FINANCIAL SERVICES CRACKDOWN
FSCA regulatory report could be a movie — fictitious policies, exam fraud plots and R100-million in fines
While the Financial Sector Conduct Authority is often criticised for not taking enough action, its first-ever regulatory report — reflecting all regulatory actions over the past year — begs to differ.
An introductory page reveals that the report “seeks to augment credible deterrence through visible enforcement, create awareness of regulatory requirements and the Financial Sector Conduct Authority’s (FSCA) expectations for embedding good conduct and ensuring fair outcomes for customers”.
Over the year to the end of March 2023, the regulator imposed a total of R153-million in administrative penalties, although R50-million of that was suspended or set aside on reconsideration by the Financial Services Tribunal, leaving just over R100-million payable.
Almost R69-million of the admin penalties related to contravention of the Financial Advisory and Intermediary Services (FAIS) Act.
The FSCA suspended the licences of 984 financial services providers, withdrew 420 licences and debarred 210 people from providing financial services. The majority of the suspensions and withdrawals related to the non-submission of statutory returns and/or non-payment of levies; while most of the debarments involved dishonest conduct.
Financial services representatives are also increasingly being caught out for exam fraud, with industry examination bodies now turning to biometrics to deal with fraudsters sitting for exams in place of the person earning the certificate — it’s like something straight out of the popular TV series, Suits.
Gerhard van Deventer, head of enforcement at the FSCA, says there are around 120 such cases currently under investigation.
Van Deventer says a “substantial number of debarments related to fictitious policies. These were mainly cases where employees or brokers fabricated a policy and submitted it to an insurer in order to be paid an upfront commission.
“Needless to say, that becomes uncovered when the insurance company investigates, but it is an emerging trend,” he says.
Other common causes of debarments include providers misappropriating clients’ funds, acting out of their mandate, trading and investing clients’ funds in their own names, misrepresenting investments and investment results and lack of oversight over juristic and natural representatives.
The insurance investigations related mostly to a high number of funeral parlours that were found to be running unregistered insurance schemes as a side business — the FSCA has now established a dedicated team for these investigations alone.
The FSCA has also noted that the volatility of the crypto market translates into a “very important regulatory concern, i.e. suitability of the asset as an investment for a large segment of the public”.
Van Deventer says the regulator is of the view that crypto asset-related activities pose significant risks to financial customers.
“Declaring crypto assets as a financial product under the FAIS Act in 2022 was viewed as a critical interim step towards protecting customers in the crypto asset environment, pending the conclusion of broader developments surrounding crypto assets through, for example, the Conduct of Financial Institutions Bill,” he says. BM/DM
Sad to say that the FSCA has become little more than a box-ticking bunch of bureaucrats. Yes, they’re good at playing policeman and levying fines (which is a good thing) but when a fully qualified (CFP) adviser tries to register a license for his practice and it takes a year, including resubmitting the same documentation 3 times, that’s not a good thing.
Time to go back to their mission statement and remember what they’re there for – to provide a service to clients and service providers.
Great to see that the FSC is doing its job , in protecting consumers from bad advisors. These actions are the only why to keep the industry on its toes and honest.