June 2021 Legislative Update

June 2021 Legislative Update

Can you believe that 11 years ago we were all huddled together in the cold watching the 2010 Soccer World Cup! Not so at the moment as we need to be socially distanced. As South Africa slowly rolls out its vaccination programme, we hold out hope that we’ll get back to that type of social interaction. Until then, sanitise your hands, wear your mask, and stay home.

 

FAIS General Code of Conduct – Complaints

A reminder that financial services providers (FSPs) must have implemented the revised complaints policy and management framework as required by the revision to the FAIS General Code of Conduct by 26 June.

If you’re unsure or would like us to review the policy and framework please get in touch.

The FSCA shortlists candidates for deputy commissioners

As part of its commitment to transparency, the FSCA has provided industry and the public with the opportunity to comment on the candidates for Deputy Commissioner. (Imagine if the public got to comment on your suitability for a job! Ed.)

The two shortlisted candidates are Ms Katherine Gibson (who is the acting Commissioner) and Ms Farzana Badat. Our engagements with Ms Badat have always been very productive and we fully support their appointments.

The comment document and the abridged CVs of the candidates are available here.

Information Technology (IT) risk management

The FSCA and Prudential Authority issued Draft Joint Standard 1 of 2021 on 9 June.

The objective of the standard is to prescribe the requirements on financial institutions in relation to IT risk management. The affected financial institutions are as follows: banks, insurers, collective investment scheme managers, market infrastructures (such as exchanges), as well as discretionary and administrative FSPs.

The draft proposes that it should be effective from 1 January 2022.

As would be expected of such a piece of legislation, the standard essentially lists the practical requirements of a suitably robust IT risk management plan, and makes the board or similar persons responsible for its implementation.

By now, prudent financial institutions should have done so, and surely realise that it’s an essential part of their operations. This legislation potentially duplicates the general risk management requirements on financial institutions already in place. Additionally, specific rules always seem to inspire some parties to find the loopholes, which defeats the purpose of the rules!

Should the standard be passed, it seems that another set of documented policies and procedures will have to be set or amended by the affected institutions, and their boards and managers will be liable for yet more.

Read the joint standard here and submit your comments.

Crypto assets to be brought into the South African regulatory purview

On 11 June, the Intergovernmental Fintech Working Group published a position paper on crypto assets. The paper states that crypto assets will be brought into the South African regulatory purview in a phased and structured manner.

The regulators have identified three main drivers for the inclusion of crypto assets in the legislation:

1. Anti-money laundering and combating the financing of terrorism (AML/CFT): The Financial Action Task Force now explicitly requires jurisdictions to regulate crypto assets and crypto asset service providers for AML/CFT purposes.
2. Cross-border financial flows: The current Exchange Control Regulations don’t explicitly cater for crypto assets, therefore the SARB’s Financial Surveillance Department (FinSurv) doesn’t have explicit powers to require South African crypto asset trading platforms to report transactions involving crypto assets.
3. Application of financial sector laws: The increased retail interest in crypto assets, growing instances of consumer abuse, fraud, and market misconduct emphasise the need for the South African authorities to take action against the growing tendency for market abuse under the guise of crypto assets.

The regulators also make it clear that this doesn’t denote condonation or approval of crypto assets – this is an attempt to set up controls to ensure fair outcomes for clients.

Read the press release here.

Submission of financial statements

The majority of FSPs have financial year-ends at the end of February. The FAIS Fit and Proper regulations stipulate that financial statements and accompanying documents must be submitted within four months of an FSP’s year-end. So, for most FSPs the submission date is 30 June every year (unless they apply for an extension).

If you’re in this group and haven’t submitted your 2021 financial statements, you should contact us and we’ll try to assist.

Lists of qualifications recognised for FSPs, Key Individuals, and Representatives

On 31 May the FSCA released an updated list of recognised qualifications.

FSPs will need to update their records – particularly their recruitment and human resources procedures – to ensure that they select suitable candidates.

The full list is available here and a segmented and zipped version here.

The FSCA imposes administrative penalty

The FSCA imposed a penalty of R17,730,465 on Vesticento cc t/as Mutual Direct Group Funeral Benefits, debarred its Key Individual and another Representative for 10 years, and withdrew the licence of the FSP.

The FSCA’s investigation revealed that the FSP had been debiting R99 from members of the public without their consent since April 2014, and had deliberately misappropriated policy benefits due to claimants.

The FSCA found that the FSP had acted dishonestly, unfairly, without due skill, care and diligence, and that its conduct wasn’t in the best interests of the clients and placed the integrity of the financial services industry into disrepute. It was also found that the FSP had contravened the FAIS General Code of Conduct as it hadn’t acted according to the contractual arrangement with the clients and hadn’t accurately accounted for the transactions.

We’re sure that the affected claimants and account holders will be indemnified as part of the resolution of this matter. Well done to the FSCA for acting decisively.

Click here to read the enforcement order.

FINANCIAL INTELLIGENCE CENTRE (FIC)

The South African Reserve Bank (the SARB) imposes administrative sanctions on an authorised dealer in foreign exchange with limited authority (ADLA)

Following an onsite inspection at Master Currency (Pty) Ltd, the SARB imposed an administrative penalty of R100,000 in terms of FICA.

Master Currency is an ADLA, and the inspection noted that the controls in place to combat money laundering and the financing of terrorism were insufficient. It’s important to note that no cases were found, merely deficiencies in the controls.

We remind all Accountable Institutions to regularly review their Risk Management and Compliance Plan to ensure that they’re still effective. Let us know if you need any assistance.

The media release is available here.

INFORMATION REGULATOR – POPIA (PROTECTION OF PERSONAL INFORMATION ACT)

The time has arrived! On 1 July 2021 all public and private bodies need to be POPIA compliant.

But, what exactly is coming into effect on 1 July 2021? Let’s clarify.

POPIA Chapter 10, sections 73 to 99 which deal with enforcement will be in effect. This means that data subjects may submit complaints to the Regulator, which will now have the powers to investigate the complaint, manage the settlement of complaints, execute warrants, issue enforcement notices, and institute civil remedies for damages, amongst other powers.

The majority of complaints likely to be submitted to the Regulator will be regarding unsolicited emails, text messages, and direct marketing calls we all loathe. You’ll have noticed in the last week the number of emails and messages being sent asking for your consent.

So you’ll need to review your client databases and try to get your data subjects’ consent to retain their personal information, especially if the data subjects are currently not active clients.

Information and Deputy Information Officer registration

The registration process via the Information Regulator’s portal has been challenging to say the least. There is some relief though. On 22 June 2021, the Regulator released a media statement removing the deadline for registration of Information Officers and Deputy Information Officers. This means that no responsible party will be held liable for not registering by 30 June 2021.

The reasons given include the “technical glitches” with the registration portal and numerous concerns raised by responsible parties regarding the registration process.

In the statement it notes that the Regulator is investigating alternative registration processes and will communicate the options in due course.

“We understand that our portal malfunctioning has caused a lot of anxiety and panic and for that we really do apologise.” said Chairperson of the Information Regulator, Advocate Pansy Tlakula.

If you want us to take some of that anxiety away please get in touch.

For a copy of the media statement, click here.

Promotion of Access to Information Act (PAIA)

The exemption for ‘small’ companies from compliance with the requirement to draw up and publish PAIA manuals comes to an end on 30 June 2021 and will be extended for another six months to 31 December 2021.

All private bodies are exempt from having a PAIA manual until at least 31 December 2021, except for:

• certain large private companies (proprietary companies)
• personal liability companies (incorporated companies)
• public companies (limited companies)
• non-profit companies (NPC)
• state-owned companies (SOC)

Examples of those who are exempt are a sole proprietor, close corporation (cc), body corporate, common law association (like a homeowners association), private school, private university, and most small and medium-sized enterprises (which includes many proprietary companies).

Examples of those who are not exempt are a law firm registered as an incorporated entity, a non-profit (some schools and homeowners associations), and Eskom which is an SOC.

The official publication of the gazette extending the exemption is awaited from the Minister of Justice.

Lastly, the Regulator mentioned that it would be publishing PAIA manual guidance. Once available, we’ll confirm what the required format and content of the PAIA manual will be.

The current draft guidelines require the PAIA manual to be available in a minimum of two local languages. The potential good news is that your PAIA manual won’t have to be submitted to the Regulator, but be available on request. We’ll keep you posted on the final requirements, but if you’d like to get started on your new or replacement PAIA manual now just let us know.

The media release is available here.

Exemptions from the conditions of lawful processing

The Information Regulator published guidance for exemptions from the conditions of lawful processing.

To recap, POPIA prescribes the eight conditions for the lawful processing of personal information by or for a responsible party. These conditions are not applicable to the processing of personal information where such processing is exempted from one or more of the conditions concerned in relation to such processing.

We’ll be reviewing the exemption in more detail to understand the applicability of the exemptions and will provide feedback in the July legislative update.

Commencement date of prior authorisation

On 11 June 2021, the Information Regulator published an amendment notice postponing the effective date of section 58(2) to 1 February 2022.

The amendment of the effective date is probably because of the number of applications the Regulator received, of which a large number were fishing expeditions. We were advised by the Regulator that further guidance will be published, which will provide more clarity on the types of processing activities that will require prior authorisation, other than the most obvious example of credit bureaux.

THE SOUTH AFRICA RESERVE BANK

The SARB feasibility study for a general-purpose retail central bank digital currency

The SARB has embarked on a study to investigate the feasibility, desirability, and appropriateness of a central bank digital currency (CBDC) as electronic legal tender. The CBDC would be for general-purpose retail use, complementary to cash, but with the benefit of electronic payments.

The SARB is one of many central banks looking at the feasibility of the issuance of digital currencies.

The feasibility study will include practical experimentation across different emerging technology platforms. The CBDC feasibility study is different from Project Khokha, which focuses on the settlement of high-value transactions between commercial banks and other stakeholders.

The SARB expects the feasibility study to be concluded in 2022.

(It seems the central banks are attempting to set up fiat crypto-currencies, even though many of us are technically already there. – Ed.)

Here’s the official press release.

FROM A-PROOFED

Correct punctuation is so important

Over the years, I’ve come to the conclusion that: a) correct punctuation is absolutely crucial to good communication, and b) many people still struggle with it (no matter what their education level is). Punctuation tells readers not only what we’re saying, but how we’re saying it. It affects clarity, tone and personality. Used correctly, punctuation can make writing easy to understand. Used incorrectly, it makes communication confusing. Perhaps more than anything else, when punctuation is used incorrectly, it can damage your credibility, and can change the meaning of a document, sometimes to your detriment.

There’s more to punctuation, of course, than full stops and question marks. We can all use those with our eyes closed. But I’m amazed at how many people get apostrophes wrong, and how few people actually know what a semi colon or an ellipsis is. It’s also somewhat alarming how often commas are used when a full stop is needed.

There isn’t enough space here for a complete list of punctuation, so I’ve only included the more contentious ones, and things to watch out for.

Apostrophes

Where do I start? This must be the most misused punctuation mark ever!

Apostrophes denote ownership (to show that something belongs to someone) We will go in Fred’s car.

They are also used for contraction (making two words into one). Shouldn’t. Didn’t. Won’t.

Things to watch out for

When writing the plural form of a word, keep apostrophes out of the picture. Otherwise, your message will look silly.

Pronouns (its, his, hers, theirs) don’t need an apostrophe to show that something belongs to something else.

Days of the week definitely don’t need an apostrophe. Mondays, Tuesdays, Wednesdays, etc.

Brackets

These are used to separate information that isn’t crucial to the meaning of the rest of the sentence. If you removed the bracketed words, the sentence would still make perfectly good sense.

Colons

You use a colon when you are going to introduce a list: like this.

The colon can be used to emphasise something at the end of a sentence. After three weeks of deliberation, the jury finally reached a verdict: guilty of apostrophe abuse!

Commas

The most common use of a comma is to separate things in a list: policy wordings, schedules, endorsements, and renewals.

It’s also used when you want to separate two sentences with a conjunction: Most birds have separate toes, but ducks’ feet are webbed.

To separate parts of a sentence: Bruce, hungry as he was, was shy to come forward and have a slice of cake.

To indicate a pause in a sentence or question: Sharon, did you remember to submit our financials?

Things to watch out for

Don’t use too many commas. They’re used to indicate a brief pause; they’re not as final as full stops.

Dash

This is a mark of separation stronger than a comma, less formal than a colon, and more relaxed than brackets. You’d use it when you want to tell a reader that what they will read next relates to what they have just read, in an interesting way, and that you’d like to emphasise it.

The only thing Mike could do – if he could do anything at all – was to sit and wait for his exam results.

Things to watch out for

Only use one dash per sentence. More than that causes confusion about exactly what is meant to be set off by the dashes.

Ellipses (…)

Ellipses are used when you want to leave out words from direct quotes (not to change meaning of course, but to clarify and condense). Don’t make the mistake of using an ellipsis when you want to keep someone in suspense (I’m not sure what Jenny is trying to say…?).

Please only use three dots. Trailing off with more than three is just plain tacky.

Exclamation marks

A general rule of thumb is to only use one exclamation mark, if at all. Remember, when you emphasise everything on the same document, nothing becomes emphasised anymore. Too many exclamation marks just look like you’re shouting (or being obnoxious, which may be worse).

Full stop

A full stop is used to end a sentence. Period.

Things to watch out for

There’s only one space after a full stop, and none before.

Hyphen

If you use a hyphen in the word, it can change the meaning. Re-form means to form again, but reform means change.

A hyphen is used to spell out some numbers. Thirty-two, forty-nine, eighty-six.

Things to watch out for

There are no spaces before or after a hyphen, unlike the dash, which has been described above.

Question mark

Question marks are used when you’re asking something. Johan, have you paid that claim?

Quotation marks

Quotation marks have an ability to imply sarcasm or to encourage readers to interpret the information for themselves. They’re used around the words that someone has said, or direct speech.

You use them inside or outside the closing quotation mark depending on whether they’re part of the quoted material. Did he say, “Good morning, Dave”? No, he said, “Where are you, Dave?”

Semicolon

A semicolon has two uses; only two.

Use it to connect two independent clauses into a single sentence. I could tell that it was getting late; it was growing darker by the second.

You can also use it when you want to separate items in a series when the items contain parenthetical elements within themselves. The following staff members were present: John Doe, the boss; Right Hand Man, his 2IC; Poppy Dolly, their PA; Racing Driver, the chauffeur; Yummy Food, the cook and chief bottle washer; and one or two significant others.

What about punctuation in abbreviations?

When a word is abbreviated after the first three letters, the rule is to put a full stop after the abbreviation. Inc. cont.

When a word is shortened by using the first and last letters, you don’t need a full stop. Mr, Dr, (Pty) Ltd

If there’s anything else that you need assistance on, I’m a phone call or email away.

Kim Hatchuel

083 657 3377 | kim@a-proofed.co.za

www.a-proofed.co.za