The Liability of Financial Services Representatives and Supervisors
The recent case of Moore, Johnsure Investments CC v Black (“the Moore case”) has affirmed the position that despite a financial services representative being exempt from particular requirements, they still have an obligation to comply with the codes of conduct imposed by law, and a failure to do so may result in the being held liable of contravening these obligations. Also, the supervisor of a representative may be held liable for any loss suffered by a client when it is clearly established that said supervisor has not performed his fiduciary duties when conducting himself in a supervisory roll.
It is important that financial services providers ensure that their representatives and supervisors are aware of their legal obligations so as to avoid being held liable by the courts.
As per the Board Notice 95 of 2003, a respresentative is defined as:
“Any person including a person employed or mandated by such first-mentioned person, who renders a financial service to a client for or on behalf of a financial services provider.”
Codes of Conduct for Administrative and Discretionary Financial Services Providers require a financial services provider to be responsible and mindful of the actions of its representatives whilst guiding and monitoring their daily transactions until they have acquired the necessary expertise, experience and skill to trade freely and independently of that supervisor (while acting within the provisions of the Financial Services Act and the Codes of Conduct).
Representatives are also governed by the Codes of Conduct personal character qualifications of honesty and integrity. Although a representative is not expected to have the same level of experience and expertise as the financial services provider, he / she still has a duty to employ reasonable care and skill in exercising his mandate. In the Moore case, the representative was held liable as he could have foreseen the risk involved, and the fact that he was being supervised did not exempt him from liability or from acting in accordance with all applicable laws.
Supervisors have an obligation to ensure that their representatives are carrying out their duties responsibly and in accordance with the applicable laws that have been put in place. In the Moore case, the superior was liable as he had a duty and a supervisory function to oversee his representative.