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FSP Compliance & Licensing

The Financial Services Conduct Authority (FSCA) was also previously known as the Financial Service Board, or FSB, is a supervisory body of financial services industry in South Africa under the Financial Advisory and Intermediary Services Act 37 of 2002 (FAIS Act). It is the financial watchdog in South Africa which governs regulation of the financial market by protecting South African traders and investors along with the economy.

The FSCA is the market conduct regulator of 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.

The Financial Sector Conduct Authority (FSCA) is responsible for market conduct regulation and supervision. FSCA aims to enhance and support the efficiency and integrity of financial markets and to protect financial customers by promoting their fair treatment by financial institutions, as well as providing financial customers with financial education. The FSCA will further assist in maintaining financial stability.

Entities registered both in and outside South Africa can apply for a license with FSCA.

In order to maintain adequate management and control of the business it is required to appoint a Representative, at least one Key Individual and a compliance officer; all the persons must be registered with FSCA. At least 1 Key Individual must be resident in South Africa in order to effectively take part in company management. Each Key Individual and Representative must pass certain regulatory examinations that are held on regular basis in South Africa.

The FSCA protects people specifically from potential money laundering as well as any fraudulent schemes. Even is South African traders and investors being free to make use of brokers that are not regulated by the FSCA such as many offshore brokers, they are advised to make use of brokers who are specifically regulated by the FSCA.

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The Financial Advisory and Intermediary Services Act of 2002, more commonly known as FAIS, applies to all Financial Services Providers (FSP), wherever they are domiciled. FSPs who are based outside of the borders of South Africa are also bound by the terms stipulated of FAIS, if they wish to continue offering their services in the country.

A financial product can be defined as per Section 1 of FAIS and it includes both securities and foreign currencies. It requires that person who provide either advice or intermediary services with respect to financial products, must register as an FSP.

No person may either act or offer to act as an FSP in South Africa unless they are licensed to do so according to Section 8 of FAIS.

The FAIS Act was introduced to regulate the business of all Financial Service Providers who give
advice or provide intermediary services to clients, regarding a wide range of financial products. In
terms of the Act, such Financial Services Providers need to be licensed, and professional conduct
is controlled through Codes of Conduct and enforcement measures.

The Act aims to achieve the following:

Professional Conduct
Better informed clients, and
A professional, responsible sector

(a) Category I
A Category I FSP renders financial services other than the financial services mentioned in Categories II, IIA, III and IV. Indicate whether the applicant will be furnishing advice (A) and/or whether the applicant will be rendering intermediary services (B) in respect of the relevant subcategories of financial products.

(b) Category II – Discretionary FSP
‘Discretionary FSP’ means a discretionary FSP as defined in the Notice of Codes of Conduct for Administrative and Discretionary FSPs, 2003. A discretionary FSP renders intermediary services of a discretionary nature as regards the choice of a particular financial product referred to in the definition of ‘administrative FSP’ but without implementing any bulking.

(c) Category IIA – Hedge Fund FSP
‘Hedge Fund FSP’ means a Hedge Fund FSP as defined in the Notice of Codes of Conduct for Administrative and Discretionary FSPs, 2003. A Hedge Fund FSP must also apply for a Category II licence.

(d) Category III – Administrative FSP
‘Administrative FSP’ means an administrative FSP as defined in the Notice of Codes of Conduct for Administrative and Discretionary FSPs, 2003. An administrative FSP renders intermediary services in respect of financial products referred to in paragraphs (a), (b), (c) (excluding any short-term insurance contract or policy), (d) and (e), read with paragraphs (h), (i) and (j) of the definition of ‘financial product’ in section 1(1) of the Act, on the instructions of a client or another FSP and through the method of bulking.

(e) Category IV – Assistance Business FSP
‘Assistance Business FSP’ means an FSP that renders intermediary services in relation to the administration of assistance policies on behalf of the Insurer to the extent agreed to in terms of a written mandate between the insurer and the Assistance Business FSP.

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