# Section 14 FAIS Debarment Guide: Lawful Grounds, PAJA Procedure & 5/15-Day FSCA Timeframes > **Category:** FSCA Debarment & Licensing | **Updated:** 2026-11-03 07:48:07 | **Canonical URL:** https://re5examprep.co.za/blog/section-14-fais-debarment-procedure-timeframes-grounds **Executive Summary:** Complete statutory guide to Section 14 debarment under the FAIS Act 37 of 2002 for RE5 Representatives and RE1 Key Individuals: valid grounds, PAJA fairness, 6-month post-resignation rule, and reappointment. --- Statutory Quick Answer (AEO Summary) Under **Section 14 of the FAIS Act 37 of 2002**, an FSP must debar a Representative or Key Individual **only** if they no longer meet the **Fit and Proper requirements** (Honesty, Integrity, Good Standing, or Competence) or have **materially contravened the FAIS Act**. Debarment may **never** be used for sales targets, commission disputes, or labour grievances. If a Representative resigns, the FSP has **6 months** from termination to commence debarment if the cause existed prior to leaving. Once debarred, the FSP must notify the FSCA within **5 days** and submit full documentary evidence within **15 days**. ## 1. Lawful vs Unlawful Grounds for Section 14 Debarment Debarment is an industry-wide regulatory sanction that prevents a person from rendering financial services for *any* FSP in South Africa. Because FSPs historically abused debarment during employment disputes, Section 14 strictly ring-fences when an FSP may debar: | Lawful Statutory Grounds (Mandatory Debarment) | Unlawful / Prohibited Grounds (Never Debar!) | | --- | --- | | Lack of Honesty, Integrity & Good Standing (e.g., fraud, forgery, theft, misrepresentation, forging a client signature) | Failure to meet monthly or quarterly sales targets / commission quotas | | Failure to meet Competence or CPD requirements (e.g., failing to pass RE5 within 24 months from DOFA) | Resigning to join a competing FSP or restraint-of-trade disputes | | Material contravention of any provision of the FAIS Act or General Code of Conduct | Contractual clawback / commission debt disputes or general HR absenteeism | ## 2. Mandatory 6-Step Procedural Fairness under Section 14(3) An FSP's debarment process is an administrative action governed by Section 14(3) of the FAIS Act and the Promotion of Administrative Justice Act (PAJA). The FSP must follow these exact steps: - Written Notice of Intention to Debar: Give adequate written notice to the Representative stating the FSP's intention to debar, the specific statutory grounds and reasons, and any terms attached to the debarment. - Provide Debarment Policy & Evidence: Furnish the Representative with a copy of the FSP's written internal debarment policy and the documents/evidence on which the FSP relies. - Reasonable Opportunity to Respond: Grant the Representative a reasonable period to make written or oral representations in response. - Consider Representations & Decide: Impartially evaluate the response and take a formal decision. - Immediate Written Notice to Representative: Notify the person in writing of the final decision, their right to apply to the Financial Services Tribunal (FST) for reconsideration, and the formal requirements for lodging that application. - Two-Stage Notification to the FSCA (5 Days & 15 Days): Within 5 days of the debarment: Notify the FSCA to remove the person from the central register. - Within 15 days of the debarment: Provide the FSCA with the written grounds, reasons, and full documentary record of the proceedings. ## 3. The 6-Month Post-Resignation Rule & 12-Month Reappointment Rule - Can a Representative Escape Debarment by Resigning? No! Under Section 14(1)(b) and 14(5), if the grounds for debarment existed before the Representative ceased to work for the FSP, the FSP may still commence debarment proceedings within 6 months from the date on which the person ceased to be a Representative of that FSP. - Protecting Clients' Unconcluded Business: The FSP must take immediate steps to ensure that the debarment does not prejudice the interests of clients and that all unconcluded business of the debarred Representative is properly attended to by another authorised Representative. - Reappointment of a Debarred Representative (Board Notice 82 of 2003): If debarred for dishonesty / lack of integrity : At least 12 months (1 year) must have elapsed since the debarment date, all unconcluded business must be resolved, all client complaints/Ombud determinations satisfied, and full rehabilitation proven. - If debarred solely for failing a competence/RE5 exam deadline : The person may be reappointed immediately as soon as they pass the outstanding RE5 exam or qualification (no 12-month wait!). ## 4. Worked Moonstone Exam Trap Example > Sample Exam Stem: "A Representative fails to pass the RE5 exam within 24 months of their Date of First Appointment and is debarred by the FSP. Two months later, the candidate passes the RE5 exam at Moonstone. When may an FSP reappoint this candidate?" Why Candidates Fail: Candidates blindly pick "Only after 12 months have elapsed since the debarment date." Correct Statutory Answer: Because the debarment was solely for competence/regulatory exam non-compliance (and NOT dishonesty or fraud), the candidate may be reappointed immediately upon passing the RE5 exam without waiting 12 months. ## 5. Frequently Asked Questions (FAQs) ### Can an FSP debar a Representative who resigns before their disciplinary hearing? Yes. Under Section 14(1)(b) and Section 14(5) of the FAIS Act, if the reason for debarment existed prior to the termination of the relationship, the FSP must still commence debarment proceedings within 6 months from the date the person ceased to be a Representative. ### Can an FSP debar a Representative for failing to meet sales targets or owing commission clawbacks? No. Section 14 of the FAIS Act strictly prohibits using debarment for contractual, employment, commission, or sales-target disputes. Debarment is limited exclusively to Fit and Proper failures or material contraventions of the FAIS Act. ### Where does a debarred Representative appeal if they believe their debarment was unfair? A person aggrieved by a Section 14 debarment may apply to the Financial Services Tribunal (FST) under Section 230 of the Financial Sector Regulation (FSR) Act for a reconsideration of the debarment decision. ### How long must a Representative debarred for dishonesty wait before applying for reappointment? Under Board Notice 82 of 2003, at least 12 months (1 year) must have elapsed since the date of debarment before a person debarred for lack of honesty and integrity may be reappointed, provided all defects and unconcluded business have been resolved. --- ## Practice Exam Questions on This Topic ### Question 1 (FAIS Act 37 of 2002, Sec 14(1) & Sec 14(5)) A Representative commits policy fraud and immediately resigns before a disciplinary hearing is held. Within what maximum period after the Representative ceased working for the FSP may the FSP commence Section 14 debarment proceedings? - **A:** An FSP can never debar a Representative after receiving a resignation letter - **B:** Within 6 months from the date on which the person ceased to be a Representative of the FSP - **C:** Within 15 days from the date of resignation - **D:** Within 5 years from the date of the offence **Correct Answer:** B — A Representative cannot evade debarment by resigning. Provided the grounds existed prior to termination, the FSP has 6 months from the termination date to commence debarment under Section 14(5). ### Question 2 (FAIS Act 37 of 2002, Sec 14(4)(d) & (e)) Once an FSP finalises the debarment of a Representative under Section 14, within what timeframes must the FSP notify the FSCA and submit the documentary evidence? - **A:** Notify FSCA within 5 days; submit grounds and documentary record within 15 days - **B:** Notify FSCA within 30 days; submit record within 6 weeks - **C:** Notify FSCA within 15 days; submit record within 4 months - **D:** Notify FSCA during the annual compliance audit once a year **Correct Answer:** A — Section 14(4)(d)-(e) mandates a two-stage notification: notify the FSCA within 5 days of the debarment, and furnish the written reasons and documentary record within 15 days. ### Question 3 (Board Notice 82 of 2003, Sec 2) If a Representative was debarred SOLELY for failing to pass the RE5 exam within their 24-month supervision period (with zero dishonesty), when may they be reappointed after passing RE5? - **A:** Only after 12 months have elapsed since the debarment date - **B:** Only after 5 years have elapsed since the debarment date - **C:** Immediately upon passing the RE5 exam (the 12-month waiting period does not apply to competence-only debarments) - **D:** Never — debarment is permanent for life **Correct Answer:** C — While a debarment for lack of honesty and integrity requires at least 12 months before reappointment, a person debarred solely for failing a competence/exam deadline may be reappointed immediately upon meeting the competence requirement. --- ## Test Yourself on the Moonstone Exam Simulator - **Free 5-Question Diagnostic:** https://re5examprep.co.za/practice - **Unlock RE5 & RE1 Pro Pass (R249 Once-Off):** https://re5examprep.co.za/boost - **All FSCA Study Guides:** https://re5examprep.co.za/blog