The FSCA has published its Integrated Report for 2022/2023. The report provides information on the performance of the regulator and gives stakeholders a holistic and balanced view of their strategy and performance in the context of risks and opportunities, and relevant socioeconomic, environmental, and technological factors.
Below we highlight some of the topics relevant to FSPs as included in the report:
1. Number of licence applications processed
- The total number of FSPs approved during the period is 584 compared to 776 reported in the previous year.
- The largest contributor to the aggregate increase in the number of FSPs authorised is the Category I FSPs with 545 FSPs approved for the period.
- There has been an increase in the number of approved Category II FSPs from 760 in the previous year to 792 in the period under review.
- The total number of approved Category IIA FSPs decreased by one from 119 in the previous period to 118 in the period under review.
- Three Category III FSPs were approved during the period resulting in a total of 33 approved Category III FSPs.
- A total of 4 Category IV FSPs were approved during the period bringing the total number of approved Category IV FSPs to 105.
- Overall, there has been an increase in the total number of approved FSPs from 11 156 to 11 740.
- During the reporting period, 17 licences were granted seven to banks and 10 to non-bank entities taking the number of over-the-counter derivative provider (ODP) licences to date to 24.
- Twenty-two licence applications – two banks and 20 non-banks – are still under consideration and there was one licence application that was withdrawn during the period under review.
2. Complaints and enquiries
The FSCA received 9 263 complaints and queries against authorised FSPs, which included entities conducting unregistered businesses of regulated activities and other general financial services issues. Based on the number of matters received, complaints represented 44% and queries 56%. More than 86% (7966) of the complaints and queries received were resolved during the reporting period. The 18% outside of the FSCA jurisdiction were referred to the relevant authorities.
There were 1 668 enforcement actions, 984 suspension of licences and 210 debarment orders issued against FSPs.
The 3 main reasons for suspensions and withdrawals were:
- Non-submission of statutory returns
- Non-payment of levies
- Dishonest conduct
3. Irregularity Reports
During the reporting period, 108 irregularity reports were received and considered – with the necessary action taken. The report notes that irregularity reports were submitted for various reasons and does not specify any particular area of non-compliance. This reflects an increase of 26% when compared to the 80 received in the previous reporting period. The findings of contraventions of the FAIS Act by FSPs through offsite monitoring and onsite inspections, 65 FSPs were referred for regulatory action. This is a reduction of 58 against the previous reporting period.
4. Over-the-Counter derivative providers
The FSCA continued with the licensing of ODPs – with supervision and oversight of ODPs continuing during the year. The process has yielded many positive insights into the processes and risks associated with the operations of the ODPs. The objective is that Over-the-Counter (OTC) markets will embody greater transparency around critical issues such as pricing, margining, market exposure and instruments traded. The market will accordingly be more structured and enable the FSCA to regulate market conduct more effectively. The post-licensing supervisory inspections of ODPs are continuing on all newly licensed ODPs. During the year under review, seven post-licensing reviews were conducted. In addition, seven onsite inspections were conducted.
5. Harmonisation and transitioning to the Conduct of Financial Institutions Bill
The Conduct of Financial Institutions (COFI) Bill is intended to significantly streamline the legal landscape for conduct regulation in the financial sector by repealing most existing sectoral laws and providing a single cross-sector conduct law that gives legislative effect to the market conduct policy approach while strengthening customer protection. In anticipation of and preparation for the COFI Bill, consolidated cross-sector legal frameworks are being developed for identified key conduct themes. The FSCA also continued work in developing an approach to transition the existing financial sector laws into the COFI Bill framework, once effective, to ensure the COFI Bill transition occurs effectively and with minimum disruption.
6. Omni-CBR
The FSCA continues to monitor the financial system to ensure fair delivery of outcomes to customers. In this regard, the FSCA requires access to meaningful, reliable, measurable, and comparable information on key conduct indicators across financial institutions. To give effect to this, the FSCA embarked on a multidisciplinary project to facilitate a process for detailed and consistent conduct of business reporting by financial institutions in future. The Insurance and Retirement Fund Benefit Administrators department leads the project.
In June 2022, the FSCA published a road map for the cross-sectoral Conduct of Business Return roll-out. The roll-out and implementation of the Omni-CBR will consist of four phases over four years. During the period under review, the market was consulted on the terminology and data requirements. In this regard, comments were received from the industry, which are being processed to update the current draft version of the return.
In summary, the FSCA 2023 annual report is useful to FSPs and provides insight into current and planned regulatory developments which will impact the business. FSPs should consider industry trends, risks to avoid or mitigate, emerging developments to be aware of and the overall performance in respect of the FSCA and financial services market.