Given the numerous and endless problems with Eskom, we’re sure you had no choice but to celebrate National Braai Day this month. (Maybe that was the plan with this bout of loadshedding.)
We hope you’ve made a plan to keep your lights on – so that you can keep up to date with the latest changes in the legislation.
THE FINANCIAL SECTOR CONDUCT AUTHORITY (THE FSCA)
2022 Levies
The FSCA confirmed the 2022 levies on 30 August. As usual, invoices are issued in September, and payments are due by 31 October.
The FSCA levy for Category I FSPs is: a base of R3,982 plus R635 per Representative and Key Individual (but only once for individuals registered in both capacities).
The FSCA levy for Category II, IIA, or III FSPs is: a base of R8,024 plus R635 per Representative and Key Individual (but only once for individuals registered in both capacities) plus 0.0000184595 times the assets under management as at 30 June.
The FSCA levy for Category I or IV FSPs that are only licensed for Long-term Category A or Friendly Society Benefits is: a base of R3,982 plus R250 per Representative and Key Individual (but only once for individuals registered in both capacities).
The levy for all FSPs for the FAIS Ombud is: a base of R1,231 plus R469 per Representative and Key Individual (but only once for individuals registered in both capacities).
Note that entities acting in other capacities – such as insurers –are liable for additional amounts, and should review the notice to confirm them. Contact us if this applies to you, and you’d like to determine the total amounts.
If you haven’t received your invoices yet, let us know and we’ll follow up with the FSCA on your behalf.
Professional Indemnity (PI) and Fidelity Guarantee (FG) exemption extensions
FSPs licensed solely for Funeral Benefits and Friendly Society Benefits have been granted an extension to their exemption from the requirement to have PI and FG cover. The extension is until 31 August 2024 as per FAIS Notice 83 of 2022.
Similarly, the exemption for Long-term and Short-term insurers from the requirement to have PI (and technically FG) cover has also been extended to 31 August 2024 as per FAIS Notice 84 of 2022.
We’re sure these requirements will simply be removed as part of the COFI (Conduct of Financial Institutions Bill) standards.
Fit and Proper of Significant Owners
Last month, we noted the FSCA’s intention to amend the Fit and Proper requirements for significant owners of registered FSPs.
The commentary (such as it was) was reviewed, and the FSCA has subsequently released an amendment to the legislation.
The change will mean that significant owners of FSPs are required to meet the honesty, integrity, and good standing requirements imposed by the FAIS Fit and Proper Regulations, but excluding the financial solvency requirements.
Appointment of acting FAIS Ombud
Thobile Prudence Masina has been appointed Acting Ombud for Financial Services Providers (FAIS Ombud) from 13 September.
Her appointment is for three months, or until a new Ombud is appointed. She replaces Advocate Nonku Tshombe, who was appointed to the position in December 2019. It is expected that the new Ombud will assume office no later than 1 November. No reasons were given for the change.
Workshops on financial soundness
A communication was released on 31 August inviting FSPs to a series of workshops with the FSCA to better understand the financial soundness conditions imposed by the legislation.
We’re not sure how many FSPs aren’t aware of their responsibilities, and we’re happy to offer our own assistance and guidance should it be needed.
Discussion document on the expansion of eligible collateral types
The FSCA and PA released Joint Communication 2 of 2022 on 31 August.
The communication invited comments on the regulators’ intention to extend the eligible collateral for over-the-counter derivatives providers beyond cash and gold to include government bonds.
More importantly, the regulators propose further reporting requirements – including a daily report, and providing the metrics and data field types.
Comments are to be submitted via email to queries.otc@fsca.co.za or marginrequirements@resbank.co.za by 13 October 2022.
PRUDENTIAL AUTHORITY (PA)
Proposed Directive to conduct client due diligence (CDD) on beneficiaries
The PA issued a proposed Directive to life insurers on 23 August. The intention of the Directive is to enhance the CDD procedures conducted by insurers determining the beneficiaries of life insurance policies.
Life insurers will be required to conduct the CDD prior to actually paying them. The CDD measures are as described in the FIC Act and related Public Compliance Communications. They may need to be altered slightly, given the specific circumstances.
Insurers act quite prudently in these situations, and it shouldn’t be a major change to their procedures.
Liquidation of Constantia Insurance Company Limited
The Constantia curator, Ashish Desai, and the PA have formally applied for the liquidation of the insurer.
In the court papers, it is noted that the non-renewal of the insurer’s quota share reinsurance treaty is a significant deterioration in the solvency position which motivated the urgent liquidation.
We’re already aware of policyholders who’ve been informed that their claims have been added to the list of creditors.
The next question is whether this will affect the Constantia Life Insurance business.
FINANCIAL INTELLIGENCE CENTRE (FIC)
FICA Amendment Bill moves to Parliament
The FIC confirmed that cabinet had approved the submission of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill, 2022 to Parliament for further processing.
The Amendment Bill was tabled in Parliament by the Minister of Finance on 29 August 2022.
Before we know it, the amendments will be ‘live’; it’s past time to start updating Risk Management and Compliance Plans (RMCPs).
RMCP guidance for non-financial businesses
The FIC released Public Compliance Communication 53 (PCC53) on 30 August.
The PCC aims to assist entities that are Accountable or Reporting Institutions, but that aren’t involved in the financial services industry, to set up their RMCPs properly.
The requirements are the same as those for any other institutions. If your entity needs assistance in drafting its RMCP, or just some guidance, please get in touch with us.
Unexplained wealth investigative tool
A number of government departments (the South African Revenue Service, the National Prosecuting Authority, and the FIC among them) are piloting a legislative tool to investigate unexplained wealth.
As much as we understand the urgency to meet the Financial Action Task Force requirements, and South Africa’s problems with illegitimately obtained wealth, the legislation forces the defendant to prove their innocence, rather than the state to prove their guilt.
Given the insidious infiltration of every sphere of government by corrupt individuals, it’s also a concern as to when this legislation gets turned on those not ‘fitting in’, and becomes just another way to entrench corruption.
Here’s the results of a LinkedIn poll on the issue run by Gareth Stokes. The comments do get you thinking!
INFORMATION REGULATOR (IR)
Registration of Information Officers and entities
After a considerable wait, the IR has reworked its website portal for the registration of entities’ information officers (IO) and deputy information officers (DIO). It’s very easy on the eye, and really user friendly. All public and private bodies are required to register their entities, IOs, and DIOs.
The beauty of the new system is that we can assist with your registration as your agent (we’ll manage the frustration). The IO and/or DIO simply verifies the submission, and can view all the applications that have been submitted on your behalf, such as additions and deletions.
Contact us to assist with the registration minefield, or if you need to make any changes to your IO and DIO details.
For those of you that we assisted with registering via the previous portal when it was up and running, or manually by emailing the completed registration forms, we’ve been advised by the IR that it will be migrating your data (the developers are busy with this). We await the communication from the IR on how you will be able to access your details via the new portal.
Submission of PAIA annual reports
Public bodies (government departments, municipalities, and the like) were required to have submitted PAIA annual reports for the 2021/2022 financial year via the new portal.
Please note that private bodies aren’t required to submit either an annual report or their PAIA manuals via the portal. Should you be unsure, please contact us for clarification.
COUNCIL FOR MEDICAL SCHEMES (CMS)
Low-cost benefit option
The CMS has invited public comments on the low-cost benefit option framework and risk assessment.
Insurers providing health insurance, and medical schemes, will need to review the proposal.
Comments are to be submitted to lcbo@medicalschemes.co.za by 7 October.
THE FINANCIAL SERVICES TRIBUNAL (FST)
Decision – Elizabeth van Heerden and André Marais v Unigro Insurance Brokers (Pty) Ltd
The decision revolves around the application for reconsideration of the debarment of the first and second applicants, and is a great example of an FSP’s ability to deal with ‘hijacking of clients’ for a competitor, and whether a contractual dispute should trigger a debarment process.
The reasons for the debarment of the Representatives by Unigro were as follows:
- Being in breach of section 13(1)(c) of FAIS by rendering financial services other than in the name of the FSP.
- Breaching a fiduciary duty in terms of regulation 9(1)(f) of BN 194 of 2017 (Determination of Fit and Proper Requirements for Financial Services Providers).
The applicants were employees and Representatives of Unigro (the respondent) based at Unigro’s Marble Hall office. The applicants and two other staff members gave notice, which raised suspicion that they were about to compete with the respondent, and that they “would filch clients and use the respondent’s confidential information”.
The respondent suspended the applicants, and initiated debarment proceedings in terms of section 14 of the FAIS Act.
Retired Judge Tuchten was engaged to conduct the hearing and decide whether the applicants should be debarred from performing any financial services under FAIS. The charges against the applicants was that “they each formed and executed a plan, while they were still employed by and Representatives of the FSP, to advance the interests of Succession (the competitor) by making clients’ information available to Succession, assisting Succession to sign existing or prospective clients of the FSP up as clients of Succession by inducing such clients to take out policies through Succession rather than the FSP, and facilitating this process by acting as conduits through which Succession documents were provided to such clients or prospective clients”.
The applications for reconsideration of the debarments were dismissed, and this statement from the FST deputy chair LTC Harms should resonate with every FSP and Representative, “The public is at risk if an FSR is prepared to filch confidential information or acts on behalf of an FSP without being that person’s registered Representative”.
For a copy of the case, click here.
It should be noted that in addition to being debarred, the applicants could be further prosecuted in terms of POPIA. Refer to the article, “Employees taking confidential information to a competitor” in the February 2022 edition of the OCS Legislative Update.
On a lighter note
We finally found our theme song!