We must have been really busy in September; it slipped our minds that Omega Compliance Solutions celebrated five years’ trading last month! It’s been a rollercoaster as we’ve navigated COVID-19 and anticipated the legislative change from FAIS to COFI. Thank you for being part of our journey as we look forward to the next five years.
THE FINANCIAL SECTOR CONDUCT AUTHORITY (FSCA)
FSCA annual report
The FSCA released its annual report at the end of September.
At 180 pages, it will take significantly more than an afternoon to digest!
The following items caught our attention:
- There are (only) 11,890 authorised financial services providers (FSPs) serviced by 32 banks and 148 insurers.
- 49 FSPs were subjected to regulatory action.
- 156 debarment orders were issued.
- The FSCA earned R943 million in penalties and fines.
- A large portion of the report is devoted to explaining how the FSCA creates and sustains value for its stakeholders – most of which relates to consumers.
The FSCA seems to have settled itself as one of South Africa’s more mature and capable regulatory bodies.
Determination of fees charged by the FSCA
The FSCA released General Notice 1 of 2024 which alters the list of fees the FSCA will charge with effect from 1 October 2024.
The initial proposal was released on 2 November 2023 and proposed a 6% increase, which has been approved following comments submitted.
As per last year, levies will be due for payment by 30 November 2024.
Regulatory Exam (RE) fraud
In this communication, the FSCA informed FSPs about increasing incidents of fraudulent activities related to FAIS REs.
The misconduct includes candidates knowingly buying forged RE certificates, altering RE certificates, paying other people to impersonate them when writing the RE, and bribing or attempting to bribe individuals to guarantee a successful pass.
The FSCA can identify these activities and the individuals involved. Several investigations into suspected fraudulent activities are currently underway.
FSPs are required to conduct due diligence on applicants and their qualifications, including the REs. The assistance of your Compliance Officer is essential in conducting this process. The FSCA also notes that it is the duty of FSPs to report any cases of RE fraud to the FSCA via the FSCA fraud hotline.
We did find this link on the Inseta website. The videos will definitely assist in cementing knowledge, but we would advise that the formal learning materials as well as the actual legislation be used by anyone writing the exam.
Regulatory action against Global and Local Investment Advisors (Pty) Ltd
The FSCA has withdrawn the licence of Global and Local Investment Advisors and has also debarred Michael Haldane and Mauro Forlin for 30 years.
This was as a result of the FSCA’s investigation into the BHI Trust scheme. Haldane and Forlin were adjudged not to have assessed the appropriateness of the BHI Trust product in relation to client risk profiles.
Haldane and Forlin are prohibited from:
- providing, or being involved in the provision of, financial services;
- acting as a key person of a financial institution; and
- providing specified financial services to a financial institution, whether under outsourcing arrangements or otherwise.
FSCA impersonators
Another example of just how brazen scam artists can be: the FSCA has had to release a notice to the press in the hopes that it makes it into public awareness as scammers continue to impersonate the FSCA.
The individuals or entities are fraudulently soliciting funds by impersonating the FSCA or FSCA staff, and claiming to be able to assist in recovering funds, but by first requesting a payment be made.
The FSCA uses every lawful mechanism for the return of funds to victims, but it is not mandated to recover investors’ funds.
There is only so much the FSCA can do to protect its cyber profiles, and impersonators do not need access to its systems to set up these scams. Yet another reminder to consumers to protect themselves and take precautions.
Warnings
Some warnings were issued during early October: one was about a Telegram group impersonating Discovery Insure Limited, Sanlam iTrade (a division of Sanlam Private Wealth), and iFX Brokers Holdings. As usual, the group solicits funds from the public by offering unrealistic returns.
Another warns the public about Miway Express Credit Solutions which is in no way linked to MiWay Insurance Limited. The entity unlawfully offers loans and insurance products it claims are underwritten by Guardrisk Life Limited and Guardrisk Insurance Company Limited as well as using another unrelated company’s National Credit Regulator registration details.
FINANCIAL INTELLIGENCE CENTRE (FIC)
FIC annual report
The FIC also released its annual report at the end of September.
Only accountants and Daily Maverick journalists are likely to wade through the entirety of this 132 page document, but we did pull out some useful information:
- As expected, the report notes that the predominant activity was the implementation of regulations to meet the Financial Action Task Force requirements which seem to have had some positive effects.
- The FIC also point out that its activity resulted in the recovery of R98.5 million in criminal proceeds.
- In total, more than 7.4 million reports were submitted to the FIC.
- The FIC exceeded seven and met eight of its 20 objectives over the period.
Let’s see if the work of the FIC can now bear some fruit and result in the necessary convictions in the the courts.
South African Reserve Bank (SARB) fines Old Mutual Life, HSBC, and Bidvest Bank
The SARB has fined Old Mutual Life Assurance Company (South Africa) Limited just short of R16 million for non-compliance with the provisions of the Financial Intelligence Centre Act.
The total fine is R15.9 million of which R5.9 million was conditionally suspended until 23 July 2027. The list of non-compliance reads much like all the fines issued recently: failure to conduct client due diligence, failure to report cash transactions, failure to report suspicious and unusual transactions, and failure to implement its Risk Management and Compliance Programme (RMCP).
The SARB fined HSBC Bank Plc – Johannesburg branch R9.5 million for similar breaches, but it also failed to attend to automated transaction monitoring system alerts within 48 hours.
Then the SARB fined Bidvest Bank Limited R5 million for failing to implement its RMCP.
Big names mean big money, but the proportion would be the same in a smaller FSP, so make sure that policies and procedures are in place, followed, and checked regularly.
FSCA fines Mika Finansiële Dienste
Another fine was issued to an intermediary for contravention of the FIC Act.
Mika Finansiële Dienste (Pty) Ltd had a R1.1 million sanction imposed for failure to document and implement a RMCP and failure to establish and identify the beneficial owner of at least one client. Of this amount, R600,000 has been suspended for three years.
PRUDENTIAL AUTHORITY (PA)
Implementation of the Basel III revised market risk and credit valuation adjustment (CVA) frameworks
Communication 12 of 2024 released in October sets out the PA’s readiness and attestation requirements for banks’ implementation of the Basel Committee on Banking Supervision’s revised market risk and CVA frameworks.
This follows on from Communication 10 of 2023 and will require banks to complete three appendices which confirm (a) their internal implementation readiness; (b) governance processes to approve the submission to the PA; and (c) the minimum criteria that will be reviewed in post-implementation reports.
NATIONAL TREASURY
Discovery statistics on two-pot withdrawals
In a press release on 30 September, Discovery Corporate and Employee Benefits gave the reasons it had been provided with by policyholders withdrawing under the two-pot system.
The company notes that the two main reasons for withdrawals are to cover home or car expenses (24%) followed by short-term debt repayments (21%). Next, were money for education (20%) and day-to-day expenses (11%). Where applicants had noted the reason as “other” (17%), further enquiry showed that the majority were for home improvements and renovations.
The statistics also confirm that as the income of claimants increases, the number of withdrawals reduces.
National Treasury annual report
Continuing the trend, National Treasury released its annual report. At 472 pages long, it’s difficult to read let alone summarise!
That National Treasury notes more than R290 million in irregular and wasteful expenditure may well catch the press’s attention.
SOUTH AFRICAN REVENUE SERVICES (SARS)
In a media release during October, SARS confirmed that it had received 1,213,646 applications for tax directives for withdrawals from the savings withdrawal benefit of the two-pot system.
At the time of release, that equated to R21.4 billion in pay outs.
COUNCIL FOR MEDICAL SCHEMES (CMS)
CMS annual report
Yet another regulatory body released its annual report.
We hesitate to editorialise, and tend to present only the facts when reviewing legislation and pertinent events – however, much of the report is a poorly masked vindication for the National Health Insurance Act. We expected better of the CMS.
In general review, the CMS seems to be meeting its current mandate. Let’s see how that role changes over the next few years.
FINANCIAL SERVICES TRIBUNAL (FST)
Amended FST rules
The FST released amended rules on 27 September. We supply them for reference, and hope that you never need them as a representative or FSP!
OMBUDS
Ombud Council annual report
The Ombud Council joined the list of entities to release its annual report during September. At least this report is only 88 pages long!
The Ombud Council’s main function is to coordinate and oversee the activities of the various ombuds and adjudicators currently in place, but it is not its role to interfere with the complaints of consumers.
Its breakdown of complaints is quite revealing:
- Motor vehicle complaints make up 40% of the complaints in the short-term insurance space.
- Complaints regarding poor advice on funeral policies make up 58% of the complaints at the FAIS Ombud.
- The FAIS Ombud noted a significant increase in complaints regarding cryptocurrency – mostly where consumers had been defrauded.
- A total of 83.5% of complaints about pension funds relate to employers failing to contribute to retirement funds.
The Ombud Council still has a long way to go in its objectives to set up a coordinated system, but it is making significant progress.
The Ombud Council also released its budget, estimates of expenditure, and levies proposals. Comments can be submitted to admin@ombudcouncil.org.za by 12 November 2024.
National Financial Ombud Scheme (NFOS) guidance for consumers
In another article aimed at educating consumers, the NFOS published a note on its website.
The general gist reminds consumers to read the policy and thus avoid issues when making a claim – something that intermediaries, underwriters, and insurers would surely support. It doesn’t mean that intermediaries can avoid providing advice as that encompasses the need and risk assessment, but consumers clearly still owe a duty to understand the conditions of the product they have bought.
There’s no need to “read the wording to the consumer” (as one non-life intermediary put it), but the products recommended must meet consumers’ needs and they should be made aware of special terms as well as be reminded to make themselves aware of the policy conditions.
A-PROOFED
I’ve noticed more and more that people capitalise random words in the middle of a sentence because they believe those words are more important. It’s as if a few extra uppercase letters will elevate the significance of “Insurance Broker” to “Master of the Insurance Universe”. In the South African insurance industry, where paperwork is endless and regulations are more intricate than a set of rugby rules, this trend has reached a fever pitch.
Let’s look at a few examples of capitalising words in the middle of a sentence – when it’s needed, when it’s not, and when it’s just plain ridiculous.
The Underwriter who became a God
The word “Underwriter” is often thrown around as if it refers to some form of divine being. And honestly, the way some of them hold the fate of your policy in their hands, they might as well be! But do we really need to capitalise “underwriter” in the middle of a sentence? Consider this: “Please speak to your Underwriter for approval.” Is the underwriter being promoted to deity status here? Are they now the God of Premiums and Risk, ruling from their swivel chair on the 12th floor? In reality, no. The humble underwriter, as important as they might be, doesn’t need a capital letter in the middle of a sentence.
When capitalisation gets… personal
Oh, the joys of personal titles in the insurance world! “Broker”, “Assessor”, “Claimant”. But do they really deserve the VIP treatment? “Your Broker will be in touch with the Assessor to finalise the Claim.” Unless these roles come with superhero capes, they’re not proper nouns and don’t need to be elevated. Let’s give the poor ‘broker’ and ‘assessor’ a rest and lowercase them. The ‘claim’? Well, unless it has achieved mythical proportions, it doesn’t need a capital either.
The client’s mystical journey
Ah, the “Client” – another capitalised character in the insurance world. A simple “client” will do, but some insist on giving it the full treatment. “The Client has requested further details.” Unless this client is about to star in their own insurance drama series, they can manage with a lowercase ‘c’.
And then there’s compliance
Of course, there are times when capitalisation in the insurance world is actually necessary. Take legal entities, for example. You wouldn’t talk about the “financial sector conduct authority” (FSCA) because it probably isn’t a good idea.. And we all know, you never mess with the FSCA. Ever.
When in doubt, don’t shout
So what’s the takeaway for all the insurers, brokers, and underwriting managers? When in doubt, don’t capitalise just to make something look grand. Stick to proper nouns and official names – save the caps for when they’re truly needed, like the FSCA or SARS. Overcapitalisation is like adding too much peri-peri to your chicken – what’s meant to spice things up just ends up overpowering the whole dish.
If you need help navigating this capitalisation nonsense (or any other proofreading gremlins), contact me and let’s sort it out together.
Kim Hatchuel
kim@a-proofed.co.za
083 657 3377
