April 2024 Legislative Update

April 2024 Legislative Update

Well, winter is upon us and South Africans are headed to the voting stations next month. Time has certainly flown – don’t waste a minute though and get up to date on the changes to the legislation.

THE FINANCIAL SECTOR CONDUCT AUTHORITY (FSCA)

Continuous Professional Development deadline looms

One of the more important reminders to key individuals (KIs) and representatives – make sure you complete your continuing professional development hours before 31 May 2024!

There are numerous options available, but please make sure to obtain the hours in time.

Submission of financial statements

The FSCA issued Communication 13 of 2024 on 3 April 2024.

The Communication states that, with effect from 1 April 2024, financial statements can only be submitted via the FSCA’s online portal. This notification arrives just before the majority of financial services providers (FSPs) submit their financial statements at the end of June.

As usual, we will submit statements on behalf of our clients.

Lehumo Securities FAIS licence provisionally withdrawn

The FSCA has concluded its investigation into Lehumo Securities (Pty) Ltd (previously Regenesys Markets (Pty) Ltd) and provisionally withdrew its licence (FSP 49977) as an FSP on 20 March.

The FSCA was satisfied that substantial prejudice to clients or the general public may occur if the licence is not provisionally withdrawn. The investigation was undertaken after complaints from clients that that they did not receive their funds, despite submitting withdrawal requests to Lehumo Securities.

The FSCA noted that that debarment and financial penalty sanctions were underway against the KI and FSP who had until 19 April to respond.

FSCA statement on consumer vulnerability

The FSCA published a statement on consumer vulnerability in March.

Ostensibly, the document aims to enhance the treating customer fairly principles with a particular focus on the ‘plight’ of vulnerable groups and individuals.

The FSCA plans to engage with stakeholders with the aim of obtaining views and inputs on how an approach to consumer vulnerability can be refined and embedded within the financial regulatory and supervisory landscape. (Let us know if you are one of the “stakeholders” contacted – Ed.)

In our opinion, the document is underpinned by assumptions about consumers and suppliers that are not empirically proven in the South African milieu; possibly leading to legislation that is drawn up based on the empathetic views and preconceptions of the writers, rather than with the actual requirements of South African consumers – further study is definitely required.

Investigation into Steinhoff to continue

The FSCA confirmed via a media statement that the death of Markus Jooste, the former chief executive of Steinhoff, does not mean an end to the investigation as there are other parties involved in the case where action is still to be taken.

The FSCA also noted that the financial sanction was issued prior to Jooste’s death, and that they may claim against his estate in this regard.

Consumer Advisory Panel

The FSCA’s newly established Consumer Advisory Panel has officially commenced its work starting on 1 April 2024. The panel was established in November 2023 to provide independent advice and consumer-relevant perspectives to the work of the FSCA.

The panel’s stated function is to represent the interests of South Africa’s retail financial customers to attempt to ensure that customer perspectives are sufficiently considered by the FSCA. The input will be on areas such as research, outreach, and the regulatory instruments used by FSCA. It is also envisaged that the panel will proactively inform the FSCA of consumer concerns related to the financial sector that may require the FSCA’s attention.

The panel will not be empowered to consider complaints from the public.

Draft conduct standard requirements for market infrastructures

The FSCA released a draft of the updated Conduct Standard Requirements for Market Infrastructures. It notes that various changes that have been made, and invite comments from industry by 23 May 2024 via FSCA.RFDStandards@fsca.co.za.

The FSCA publishes its sustainable finance consumer risk report and roadmap 2024

The FSCA has released a report that sets out consumer risks in relation to sustainable finance as well as its sustainable finance roadmap for 2024.

Sustainable finance is an effort to align financial flows and products to a sustainable development pathway that considers the implications of economic development for society and the environment.

The publication consists of two sections: Part A contains research on risks posed to financial customers in the sustainable finance landscape. Part B outlines recent developments and planned actions related to the FSCA’s programme of work on sustainable finance.

The FSCA plans to engage, coordinate, and cooperate with stakeholders as it implements its sustainable finance programme of work.

FSCA imposes an administrative penalty on Shoayb Joosub

The FSCA imposed a R500,000 penalty on Shoayb Joosub for operating as an FSP without being duly licensed.

As much as it seems Joosub simply intended to assist clients according to Islamic monetary tenets, this activity still requires registration as an FSP and a representative. The legislation is quite broad and accommodating of these practices, but cannot be avoided.

Warnings

The FSCA has become so inundated with cases where it needs to issue warnings that it no longer issues them individually! This document and this one list a total of 27 persons or entities trading without being authorised and potentially involved in fraudulent and scam transactions.

In addition, warnings were issued regarding Odyssey Investment Group, Glowfx, Bennefx, Xprestrade, and David Carter, and Swiftkryprtotrade.

Two cases were resolved where penalties have been imposed on Coenraad Barend Nolte Botha as well as on Veracity Markets (Pty) Ltd, Shelly Ann du Plessis, Dane Mesane, Nirvesh Financial Services (Pty) Ltd, Madhubala Lila Patel, and Bhavesh Patel.

Two more warn the public against Rina Labuschagne who is impersonating FP Markets (Pty) Ltd, and a group impersonating Fairtree Asset Management (Pty) Ltd; both through WhatsApp.

In another case, the warning pertains to a group calling themselves Afriforum Future Trading but with no links to the non-profit organisation Afriforum. It is even more obvious given that the fraudsters refer to the licence number 52116 of Nkosi Sabelo Capital Partners (Pty) Ltd.

Trustee Training Toolkit – Part 2

The FSCA released Part 2 of its Trustee Training Toolkit comprising the last 11 modules of the e-learning platform.

The additional modules aim to enhance pension and retirement fund trustees’ knowledge and skills.

FINANCIAL INTELLIGENCE CENTRE (FIC)

Guidance on the definition of high-value goods dealers

The FIC release Public Compliance Communication 58 (PCC58) to provide guidance on the interpretation of high-value goods dealers (HVGDs).

An HVGD is a person who carries on the business of dealing in goods in respect of any transaction where the business receives payment in any form to the value of R100,000 or more, whether a single payment is made or a series of payments. High-value goods means any item that is valued in that business at R100,000 or more.

PCC58 provides guidance on the practical interpretation and application of the definition of a HVGD. Note that motor vehicle dealers, dealers in precious metals, and dealers in precious stones are included in the definition of HVGDs.

The PCC provides an overview of certain money laundering, terrorist financing, and proliferation financing vulnerabilities.

Centriq Life Insurance Company Limited sanctioned

In its capacity as the supervisory body in terms of FICA, the Prudential Authority imposed administrative sanctions on Centriq Life Insurance Company Limited on 5 April 2024.

Centriq Life failed to submit its return in terms of Directive 4 of 2022 on time. The error has already been resolved and the R200,000 fine will be suspended for three years provided Centriq Life remains compliant.

Proposed amendments to the Financial Intelligence Centre Act (FICA) regulations

The minister of finance invited submissions on the draft amendment to the FICA money laundering and terrorist financing control regulations. The amendment is intended to enhance the reporting of the conveyance of cash or bearer negotiable instruments into or out of South Africa, and proposes that the threshold for reporting these activities be set at R24 999,99.

Comments were due 11 days after publication, which seems to imply the change was going ahead anyway. Confirmation will most likely be provided in May.

PRUDENTIAL AUTHORITY (PA)

Determination of equivalent foreign jurisdictions

The PA released a notice to confirm the list of foreign jurisdictions whose laws, supervisory, and information sharing frameworks meet the objects of the Insurance Act and are deemed as equivalent to the regulatory framework established under the Insurance Act.

The list of jurisdictions is currently:

Proposed directive on loss absorbency requirements

The PA released a proposed directive to banks on loss absorbency requirements for additional tier 1 and tier 2 capital instruments.

The regulations relating to banks set out the prescribed minimum requirements for capital instruments to qualify as either additional tier 1 or tier 2 capital.

This proposed directive directs banks to comply with the requirements related to loss absorbency and the relevant trigger events for capital instruments, in addition to the respective requirements specified in the regulations.

Directive on CODI fund liquidity contributions

The PA issued Directive 3 of 2024 to banks on 16 April.

The directive provides the guidelines for the calculation of the minimum required capital and reserve funds related to credit risk exposure specific to the credit risk approach adopted by the banks.

As usual, the chief executive and auditors are required to confirm receipt of the directive.

NATIONAL TREASURY (NT)

Corporation for Deposit Insurance (CODI)

National Treasury released the Deposit Insurance Regulations on 22 March 2024.

Banks now have the set of rules they will be expected to adhere to when funding the CODI.

Given that the regulations were in place, the CODI then released its requirements for its monthly data submissions https://www.gov.za/sites/default/files/gcis_document/202403/50311gen2378.pdf.

COUNCIL FOR MEDICAL SCHEMES (CMS)

Updated demarcation exemption renewal framework

The CMS issued Circular 16 of 2024 to inform industry that the exemption for insurers conducting the business of a medical scheme has been extended to 31 March 2025.

The exemption application renewal process and fees are described in the circular.

FINANCIAL SERVICES TRIBUNAL (FST)

Shuping and Shuping v the FSCA

It’s not often that the FST makes the pages of our updates, but this case is unusual.

The case revolves around an application for the overturning of the debarment of the KI of Shuping and Shuping cc. As noted in the document, the FSCA debarred the KI of the FSP based entirely on a report provided by 1Life Insurance Limited. The FST found that the FSCA should have conducted its own investigation and that its decision to debar the KI was irregular and unlawful.

One simple case seems to present evidence of disdain for the rights of some industry participants over others, and the lax attitude of the regulators raises concerns over the legitimacy of their authority. At least there’s still the FST who we commend for its handling of a potentially controversial case.

OMBUDS

Appointment of National Financial Ombud Scheme (NFOS)

The NFOS has appointed Reana Steyn as the head ombud.

Steyn has experience at the Ombud for Banking Services, the Credit Ombud, worked at a leading insurer, and is a qualified attorney. The role of the head ombud is to develop and implement the NFOS’s strategy and objectives, represent the NFOS to all its stakeholders, and to oversee the functions of the new scheme by working with the four divisional lead ombuds.

The NFOS is currently comprised of the previous credit, banking, short-term, and long-term ombuds offices.

We wish her well as she takes on the role.

FINANCIAL SECTOR TRANSFORMATION COUNCIL (FSTC)

Annual submission

The FSTC released its usual annual submission request for the period from 1 December 2022 to 30 November 2023.

A-PROOFED

Let’s dive into the wild world of capital letters in sentences. You know, those big, bold letters that sometimes pop up in the middle of a perfectly good sentence, demanding attention like a toddler throwing a tantrum. Yip, those ones. But here’s the thing: just because a word is shouting in CAPS or Title Case doesn’t mean it’s suddenly the VIP of the sentence.

Sure, capital letters have their time to shine. They kick off sentences with style and give proper nouns the respect they deserve. But when it comes to randomly sprinkling capitals throughout a sentence like confetti at a party, things start to get a little out of hand.

Picture this: you’re reading something, taking in what’s being said, when suddenly bam! There it is, a capital letter where you least expect it. It’s like someone threw a wrench in the works of your reading flow. And let’s be honest, nobody likes a wrench in their reading flow.

So why do people feel the urge to capitalise random words? Maybe they think it adds emphasis, like saying, “Hey, pay attention to me!” But newsflash: shouting a word with a capital letter doesn’t make it any more important.

Then there’s the whole capitalising-nouns-like-they’re-proper-nouns debacle. Last time I checked, not every noun dreams of being a proper noun when it grows up. Sorry, nouns, but not everyone can be a superstar. And don’t even get me started on the unnecessary capitalisation of job titles. Yes, being a doctor or a lawyer is impressive, but slapping a capital letter on those titles every time you mention them is not necessary. It’s like wearing a tuxedo to a barbecue.

In the end, it all boils down to clarity and sanity. Randomly capitalising words in a sentence is confusing and frustrating for everyone involved. So next time you feel the urge to hit that shift key with reckless abandon, take a deep breath and ask yourself: is this really necessary? Your readers will thank you.

Kim Hatchuel

kim@a-proofed.co.za

083 657 3377