The FAIS Act creates a duty on FSPs to submit their financial statements to the Registrar. We discuss the requirements of what these statements and records should entail.
The Financial Services and Intermediary Services Act (FAIS) creates a duty for Financial Services Providers (FSPs) to comply with the provisions of the Act regarding the financial statements and accounting records of the FSP.
In order to create clarity on what is expected by the Financial Services Board (FSB), we discuss the requirements of what these statements and records should entail.
In the first instance, and according to the FAIS Act, an authorised FSP must:
19(1) (a) Maintain full and proper accounting records on a continual basis, brought up to date monthly. The reason for this is to make sure that the responsible party is up to date with the financial situation of the FSP.
- b) Annually prepare, in respect of the relevant financial year of the FSP, financial statements reflecting;
- The financial position at its financial year end; and
- The results of operations, the receipt and payment of cash and cash equivalent balances.
- All changes in equity for the period as well as any additional components which may be required.
- A summary of significant accounting policies and explanatory notes.
2(b) the financial statements must;
- Fairly represent the state of affairs of the FSP;
- Refer to any material matter that has/can have an effect on the FSP’s financial affairs.
When must Financial Statements be submitted to the registrar?
An FSP must submit its annual financial statements to the registrar no later than four months after its financial year end.
Changing your financial year end?
As per S7(a) of the FAIS Act, an FSP may not change a financial year end without the approval of the registrar. To apply to change the financial year end, any FSP which operates as a Company or a Close Corporation will first have to gain approval from the Companies and Intellectual Property Commission (CIPC). Once such approval is granted by the CIPC, a letter requesting approval from the registrar, the proof of payment for the request and the proof of permission by the CIPC must be submitted to the FSB by email firstname.lastname@example.org or faxed to (012) 422 2973. Further information on profile change processes and the contact details of the FSB for profile changes can be found here: https://www.fsb.co.za/Departments/fais/registration/Pages/profile.aspx
Audited or unaudited annual financial statements?
In terms of section 19 of the FAIS Act all financial statements must be audited. However, in terms of BN82 of 2015 the Registrar has exempted certain FSPs from the audit requirements.
The following financial statements of the respective FSPs must be submitted:
- Category I FSPs that DO NOT receive or hold client funds or premiums are defined as eligible FSPs in terms of BN82 of 2015 – unaudited financial statements unless otherwise required by law or agreement.
- Category I FSPs that are only licenced for Long Term Insurance Category A and/or Friendly Society Benefits and which DO receive or hold client funds or premiums are defined as eligible FSPs limited by product in terms of BN82 of 2015 – unaudited financial statements unless otherwise required by law or agreement.
- Category I FSPs that DO receive or hold client funds or premiums and are not eligible FSPs limited by product – audited financial statements.
- Category II, IIA, III and IV FSPs – audited financial statements.
It is important to note in addition to the submission of the annual financial statements:
- Eligible FSPs and eligible FSPs limited by product must annually submit to the registrar in addition and simultaneously with their annual financial statements the annual return as referred to in Annexure A of BN82 of 2015.
- FSPs which receive or hold client funds or premiums must ensure that they also comply with section 19(3) of the FAIS Act and report accordingly.
How do you submit the financial statements?
The respective methods for FSPs to submit their financial statements to the Registrar are set out on the FSB’s website: https://www.fsb.co.za/Departments/fais/supervision/Pages/statements.aspx
However, the FSB’s preferred method for submission is via FAIS Online Submissions on the FSB’s website. If you require assistance, please contact your Masthead Compliance Officer.
In terms of section 4(1) of the FAIS Act, FSPs may apply in writing to the Registrar for an extension to the period in which they must submit their annual financial statements.
Such an application must be fully motivated i.e. you must provide a detailed explanation as to why you cannot submit your annual financial statements within 4 months of your financial year-end.
An application for extension can be submitted by using any one of the prescribed methods, either electronically, by fax or email as set out on the FSB website. All requests for extension must be submitted 15 days prior to the submission deadline date.
An application fee of R550 is payable and proof of payment must be submitted together with your extension request. It should be noted that this fee is non-refundable even if your application is declined.
Non submission of financial statements:
In terms of section 41(2) of the FAIS Act, an FSP who fails to submit its financial statements within the period prescribed or any extension thereof is liable to pay a penalty for every day during which the failure continues.
- The Registrar is able to impose a penalty up to R1000 per day from the day on which the financial statements become due until the date on which it is received by the Registrar.
- FSPs must, therefore, submit their financial statements within 4 months after their financial year-end or such longer period granted in terms of an extension to avoid the imposition of a penalty under section 41(2) of the FAIS Act.
- In addition, the non-submission of financial statements and/or the non-payment of penalties may result in the suspension of an FSP’s licence.
For those FSPs with a financial year end of 28 February, their annual financial statements must be received by the FSB on or before 30 June 2016. As already mentioned, failure to timeously submit these can have severe consequences for an FSP. Should a licence be suspended not only will this impact on the ability of the FSP to do business during such suspension, but can also have reputational repercussions as this will be made known on the FSB’s public website.
If you foresee that you will not be in a position to meet the deadline, please ensure that you apply for an extension within the prescribed period of 15 days prior to the deadline date. Should you have further concerns or questions about the submission of your financial statements, please contact your regional Masthead Compliance Officer for assistance.