Financial Sector Conduct Authority (FSCA)

What is the role of the FSCA?

The Financial Sector Conduct Authority (FSCA), previously known as the Financial Services Board (FSB), is the market conduct regulator of financial institutions in South Africa.

How does the FSCA implement its role as a regulator?

By enhancing and supporting the efficiency and integrity of the financial system and by protecting financial customers by promoting their fair treatment by financial institutions.

It also provides financial customers with financial education and promotes financial literacy and financial capability.

Which financial institutions are regulated by the FSCA?

The FSCA website indicates the following: “Financial institutions that provide financial products and financial services, financial institutions that are licensed in terms of a financial sector law, including banks, insurers, retirement funds, and administrators, and market infrastructures.”

Is the FSB still functioning?

No.

On 1 April 2018, the Twin Peaks model for financial sector regulation came into effect with the result that the Financial Services Board (FSB) being transformed into a dedicated market conduct regulator with an extensive mandate and new name, the Financial Sector Conduct Authority (FSCA).

What is the Twin Peaks model?

The Twin Peaks model refers to two peaks of regulation in the financial sector, namely: the prudential peak and the conduct peak.

• The prudential peak is called the Prudential Authority and functions as a subsidiary of the South African Reserve Bank. It is also called the “system regulator” and is mandated to create and enforce prudential regulations.
• The conduct peak is called the Financial Sector Conduct Authority (FSCA). It is also called the “good conduct” peak by South African authorities.

What is a Financial Service Provider (FSP)?

A Financial Service Provider (FSP) is a business offering financial advice and/or intermediary services. Examples of FSPs: brokerages, insurance companies, banks, financial advisor businesses.

Key Individual (KI)

A key individual (KI) is responsible for managing and overseeing the regulated functions of an FSP. The key individual must make sure that the FSP has policies and procedures in place to ensure compliance with the General Code of Conduct and with the Fit and Proper requirements.

This includes supervising representatives and their work in an official capacity.

The KI is the person who has to report to the FSCA and who the FSCA will hold for any actions against the FSP.

Representatives

Representatives give advice on financial services and products to prospective clients and act as intermediaries between clients and the relevant product suppliers, like insurance companies.

As an advisor, a representative facilitates a client’s decision in relation to a financial product, like an insurance policy.

As an intermediary, a representative may facilitate the administration of the financial product.

A key individual can also act as a representative.

FAIS Act

The Financial Advisory and Intermediary Services (FAIS) Act is administered by the FSCA. The purpose of the FAIS Act is to protect consumers in dealing with FSPs, by regulating the advice-giving and selling activities of FSPs.

The Act also ensures that consumers are provided with sufficient information about the financial products they use and about the people and institutions that sell these financial products.

General Code of Conduct (GCOC)

When rendering financial services and making adequate product disclosures to clients, authorised FSPs and their representatives are compelled to act “honestly, fairly, with due skill, care and diligence, in the interests of clients and the integrity of the financial services industry.”

This is according to the Code of Conduct (GCOC) of the FAIS Act.

Fit and proper requirements for an FSP, KI or Representative

In terms of the FAIS Act certain requirements are set for the honesty and integrity, competency, and operational ability of all FSPs, key individuals, and representatives. Solvency requirements applicable to FSPs, are also set.

Fit and Proper requirements aim to preserve and improve professionalism and compliance in the financial service industry, as well as to establish increased competency in the industry.

FSP registration and FSP license

In order to operate as an authorised FSP in South Africa, a business entity or individual must be registered with the FSCA and issued with a FAIS license, more commonly known as an FSP license.

Before applying for an FSP license, certain FAIS requirements such as education and experience are to be met. A number of documents are also required.

Applying for an FSP license can be arduous. However, there are businesses that can assist, at a certain cost, with the registration of an FSP.

The turnaround time for a license application to be processed can be between 6 and 12 weeks. However, this was before COVID-19.

FSCA fees and levies

The FSCA website has the latest fees and levies.

How to check if an FSP or representative is registered with the FSCA

You can verify if an FSP, key Individual, or representative (financial advisor) is licensed with the FSCA, as well as for which categories and subcategories they are authorised.

This can be done on the FSCA website. All you need is either the name of the FSP or the FSP number.

Go to the FSCA website and click on “Financial Service Providers Search”. Enter either the FSP name or number and submit. This will take you to a page with information about the FSP. Click on “details” to get you to the next page, where you can click on “Representatives” and follow the instructions.

Debarment of a representative

A representative is debarred under section 14 of the FAIS Act if he/she is no longer fit and proper or has disobeyed the requirements or conditions of the FAIS Act.

With debarment, a representative is prevented from rendering any financial services as a representative of any FSP.

Under certain conditions and after a specific time a debarment can be lifted.

To check for debarred representatives, go to the FSCA website. You will need the person’s ID number. You can also contact the FSCA call centre at 0800 20 37 22.

Complaints about an FSP

Want to complain about an FSP? The Financial Advisory and Intermediary Services Ombudsman (FAIS Ombud) is the one to go.

Complainants can also lodge a complaint in electronic format on the Ombud’s website.

But before submitting a complaint to the FAIS Ombud, first try to resolve the complaint with the responding party. The FAIS Ombud recommends that you do this in writing and keep proof that you had done so.