The FSCA recently published a Press Release warning the public against Fern Finance (Pty) Ltd (Fern). Fern was previously licensed by the FSCA as a Financial Services Provider (FSP) but had its licence withdrawn on 10 October 2019 for failure to comply with the provisions of the FAIS Act and for contravening section 7(1) of the Short-term Insurance Act No 53 of 1998 (STIA).
Fern issued guarantee policies to several contractors, which guarantee policies constituted short-term insurance policies as contemplated in the STIA. Fern was not licensed as a short-term insurer and was thus in contravention of the STIA.
After having considered the evidence obtained during investigations, the FSCA found that Fern no longer meets the Fit and Proper requirements as it had contravened a financial sector law in a material way. The FSCA also found that the said Key Individual does not comply with the personal character qualities of honesty and integrity outlined in the fit and proper requirements of all authorised FSP representatives, as he allowed Fern to contravene the STIA.
The FSCA issued a directive to both Fern and the Key Individual to immediately cease issuing guarantee policies and imposed an administrative penalty of R3.5 million on Fern for contravening the STIA and debarred the Key Individual for a period of 10 years from providing or being involved in the provision of financial services.
FSPs are reminded of the importance of doing ‘homework’ before starting something new in your business. Ensure that you have the necessary checks and balances in place (research, seek professional advice, etc.) to avoid falling foul of legislation which could have far reaching consequences for you and your business.