In September, the FSCA published its Integrated Report for 2023/2024 for the period from 1 April 2023 to 31 March 2024. The report aims to show stakeholders how the FSCA manages value creation, preservation, or erosion over time, covering leadership, operations, strategic and financial performance, and governance, while demonstrating integrated thinking.
The report highlights the following matters as material in terms of the report: talent management digital transformation, funding, governance and reputation, fair outcomes for financial customers and the management of stakeholders. The material matters identified are linked to the FSCA’s strategic risks, strategy and functions and will provide reports on these to address the information and decision-making needs of FSCA stakeholders. The report covers the FSCA’s leadership overviews, operational overview, strategic performance, governance accountability, and financial performance.
Below we highlight some of the topics relevant to FSPs included in the report:
1. Number of licence applications processed for providers of financial products, services and market infrastructures
During the period, 668 FSPs were approved, up from 584 the previous year, and the number of authorised FSPs increased from 11 740 in 2023 to 11 890. Additionally, 38 ODPs (16 bank and 22 non-bank) were approved by 31 March 2024, compared to 24 licences in 2023, with 13 applications still under consideration. The number of active section 13B benefit administrators decreased from 127 to 114, and 59 licences were authorised for Crypto Assets Providers (CASP).
2. Complaints and enquiries
In terms of dealing with complaints and queries, the report highlights the establishment of the Business Centre which created a single point of entry for all external stakeholder inputs, including queries, complaints, statutory submissions, and financial services applications. The FSCA has implemented a policy and framework to ensure efficient and effective management of complaints and queries, utilising data for supervisory intelligence.
From the report, the FSCA received 9 731 complaints and queries against authorised FSPs in this reporting period. In the 2023 reporting period, the FSCA received 9 236. There were 2 724 complaints, and 6 117 queries were assessed and completed while referring most complaints outside FSCA’s jurisdiction to relevant institutions. A total of 1 839 complaints fell outside of the jurisdiction of the FSCA. In terms of complaints, 87% of complaints and queries received were resolved versus 86% in 2023 with ongoing efforts to enhance the process.
In handling Unclaimed Benefit Queries, 6 906 queries were received during the reporting period, a 4.5% increase from the previous year, which is likely to have been driven by awareness initiatives. Online Platforms for Pension Fund Searches also provide consumers with Web, SMS, and Email Search platforms for unclaimed benefit searches, with web searches being the most utilised.
3. Onsite Inspections 2023/24
The purpose of onsite inspections is to identify the compliance of licensed entities with the legislation. Themed visits, where specific aspects are scrutinised, allow the FSCA to build trend reports focusing on supervisory activities. The FSCA adopted a risk-based approach in their selections for inspections where the objective of inspections is to review whether the identified issues could cause harm to consumers resulting in a lack of confidence in the financial system.
There were 2 general inspections of traditional insurers, 6 of cooperative banks and CFIs, and 3 of microinsurers. For understanding ML/TF risk and customer due diligence, there were 30 AML inspections, 18 financial institutions (FAI) inspections. Compliance with the General Code of Conduct and Fit and Proper requirements was reviewed in 44 FAIS inspections of Cat I and IV FSPs. The process undertaken by banks to terminate accounts was inspected 15 times. There were 30 general onsite inspections of investment providers. Additionally, there were 6 engagements to review the progress made by the industry since the FSCA’s mandate extension to oversee the conduct of payment providers.
In terms of the supervision activities for authorised FSPs, during the reporting period, 11 465 AFS were submitted to the FSCA and 9 988 (87%) were analysed and reviewed to determine adherence to financial soundness requirements.
4. Irregularity Reports
During the reporting period, 88 material irregularity reports were received and considered in relation to Cat I FSPs – with the necessary action taken which reflects an increase of 35.3846% when compared to the 65 received in the previous reporting period. In terms of Cat II and Cat IIA FSPs, there were 31 (Cat II) and 2 (Cat IIA) irregularities submitted. The report does not specify any particular area of non-compliance.
5. Harmonisation and transitioning to the Conduct of Financial Institutions Bill
The COFI Bill transition project, outlined in the 2023 Regulation Plan, made good progress during the reporting period. Initial cross-sector themed legal frameworks have been developed and will be refined further in 2024. The FSCA also continued to develop an approach for transitioning existing financial sector laws into the COFI Bill framework, ensuring a smooth and minimally disruptive transition once the COFI Bill is effective.
6. Enforcement
The FSCA is committed to taking clear, fair, and effective action against those who threaten the fair treatment of financial customers and the integrity of the financial system. This approach enhances our ability to protect financial customers and ensure transparent and effective administrative actions.
During 2022/23, the FSCA opened 667 cases and concluded the year with 207 ongoing investigations. We took 1 900 regulatory actions and issued 217 debarment orders. Additionally, 621 licenses were suspended, mainly due to non-submission of statutory returns or non-payment of levies, with most debarments involving dishonest conduct. Administrative penalties totalling R923 230 068 were imposed on 19 parties, including R475 million against Mr. Markus Jooste, primarily for non-compliance with the FAIS Act.
As of 31 March 2024, the FSCA opened 518 new investigation cases, finalized 371, and has 426 ongoing cases. Most of these cases involve unauthorised FAIS and insurance business. The FSCA took 60 enforcement actions, including 19 administrative actions, 7 debarment orders, and 34 enforceable undertakings, mostly related to unregistered insurance and dishonest conduct.
During the reporting period, the FSCA also collaborated on four matters with international counterparts through bilateral and multilateral MoUs and worked with one domestic enforcement agency.
7. Omni-CBR
An update on the development of the cross-sectoral Conduct of Business Return (Omni-CBR) planned for financial institutions by FSCA was issued on 4 December 2023. The update included an overview of the stakeholder consultation process undertaken in respect of the first draft of the Omni-CBR template, including a summary of industry comments received; and details on the next steps for the roll-out and implementation of the Omni-CBR. The FSCA is finalising a consultation survey to obtain deeper insights on the potential operational and systems impact of future Omni-CBR reporting. The survey is envisaged to run, in parallel with the industry pilot of the revised reporting template