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Financial services watchdog, the Financial Sector Conduct Authority issued R100.6 million in fines in 2022/23, suspended 984 licenses and debarred 210 people in the financial services sector according to its first Regulatory Actions Report.
The report focuses on enforcement interventions and provides an overview of enforcement trends, statistics and case studies.
According to the Financial Sector Conduct Authority (FSCA), it is important for consumers to have confidence and trust in financial institutions as well as their products and services to transact, save and insure against risk.
A high level of trust and confidence in the financial sector boosts economic activity and stimulates growth for the benefit of all South Africans and, therefore, the FSCA aims to maintain and support confidence and integrity in the financial sector by acting decisively and visibly against misconduct.
The FSCA decided to publish an annual regulatory action report from now on, to enhance its commitment to transparency by communicating its regulatory actions for the past financial year, including enforcement actions.
It also hopes to add to credible deterrence through visible enforcement and create awareness of regulatory requirements as well as its expectations for embedding good conduct and ensuring fair outcomes for customers.
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The FSCA can impose administrative penalties in appropriate cases to promote general and specific deterrence and the process it uses is designed to fully comply with administrative law principles, while respondents get a reasonable opportunity to reply and provide reasons why a penalty should not be imposed.
During the past financial year, the FSCA imposed administrative penalties of R153 864 300 in on 44 people, but after subtracting penalties that were suspended or set aside on reconsideration to the Financial Services Tribunal, a total of R100 644 300 administrative penalties were payable.
The FSCA can take steps such as suspending a license or withdrawing authorisations if someone in the financial services sector contravenes a licence condition, contravene a financial sector law, fail to comply with a directive, or defaults on an enforceable undertaking to protect consumers against risk and financial harm.
In addition, the FSCA can suspend a license when someone can rectify the reason for it, such as submitting statutory returns when it was not done. The licensee is not allowed to provide financial services during the suspension.
During the past financial year, the FSCA suspended the licences of 984 financial service providers, approximately 8% of the total number of licenses.
A total of 938 (95%) suspensions related to non-submission of statutory returns and/or non-payment of levies and in 522 (53%) cases the suspension was lifted. In addition, the FSCA withdrew the licences of 420 (4%) financial service providers where approximately 380 (90%) were suspended for the same reasons.
The FSCA also withdrew the licence of a market infrastructure in terms of the Financial Markets Act for prolonged non-compliance with the liquidity and capital adequacy requirements of an exchange.
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A total of 210 people were debarred during the past financial year.
The FSCA can debar someone who contravenes a financial sector law, an enforceable undertaking, a foreign law that corresponds to a financial sector law or attempted, conspired with, aided, abetted, induced, incited or procured another person to contravene a financial sector law.
A debarment prohibits someone from providing, or being involved in the provision of, specified financial products or financial services, generally or in circumstances specified in the order, acting as a key person of a financial institution or providing specified services to a financial institution to protect consumers.
In the majority of cases, the reasons for debarment involved dishonest conduct and a substantial number of debarments resulted from the submission of fabricated policies.
Other common causes of debarments include providers misappropriating clients’ funds, acting contra mandate, trading and investing clients’ funds in their own names, misrepresenting investments and investment results and lack of oversight over juristic and natural representatives.
The FSCA also collaborated on 45 matters with international counterparts as well as domestic counterparts and enforcement agencies and opened 481 new investigation cases, finalised 406 and is still working on 329 cases. The majority of the investigation cases relate to unauthorised FAIS and insurance business.
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To warn the public of possible unauthorised or illegal activities, the FSCA published 47 public warnings that mainly related to the rendering of unauthorised financial services.
The FSCA intervened with curatorships, statutory management, enforceable undertakings and removal of people from positions, mostly in the retirement funds industry.
The FSCA also took 1 668 administrative action decisions during the reporting period, of which approximately 1,4% were set aside on reconsideration to the Financial Services Tribunal.
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