Can a Representative Use a Key Individual's Instruction as a Defence Against Personal Liability Under FAIS?

A Key Individual calls a representative into her office. The team is behind on conversion targets, and the KI has a solution: stop front-loading product presentations with risk disclosures that put clients off before the conversation gets started. The KI frames it as an efficiency measure. The representative, who has worked at the FSP for three years and has never been in regulatory trouble, nods and adjusts her approach. She believes — and is told — that KI instructions carry the liability. The question of representative personal liability does not cross her mind.

That belief is wrong, and its consequences are serious. The representative's obligations under the General Code of Conduct do not depend on what the FSP has authorised or what the KI has directed. They attach to the representative personally. A KI's instruction cannot discharge them. A representative who knowingly executes a deceptive or non-compliant practice on instruction has personally breached those obligations — and faces personal debarment consequences as a result.

The Representative's Direct Regulatory Obligations

The General Code of Conduct defines "provider" to include a representative — meaning every obligation imposed by the Code binds representatives directly, not through the FSP. A Key Individual's instruction cannot transfer or discharge those personal obligations. A representative who knowingly executes a deceptive or unsuitable practice on instruction has personally breached the GCOC general duty under Section 2 and their fit and proper requirement for honesty and integrity under Board Notice 194 of 2017. That breach grounds mandatory debarment under Section 14(1) of the FAIS Act — regardless of who gave the direction.

The starting point is the General Code of Conduct for Authorised Financial Services Providers and Representatives (GCOC), issued under Section 15 of the Financial Advisory and Intermediary Services Act 37 of 2002 (FAIS Act). The GCOC defines "provider" in its Section 1(1) to mean "an authorised financial services provider, and includes a representative." Section 1(3) then states without qualification:

"The provisions of this Code apply, unless stated otherwise in this Code or otherwise by law, to all financial services providers and representatives."

The GCOC does not address representatives through the FSP. It addresses them directly. The obligations imposed on "providers" in every substantive section of the Code bind each representative personally.

Section 2 sets out the foundational duty:

"A provider must at all times render financial services honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry."

Since "provider" includes "representative," this is a personal obligation on every representative at all times. An instruction from a KI to omit required disclosures, to recommend an unsuitable product, or to misrepresent a product's features is an instruction to breach Section 2. Complying with that instruction is a personal breach by the representative — not merely a failure of the FSP's governance.

The Fit and Proper Dimension

The representative's personal regulatory exposure does not stop at the GCOC. Board Notice 194 of 2017 (the Fit and Proper Requirements) applies directly to representatives as individuals. Chapter 2 of Board Notice 194 states at Section 7(1):

"The fit and proper requirements relating to honesty, integrity and good standing contained in this Chapter apply to all FSPs, key individuals and representatives."

Section 8(1) then requires every representative to be honest and to have integrity — a continuous requirement, not a threshold assessed at appointment. This is not a corporate attribute of the FSP; it is a personal quality that each representative must maintain throughout their appointment.

Section 9(1) of Board Notice 194 sets out circumstances that constitute prima facie evidence that a representative does not meet the honesty and integrity standard. The list includes, at Section 9(1)(l), a person who "has demonstrated a lack of readiness and willingness to comply with legal, regulatory or professional requirements and standards."

A representative who knowingly executes a practice they know to be non-compliant — even one they have been directed to execute — has demonstrated precisely that. The section does not require a criminal conviction or a formal finding. It requires conduct that evidences unwillingness to comply with regulatory requirements.

How the Debarment Obligation Is Triggered

Section 14(1)(a) of the FAIS Act requires the FSP to mandatorily debar any representative where the FSP is satisfied that the representative either:

• no longer complies with the fit and proper requirements (Section 14(1)(a)(iii)); or
• has contravened or failed to comply with any provision of the Act in a material manner (Section 14(1)(a)(iv)).

The debarment obligation is triggered by the representative's own fitness and conduct. It is not modified by whether the FSP or KI directed the representative's conduct. If the representative's participation in a deceptive practice demonstrates a breach of the honesty and integrity requirement, the FSP must debar — and the FSP cannot shield the representative by characterising the conduct as a KI directive.

The FSCA's Independent Route

The FSP's internal assessment is not the only debarment mechanism. Section 153(1) of the Financial Sector Regulation Act 9 of 2017 (FSR Act) gives the FSCA authority to issue debarment orders independently. Section 153(1)(c) covers a person who has:

"attempted, or conspired with, aided, abetted, induced, incited or procured another person to contravene a financial sector law in a material way"

A representative who executes a KI's instruction to contravene the GCOC has, at minimum, aided and abetted that contravention. Section 153(1)(c) does not require the representative to have been the primary actor. It reaches anyone who assisted in a financial sector law breach — including a representative who carried out the acts the KI directed.

What Section 13(1)(b)(bb) Actually Does

Representatives sometimes point to Section 13(1)(b)(bb) of the FAIS Act, which requires confirmation to clients that "the provider accepts responsibility for those activities of the representative performed within the scope of, or in the course of implementing, any such contract or mandate." This is read as though it creates a liability shield for the representative.

It does not. Section 13(1)(b)(bb) is a client-protection provision: it ensures clients know the FSP stands behind the representative's acts and can look to the FSP for redress. It operates in the civil relationship between client and FSP. It does not affect the FSCA's separate authority to pursue the representative personally for breaches of their own regulatory obligations. The two forms of liability are independent.

Where Representatives Go Wrong

The authority confusion. Most representatives who accept an unlawful KI instruction do so because they conflate the FSP's management authority over them as an employee with the regulatory framework's obligations on them as a licensed representative. The KI has authority to direct the representative's commercial activities. The KI does not have authority to override the representative's statutory obligations to clients and the regulatory system. These are obligations the representative holds personally — they are not delegated from the FSP, and they cannot be recalled by the FSP.

The written-objection trap. A representative who documents her disagreement before executing a KI's instruction believes the written record will protect her. In one sense this is correct: if the representative refuses to execute the instruction, the documentation supports her refusal. But if the representative objects in writing and then executes the instruction anyway, the written objection does not create a defence. It creates evidence of knowledge. The representative knew the instruction was wrong, and executed it regardless. That is a more direct demonstration of willingness to participate in a non-compliant practice than if she had simply followed orders without reflection.

The vicarious liability confusion. Representatives assume that because the FSP accepts responsibility under Section 13(1)(b)(bb), the FSP's liability absorbs their own. It does not. A client's ability to hold the FSP liable is a separate legal relationship from the FSCA's ability to debar or prosecute the representative. The FSP can be held responsible without the representative escaping their own consequences, and the representative can be debarred regardless of whether the FSP has also been sanctioned.

How This Works in Practice

The omitted disclosure investigation

A representative omits product risk disclosures from a series of presentations over a six-month period, following a KI directive to streamline the client onboarding process. Client complaints emerge eight months later. An FSCA investigation establishes that the representative personally made the presentations and personally omitted the required disclosures. The representative produces the KI's written instructions and her own objection emails.

The FSCA does not accept the KI instruction as a defence for the representative's Section 2 breach. The representative personally rendered financial services in a manner that was not honest, fair, or with due skill and care. The representative's fit and proper requirement for honesty and integrity is at issue. The FSP proceeds to mandatory debarment under Section 14(1). The FSCA's separate investigation of the KI proceeds in parallel.

The Section 153(1)(c) route

An FSCA market-conduct inspection identifies a systematic unsuitable-advice pattern at an FSP. The product recommendations consistently align with the FSP's 30%+ remuneration relationship with a single product supplier, without the required disclosure under GCOC Section 3(1)(c)(i). The KI directed the recommendations matrix.

Three representatives who implemented the matrix argue they were acting under instruction. The FSCA invokes FSR Act Section 153(1)(c): each representative, by implementing recommendations that omitted the required conflict-of-interest disclosure, aided and abetted the FSP's material contravention of the GCOC. All three are individually debarred. The KI's direction does not affect this outcome — it is relevant to the KI's own liability, not the representatives'.

Practical Implications

For representatives

If a KI's instruction requires you to omit a disclosure, misrepresent a product, recommend an unsuitable product, or carry on a practice you know to be non-compliant, the correct response is to refuse and escalate — not to execute and document. Documenting an objection while executing the instruction provides no regulatory shield. The representative who refuses an unlawful KI instruction and records that refusal is in a fundamentally different regulatory position from the one who executes it, regardless of what is written in either case. Your obligations under the GCOC and the fit and proper requirements are personal. No one inside the FSP has the authority to override them.

For compliance officers

Where a KI directive has generated representatives' conduct concerns, the compliance officer's role is to document the instruction and its regulatory implications, advise affected representatives of their personal exposure, and flag the matter to the governing body. Representatives who have already executed a non-compliant instruction need explicit advice that the KI's direction is not a retrospective defence — and that their best option may be voluntary disclosure rather than continued execution while hoping the matter does not come to light.

For exam candidates

RE5 scenario questions on this topic test one core distinction: the difference between the FSP's management authority over the representative (which is hierarchical) and the regulatory framework's obligations on the representative (which are personal and cannot be overridden by management). A KI's instruction that contravenes the GCOC does not shield the representative — the representative has a personal duty to comply with the Code regardless of what the KI directs. In any scenario where a representative follows an instruction that results in a regulatory breach, the representative is personally liable. The instruction is relevant to the KI's own exposure — not to the representative's.