FSCA FSB BROKERS

The Role of the Financial Services Conduct Authority in South Africa

The Financial Services Conducta Authority (FSCA) is the regulatory agency of the financial markets and its operators in South Africa. With offices in Johannesburg, South Africa, the FSCA operates as an independent institution that regulates the non-banking financial services segment of the South African market. The FSCA has carried out this function for more than 20 years (previously as the FSB).

An Overview of the FSCA

The financial services industry in South Africa is divided into the banking and non-banking services. While the Reserve Bank of South Africa oversees the banking segment of the market, the FSCA oversees the non-banking segment. The services that constitute the non-banking financial services include the following:

• The capital markets (the Johannesburg Stock Exchange or JSE)
• Derivative markets (forex, binary options, etc)
• Insurance (long and short term)
• Funeral insurance
• Companies offering capital market, derivative market and insurance services
• Collective investment schemes such as unit trusts
• Financial advisors
• Brokerage firms

History of the FSCA

The FSB was founded in 1996. The constitution of the FSB management team is comprised of a board of 10 members and a team of 7 Executive members. In 2018, the FSB merged with the FSCA.

Functions of the FSCA

The FSCA carries out its functions through the various departments within it. These departments are:

• Market Conduct Strategy Unit
• Capital markets
• Credit ratings
• Insurance
• International and Local Affairs
• Financial Advisory and Intermediary Services (FAIS)
• Media Centre

Some of these units are directly involved in the core regulatory function of the FSCA, working to protect investors from deceptive investments and impropriety on the part of companies servicing the non-banking financial services industry.

How the FSCA Protects Traders

The FSCA has four core mandates which can be summarized below.

1. 1. Registers providers of financial services after they have met the proper requirements
   2. Supervises such providers on a continuous basis to ensure compliance with the law
   3. Takes necessary regulatory action against unregistered entities or registered entities that have flouted the relevant laws.
   4. The FSCA Enforcement Committee and the FAIS division are responsible for carrying out these functions.

What does each mandate entail and how do these ensure consumer protection?

Registration
The starting point for any company or entity that wants to operate in the South African financial services industry is registration and licensing. FAIS maintains an e-portal where new license applications are made. Applications can therefore be made to the FSCA directly using this portal, or through a recognized representative body.

Compliance
New license applications follow a process of payment of requisite fees and approval. The schedule of fees is shown below:

Supervision
As part of the supervisory functions of the FSCA, the agency requires all companies that it licenses to submit periodic compliance reports as well as submit to auditing of their financial statements. These statements are to be submitted electronically. Failure of a financial service provider to submit these statements attract financial penalties of up to R1,000 per extra day, calculated from the deadline until when the statement eventually gets to the Registrar. Companies that flout this rule or refuse to pay the penalties could risk losing their FSP licensing.

Compliance
The FSCA routinely withdraws the licenses of companies that fail to meet its regulatory requirements. Cases are usually reviewed when the companies in default address the reasons for their license suspensions. The FSCA maintains a list of companies whose licenses have been provisionally or fully withdrawn, provisionally suspended or reinstated. These lists are available from the FSCA’s website and can be viewed by the general public.
Enforcement

The FSCA through its FAIS Unit, also performs enforcement of its decisions. Where a financial service provider’s license has been withdrawn, forceful closure of the business premises of the affected provider can be undertaken.

What the FSCA Requires of Financial Service Providers

The Financial Services Board has put in place certain competency requirements which financial service providers in South Africa must fulfill before they are licensed to carry out business in South Africa. These competency requirements border on:

1. 1.  
   2. Experience
   3. Qualifications
   4. Regulatory Examinations
   5. Experience

The various categories of financial service providers and their company representatives regulated by the FSCA carry different experience level requirements. The table below shows the experience level requirements for FSPs operating in the core investment business of forex trading, bonds, securities and money market instruments.