behalf of the Company, and his authority to act on behalf of the
Company either as a registered representative or key individual is withdrawn; that his name
be and is hereby removed from the Company’s register of representatives as contemplated
in section 14(1) of the FAIS Act, and further that the Company shall inform the registrar
in writing thereof and provide written reasons for the implementation of Basson’s
debarment as contemplated in terms of section 14(3)(a) of the FAIS Act.’ 5

[11] On the same day (17 May 2017), Mr Kruger also wrote to the registrar
of the Financial Services Board (the FSB) requesting that Mr Basson be
debarred as a representative for material contravention or non-compliance
with provisions of the FAIS Act as well as non-compliance with ‘Fit and
Proper Requirements’. The letter set out details of Mr Basson’s transgressions
and a copy of the judgment in the disciplinary enquiry was attached. In a form

5 The specified paragraphs related to the findings made by Mr Leslie on the complaints in respect of which
Mr Basson was found guilty. In complaint 4, Mr Basson was found to have sent an email dated 22 September
2016 from his work email address to a Mr Richard Turner advising him that the returns on a ‘10M’ investment
program were “. . . 300% in 30 days, and then about 50% per week from 40 weeks”, and that it was a very
good program”. The chairperson found that, as an experienced financial services representative he should
have been extremely careful before accepting the legitimacy of the 10M programme. His unqualified
endorsement of it amounted to gross negligence which posed a risk to his employer’s reputation and business.
In relation to complaint 5, Mr Basson was found to have concluded an agreement between himself, APS,
Germix Investments SA and C.A. L.E.B Foundation without the necessary authority.
In relation to complaint 8, he was found to have repeatedly failed to comply with internal compliance
procedures and statutory obligations relating to the completion of client documents.
In relation to complaint 9, he was found to have caused the appellants’ names to be used in what may well
have been illicit diamond trade dealings with Congolese nationals, which dealings had nothing to do with the
appellants.

entitled ‘Notification of Debarment in terms of Section 14 of the FAIS Act’
completed in respect of Mr Basson, the appellants were described as ‘the
debarring FSP’. On 2 June 2017, the FSB notified the appellants’ attorneys
that its register had been updated on the previous day and that Mr Basson’s
name appeared on it as a person who had been debarred.

[12] On 6 September 2017 Mr Basson launched review proceedings in the
high court seeking that the decision taken by the appellants to debar him be
set aside. The grounds for the review were that, firstly, he had not been
afforded a reasonable opportunity to make representations and to call
witnesses before the debarment decision was taken. Aligned to that was a
contention that the compliance authority, Moonstone, recommended his
debarment without having been involved in the investigations and the
disciplinary proceedings, and that it made its recommendations to the
appellants based purely on the results of the disciplinary proceedings.
Therefore the debarment recommendation was tainted by procedural
unfairness. Secondly, the majority directors who passed the resolutions had
pre-judged the issues; the decision was tainted by ulterior motive; and they
had acted as judges in their own case, because they had given evidence at the
disciplinary hearing.

[13] In the meantime, Mr Basson had, on 23 August 2017, prior to
consideration of his review application by the high court, been reappointed as
a representative by Rebalance Fund Managers (Pty) Ltd (Rebalance). In
addition to opposing the review application, the appellants brought a counter-
application, in which they sought the joinder of Rebalance and the review of
the decision by Rebalance to appoint Mr Basson as its representative. As

against the Registrar, the appellants sought a range of declaratory orders to
the effect that Mr Basson’s debarment ought not to have been lifted without
the Registrar first satisfying herself that he complied with the necessary fit
and proper requirements of FAIS and was honest and had integrity.

[14] The appellants also sought a declarator that Mr Basson would only be
eligible for re-appointment after the lapse of 12 months from the date of his
debarment. It was contended that his re-appointment was in contravention of
the regulatory framework which governed re-appointments.6 In response, the
Registrar explained that Mr Basson ‘[was] currently not a representative of
Rebalance or any FSP’. Rebalance had since removed Mr Basson as its
representative. In a further affidavit the appellants alleged that Mr Basson had
once more been appointed by another FSP (financial service provider) -
Vision Risk and Investment Consultants (Pty) Ltd. The high court dismissed
the counter-application on the basis that the issues raised therein had become
moot.

[15] At the time of Mr Basson’s re-appointment by Rebalance the guidelines
issued by the FSB for re-appointment of representatives provided that:
‘the onus rests on the reappointing provider . . . as a first step to convince the [FSB] on a
balance of probabilities that there has been a genuine, complete and permanent reformation
on the part of the representative and that the defects and character, attitude or other aspects
that led to the representative being considered not fit and proper, no longer exist . . . it must
be clear when the registrar peruses the documents supplied by the provider, that the latter
is aware of the details of the applicant’s transgression and the provider is satisfied that the
representative will not commit the offence again’.

6 Titled ‘Determination of Requirements for Reappointment of Debarred Representatives, 2003’, published
in Board Notice 82 of Government Gazette 25299.

[16] Subsequent to the removal of Mr Basson as a representative for Vision
Risk, the Registrar withdrew the reappointment guidance notice, which was
in force at the time of Mr Basson’s re-appointment and on which the
appellants had largely relied in their counter-application. A fresh guidance
notice was issued in which the Registrar advised that it played a ‘relatively
minor role’ in supervising entry into and debarment from the profession,
‘mainly relating to the updating of the central register of representatives’.

[17] In setting aside Mr Basson’s debarment and dismissing the appellants’
counter-application, the high court found that because the disciplinary
proceedings were regulated by provisions of the Labour Relations Act 66 of
1995, the results thereof could not inform the debarment proceedings as the
latter fell under the FAIS Act. The court was of the view that a separate
‘debarment inquiry’ should have been held under s14(1) of the FAIS Act ‘to
determine whether Mr Basson complied with the “fit and proper”
requirements contemplated in s 13 of [that] Act and published in regulations
under section 6A’. It also found that the responsibility lay exclusively with
the appointing FSP (Rebalance) to ensure that the pre-requisites were met for
Mr Basson’s re-appointment and upheld the argument by the Registrar that
the relief claimed in the counter-application was moot.

[18] On appeal, the appellants took issue with the key finding of the high
court – that the disciplinary and debarment processes were separate and
distinct and that the earlier process could not inform the later one. It was
submitted on their behalf that on a finding that Mr Basson lacked integrity and
honesty, the appellants had a duty to debar him. The appellants also persisted

in their appeal against the dismissal of their counter-application because of
Mr Basson’s further appointment by Vision Risk.

[19] Mr Basson also persisted in his procedural unfairness contention, re-
asserting that he was not afforded the opportunity to make representations and
to call witnesses prior to his debarment. He also insisted that his debarment
was fatally flawed as a result of bias on the part of his co-directors.

Debarment and administrative decision
[20] An overview of the relevant sections of the FAIS Act is helpful for an
understanding of the context and the relationship between the parties. The
purpose of the Act is, according to its long title, to ‘regulate the rendering of
certain financial advisory and intermediary services to clients’. It does so by
means of an administrative system of licencing, controlled by the FSB under
the management of its Registrar, and largely thereafter, by a system of self-
regulation in which licenced FSPs ensure that their representatives and key
individuals are fit and proper persons to be entrusted with providing financial
advice to the investing public. 7

[21] In terms of s 7, the FSP may not provide financial services unless it is
licenced in terms of s 8. Neither may a representative of a FSP do so unless
he or she has been appointed as such by an ‘authorised’ or licenced FSP in
terms of s 13. FSPs are required to keep registers of their representatives and
key individuals.8

7 See the FAIS Act, ss7, 8 and 13.
8 In terms of s 1 ‘an ‘authorised service provider’, or provider means a person who has been granted an
authorisation as a financial service provider by the issue to that person of a licence in terms of section 8’.

[22] The Act decrees a close supervisory responsibility by FSPs over their
representatives. In terms of s 13(1)(b)(i), no person may act as a representative
of an authorised FSP unless, prior to the rendering of a financial service, he
or she provides to clients confirmation certified by the FSP, that the FSP
accepts responsibility for the activities of the representative performed within
the scope of or within the course of implementing a service contract with the
FSP. Section 13(iA) prescribes that a representative must meet the ‘fit and
proper’ requirement. In terms of s 13(2)(a) an authorised FSP must, at all
times, be satisfied that its representatives and key individuals are competent
to act and that they comply with the fit and proper requirement. FSPs are
charged with the duty to take reasonable steps to ensure that representatives
comply with any applicable code of conduct and applicable laws in the
conduct of business.

[23] Under s 14 of the FAIS, the FSPs bear the duty to debar representatives,
who do not meet the fit and proper requirement. Section 14(1)(a) provides that
an FSP must debar its representative and key individual if satisfied that he or
she (the representative and key individual) does not meet, or no longer
complies with the requirements set in s 13(2)(a), or has contravened any
provision of the Act in a material way. Mr Basson’s debarment was effected
in terms of s 14(1) of the Act.

[24] Once debarment has been effected, the FSP must immediately
withdraw any authority that may still exist for the person to act on its behalf,
remove the name of the debarred person from the its register of
representatives, immediately take steps to ensure that the debarment does not
prejudice the interests of clients, notify the FSB of the debarment within five

days, and provide the authority with the reasons for the disbarment. A
(previously) debarred person may only carry on business or render financial
services to clients or act as a representative or a key individual of an authorised
provider if he or she complies with the requirement set in s 13(1)(b)(ii) of the
FAIS Act.

[25] The appellants, being private juristic entities, exercised their authority
under s 14(1) of the FAIS Act to debar Mr Basson. In doing so they acted in
furtherance of the objects of the FAIS Act – and in the public interest. They
exercised public power in terms of that Act. The debarment had an adverse
impact and direct, external legal effect on his rights.9 It was not in dispute that
the debarment of Mr Basson was an administrative action and that it was
therefore reviewable under s 6(2) of the Promotion of Administrative Justice
Act 3 of 2000 (PAJA). Section 6(2) of the PAJA enumerates the grounds for
review of administrative action. In terms of s 6(2)(c) a court may set aside
administrative action if it ‘was procedurally unfair’, whilst s 6(2)(a)(iii)
provides that administrative action may be set aside if the administrator who
took it ‘was biased or reasonably suspected of bias’.

Procedural fairness
[26] Section 33 of the Constitution provides that everyone has a right to
administrative action that is lawful, reasonable and procedurally fair. Section
3(1)(a) of PAJA incorporates the procedural fairness requirement by

9 In terms of s 1 of PAJA administrative action as any decision taken or any failure to take a decision by:
an organ of state when:
exercising a power in terms of the Constitution or a provincial constitution; or
exercising a public power or performing a public function in terms of any legislation; or
a natural or juristic person, other than an organ of state, when exercising a public power or performing a
public function in terms of an empowering provision, which adversely affects the rights of a person and
which has a direct, external legal effect.

providing that ‘administrative action which materially and adversely affects
the rights and legitimate expectations of any person must be procedurally
fair’. What is fair in the particular circumstances, will depend on the context
of each case.10 But the core of the right comprises the giving to the affected
person of ‘adequate notice of the nature and purpose of the proposed
administrative action’; a ‘reasonable opportunity to make representations’;
and a ‘clear statement of the administrative action’ (section 3(2)(b) of PAJA).

[27] The procedural fairness requirement is, again, ordained in ss 14(2) and
(3) of the FAIS Act wherein the procedure for debarment is prescribed as
follows:
‘(2)
(a)
Before effecting a debarment in terms of subsection (1), the provider must
ensure that the debarment process is lawful, reasonable and procedurally fair.
(b)
If a provider is unable to locate a person in order to deliver a document or
information under subsection (3), after taking all reasonable steps to do so,
including dissemination through electronic means where possible, delivering the
document or information to the person's last known e-mail or physical business or
residential address will be sufficient.
(3) A financial services provider must-
(a)
before debarring a person-
(i)
give adequate notice in writing to the person stating its intention to debar
the person, the grounds and reasons for the debarment, and any terms
attached to the debarment, including, in relation to unconcluded business,
any measures stipulated for the protection of the interests of clients;
(ii)
provide the person with a copy of the financial services provider's written
policy and procedure governing the debarment process; and
(iii)
give the person a reasonable opportunity to make a submission in response;

10 Section 3(2)(a) of PAJA. See also Chairman, Board on Tariffs and Trade v Brenco Inc 2001 (4) SA 511
(SCA) at para 19.

(b)
consider any response provided in terms of paragraph (a)(iii), and then take a
decision in terms of subsection (1); and
(c)
immediately notify the person in writing of-

(i)
the financial services provider's decision;
(ii)
the persons' rights in terms of Chapter 15 of the Financial Sector Regulation
Act; and
(iii)
any formal requirements in respect of proceedings for the reconsideration
of the decision by the Tribunal.’

[28] Against the factual background and legislative framework, it becomes
readily apparent that the contention that Mr Basson was not given a fair
opportunity to make representations cannot be supported. The letter addressed
by the appellants’ attorneys to Mr Basson (dated 4 May 2017 - almost two
weeks prior to the date of the meeting) and the notices attached thereto were
an express invitation to Mr Basson to attend the meeting of the appellants’
boards on 17 May 2014. He was expressly invited to make representations in
relation to the proposed resolutions.11 Mr Basson’s attention (and that of his
attorneys) was drawn pertinently to the findings of the chairperson in the
disciplinary process and the effect those had on his position as a financial
service provider. More particularly in relation to proposed resolutions 4 and 3
respectively the notice referred to specific portions of the chairperson’s
findings in his judgment12 and warned that:
‘Basson no longer complies with the requirements referred to in section 13(2)(a) of the
FAIS Act and/or has contravened or failed to comply with the FAIS Act in a material
manner, and accordingly the Board resolves as follows:
“ that Basson be and is hereby prohibited from rendering any new financial service on
behalf of APS, and his authority to act on behalf of APS either as a registered

11 Except Resolutions 2 and 5 (and 4 respectively) in terms of which the directors would be authorised to
execute the directives of the resolutions.
12 See para 10 supra.

representative or key individual is withdrawn; that his name be and is hereby removed
from APS’s register of representatives as contemplated in section 14(1) of the FAIS Act,
and further that APS shall inform the registrar in writing thereof and provide written
reasons for the implementation of Basson’s debarment as contemplated of section 14(3)(a)
of the FAIS Act”.

[29] Not only was Mr Basson apprised, through the notices, of the
implications of the findings made against him in the disciplinary process, but
it is clear from the record that he was independently aware of the significance
thereof. In his representations (dated 17 May 2017), his attorneys wrote that
‘his income as a professional is likely to be destroyed by the adoption of the
recommendation to dismiss him and the likely accompanying decision to
disbar him’. Significantly, Mr Basson responded pertinently to the invitation
to make representations but did not address the core question of debarment –
except in passing. He can hardly complain of procedural unfairness when the
resolutions were passed after he had chosen not to address that core issue.

[30] The fact that in the disciplinary hearing Mr Basson was not required to
address issues of his honesty and integrity or whether he was a fit and proper
person, weighed heavily with the high court, leading to the finding that there
was a failure to afford him an opportunity to make representations. Whilst it
is correct that the disciplinary enquiry was not directly concerned with
whether Mr Basson was a fit and proper person to represent APS and
Pentagon, the disciplinary inquiry afforded him the opportunity to respond to
the transgressions under consideration, the nature of which pertinently
implicated his honesty and integrity.13

13 In terms of s 6A(2) of the FAIS Act ‘Fit and proper requirement may include, but are not limited to,
appropriate standards relating to –
(a) personal character qualities of honesty and integrity;

[31] The argument that a ‘debarment factual inquiry’ should have been held
in compliance with procedural fairness prescripts is unsustainable. It was clear
in the notices of 4 July 2017 that the outcome of disciplinary hearing was the
factual basis for the meetings and the proposed resolutions. The facts
established in the disciplinary proceedings impacted directly on Mr Basson’s
honesty and integrity, raising the issue squarely whether he met the crucial
requirement of a fit and proper person to be a representative and key
individual under s 8(1) of the FAIS Act.14 Any further inquiry would have
been absurd and unnecessary, particularly as it could hardly be accepted that
whilst not a fit and proper person qua employee, he could nonetheless be a fit
and proper person qua representative. To insist on a further inquiry in these
circumstances would be to place form above substance.

[32] At the hearing of the appeal, Counsel for Mr Basson accepted that the
disciplinary hearing could indeed have unearthed facts that enjoined the
appellants to exercise their authority under the FAIS Act. But even then, it
was submitted (without reference to any authority), they could only take into
account common cause facts. Allegations that were in dispute at the
disciplinary hearing had to be adjudicated afresh, so it was submitted. The
argument rested on an untenable distinction between the appellants qua
employers and qua FSPs. And, contrary to the submission, the facts on which
the debarment was founded had already been established in the disciplinary

(b) competence, including-
(i)
experience;
(ii)
qualifications; and
(iii)
knowledge tested through examinations determined by the registrar;
(iv)
operational ability
(v)
financial soundness; and
(vi)
continuous professional development’.
14 In the representations Mr Basson threatened to challenge any decision taken on the basis of the
chairman’s finding. However no challenge was pending at the time of the hearing of the appeal.

proceedings. Those facts had been established after a full enquiry. Mr Basson
had participated fully in the enquiry. He had every opportunity to test the
allegations levelled against him. By the conclusion of the enquiry many
serious allegations that impacted substantially on Mr Basson’s honesty and
integrity were either common cause or undisputed. None of that could
subsequently have changed.

Was the debarment decision free of bias?
[33] In this regard the argument on behalf of Mr Basson was threefold – a)
that the decision was motivated by an ulterior motive, b) that the majority
shareholders had pre-judged the matter, and c) that they had acted as judges
in their own case. The high court held that the majority of the directors of APS
and Pentagon pre-judged Mr Basson’s debarment because that decision was
based on the findings made by the chairperson and Moonstone’s advice. That
court also found that the directors were biased because they testified in the
litigation initiated by Mr Basson regarding his exit from the companies and
the fair value of his shares.

[34] Mr Kruger denied that the resolutions were passed for the ulterior
purpose of rendering Mr Basson’s shares worthless. His denial was a detailed
explanation of precisely how the resolutions came to be proposed and why
they were passed. There can be no doubt that there was a strong rational
connection between the facts that were found to have been established in the
disciplinary enquiry and the decision to debar Mr Basson. The fact that a
resolution for debarment was proposed prior to the meeting of the 17 May
2017 was consistent and in compliance with the provisions of s 14(1) of the
FAIS Act. Once the findings impacting on Mr Basson’s honesty and integrity

were made by the chairperson the appellants were obliged to inquire into
whether or why he should not be debarred. The duty fell on the appellants and
no one else. Section 14(1)(a) compels a provider to debar a representative or
a key individual who has misconducted him or herself, if he or she is no longer
a fit and proper person to be trusted to give financial advice to members of the
public. Mr Basson’s argument that the decision should have been referred or
left for the Registrar to make is untenable: the Registrar had no power to
decide on Mr Basson’s debarment. So too was the submission that it was
improper for the appellants to sit in judgment of Mr Basson in the middle of
a pending dispute about the valuation of his shares. The appellants were the
only persons empowered by the FAIS Act to decide whether Mr Basson
should be debarred.

[35] Curiously the objection based on bias was never raised prior to the
debarment. In any event, nothing on the record supports the argument that the
debarment was made for reasons other than those prescribed in the FAIS Act.
The very purpose of giving Mr Basson notice of the contemplated resolutions
was to afford him the opportunity to make representations. To suggest that
this amounted to pre-judgment is unsustainable, otherwise every
administrative decision requiring prior hearing would be susceptible to being
set aside on account of pre-judgment. Moreover, the FAIS Act vests the power
to debar in persons who inevitably would have a history to speak of – and be
aware of the misdeeds of – what may be described as an errant representative.
This method of regulation thus accepts that some institutional bias may be
present and will be tolerated in respect of debarment proceedings in terms of
the FAIS Act.

The counter-application
[36] The appellants persisted in their appeal against the dismissal of their
counter-application on the basis that although Rebalance had revoked Mr
Basson’s registration as its representative he was, once more, registered as a
representative for Vision Risk. It was also submitted that there was evidence
of laxity in the supervision, by the Registrar, of reappointment of formerly
debarred representatives. Much reliance was placed on Financial Services
Board v Barthram and Another15 in which this court held that debarment of a
representative in terms of s 14(1) of the FAIS Act becomes effective on an
industry-wide scale because of the risk posed to the public by a debarred
person who does not meet the requirements of honesty and integrity.

[37] However, as far back as December 2017, it was stated on behalf of the
FSB that Mr Basson was not registered as a representative of any FSP. There
was also an explanation that Mr Basson’s online appointment by Rebalance
resulted from compliance with a court order in terms of which the FSB was
ordered to remove publication of his debarment from its website. This resulted
in an inadvertent disabling of a search function for debarred representatives
on the website, allowing the uploading of Mr Basson’s appointment by
Rebalance. In this sense his appointment by Rebalance was never a
‘reappointment’, but no more than an administrative error.

[38] In this context the counter-application had indeed become academic.
There had been no reviewable decision by the FSB. Neither could the FSB

15 Financial Services Board v Barthram and Another [2015] 3 All SA 665 (SCA)

‘take any steps as may be required in terms of s 14A (now s 153) of the FAIS
Act in regard to [Mr Basson]’.16

The order
[39] Consequently, it is ordered that:
The appeal as to the main application is upheld with costs, such costs,
including those of two counsel, to be paid by the first respondent.
The appeal as to the counter-application is dismissed with costs, such
costs to include those of two counsel.
The order of the high court is set aside and replaced with the following:
‘The application and counter-application are dismissed with costs, such
costs to include those of two counsel’.

________________________
N DAMBUZA
JUDGE OF APPEAL

16 This was the alternative order sought by the appellants in the alternative to remittal of the reappointment
for reconsideration. Section 153 of The Financial Sector Regulation Act No 9 of 1017 also regulates
debarment under the authority of the Reserve Bank.

Appearances

For appellants:

Adv Kirk-Cohen SC with him Adv Mark Greig
Instructed by:

Webber Wentzel Attorneys, Cape Town

Symington & De Kok Attorneys, Bloemfontein

For 1st Respondent:
Adv Van Riet SC with him Adv Dorsten
Instructed by:

De Waal Grobbelaar Fischer Attorneys, Cape Town
JL Jordaan Attorneys, Bloemfontein.

For 2nd Respondent:
Adv Pillay SC
Instructed by
:
Bisset Boehmcke Mcblain, Cape Town

Webbers, Bloemfontein

THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA
MEDIA SUMMARY - JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

Associated Portfolio Solutions (Pty) Ltd & Another v Basson & Others
(554/2019) [2020] ZASCA 64 (12 June 2020)
From:
The Registrar, Supreme Court of Appeal

Date:

12 June 2020
Status:
Immediate

Please note that the media summary is for the benefit of the media and does not form part of
the judgment of the Supreme Court of Appeal.

Today the Supreme Court of Appeal (SCA) upheld an appeal by two appellants, Associated Portfolio
Solutions Pty Ltd and Pentagon Financial Solutions (Pretoria) Pty Ltd against the first respondent Pieter
Willem Basson. During May 2017 the two companies, being financial services providers, dismissed the
first respondent, Pieter Basson from his position as an employee and director in both companies,
following a disciplinary process in terms of which he was found guilty of misconduct involving acts of
dishonesty which impacted on his integrity. They then debarred him as their representative and key
individual under the Financial Advisory and Intermediary Services Act of 2002 (The FAIS Act).

Basson then successfully challenged his debarment in the Western Cape High Court, Cape Town. The
high court found that the appellant should not have relied on the outcome of the disciplinary process in
debarring Basson; they should have held another inquiry in which there would have been another
inquiry into the transgressions which formed the basis of his debarment. That court also found that the
debarment process was vitiated by bias as Basson’s co-directors in the appellant companies, who took
the decisions to debar him, had prejudged the issues, were driven by ulterior motive as they were locked
in a dispute with Bassson about the value of his shares in the companies, and had testified against him
in the disciplinary hearing,

In upholding the appeal against the judgment of the high court, the SCA held that the facts established
in a disciplinary hearing may be taken into account in a debarment process. In this case Basson had
been afforded opportunity to, and did make representations prior to the debarment meeting. Further, in
terms of section 14(1) of the FAIS Act the appellants, as financial services providers must debar a
representative who does not meet the requirement of a ‘fit and proper’ person as prescribed in the Act.
Once Basson was found guilty of acts of dishonesty which impacted on his integrity, the appellants had
a duty to debar him. The Registrar of the Financial Services Board had no basis, in the circumstances,
to debar Basson.

The SCA also dismissed an appeal by the appellants against the dismissal of their counter-application
by the high court. In that counter-application the applicants had sought a declaratory order that Basson

would only be legible for re-appointment 12 months from the date of his debarment. The SCA held that
although subsequent to his debarment Basson had been erroneously appointed by another financial
services provider, that appointment had since been withdrawn and that issue had become academic.