On 25 February 2020, the Financial Sector Conduct Authority (FSCA) published their Annual Perimeter Report for 2020. The Report provides information on the FSCA’s mandate, who they regulate, their jurisdiction and current uncertainties of jurisdiction.
What is the FSCA’s Perimeter
The FSCA’s mandate is set out in the Financial Sector Regulation Act (FSRA) which also defines the scope of the FSCA’s jurisdiction. The FSRA defines financial products and financial services, and these are subject to regulation by the FSCA. The Report explains that the FSCA’s perimeter is that boundary between what the FSCA regulates and what they do not. Issues outside of the perimeter are those activities that the FSCA have no jurisdiction over.
Who does the FSCA Regulate?
The FSCA regulates and supervises all financial institutions that provide a financial product and/or a financial service. This includes life and non-life insurers, banks, collective investment schemes (CIS), retirement funds, investment managers, financial advisors and other financial intermediaries. The FSCA also oversees market infrastructures such as exchanges, central counterparties, central securities depositories, clearing houses and trade repositories. The FSCA also regulates credit rating agencies.
Testing the Perimeter
The Perimeter Report identifies activities that are currently testing the FSCA’s regulatory perimeter. These activities include those that the FSCA may have jurisdiction over in law but either have no way to apply such jurisdiction in practice or have not yet fully exercised their jurisdiction such as the case with the Banking sector, services related to credit, payment services, buying and selling of forex, certain aspects of medical schemes, enforcement powers, financial market fragmentation, etc.
The perimeter is also tested by those activities that the FSCA does not currently have jurisdiction over but because of the impact or potential impact the activities have on financial customers or financial institutions the FSCA considers that such activities may warrant future regulatory action or guidance. Some examples of such activities include ponzi schemes, stokvels, cryptoassets, crowdfunding, binary options, etc. Regulatory responses to these perimeter issues can include bringing these within the FSCA’s regulatory perimeter and subjecting them to regulation and supervision.
The FSCA’s response to issues testing the perimeter
The FSCA confirmed that they will continue to monitor issues that test its regulatory perimeter by taking the following actions: clarifying its role in relation to perimeter issues, targeting improved customer understanding on fair treatment issues and customer protection, studying the responses of other regulators to similar issues (locally and internationally), work with National Treasury and other stakeholders to promote a sound regulatory framework, remove jurisdictional uncertainties and clarify legislative ambiguities.
The Report also contains an Annexure with additional information about the FSCA and what financial customers can expect in terms of the FSCA’s mandate. The annexure further provides contact details of the six financial sector ombuds to resolve complaints.