The financial year ended on 28 February for many financial service providers (FSPs), and the countdown has started for the submission of annual financial statements.
In terms of Section 19 of the Financial Advisory and Intermediary Services Act (FAIS), FSPs must meet the FSCA’s accounting and auditing requirements. Section 19(1)(a) states that full and proper accounting records must be continually maintained and brought up to date monthly. Section 19(1)(b) requires FSPs to annually prepare and submit financial statements for that financial year.
Annual financial statements are financial reports based on a 12-month consecutive time-period. It can be based on the calendar year, the tax year which ends on 28 February, or another 12-month period chosen to be the annual accounting period for your business. In this period of time, your business completes a full accounting cycle from journal entries to year-end financial statements.
The FSCA requires annual financial statements to be submitted not later than four months after the end of your financial year. FSPs whose financial year ends on 28 February must therefore submit their annual financial statements by the end of June.
Submitting annual financial statements
Financial statements can be submitted electronically or physically via post or hand submission.
The FSCA prefers financial statements to be submitted electronically. To submit financial statements, key individuals and compliance officers may log onto the FAIS Online system, capture the information onto the system and attach a copy of the signed financial statements as an annexure.
If you choose to post your financial statements, you will need to keep proof of postage. By sending your financial statements via registered mail, the tracking number would serve as proof. Be sure to allow sufficient time for delivery so the Registrar can receive your statements by the due date.
Statements sent via the post must be addressed to:
The Registrar of Financial Services Providers
Attention: FAIS Supervision – Financial Statements
PO Box 35655
Menlo Park
0102
Financial statements can also be hand delivered or couriered to:
The Registrar of Financial Services Providers
Attention: FAIS Supervision Department, Financial Statements
Riverwalk Office Park
Block B
41 Matroosberg Road
Ashlea Gardens Extension 6
Pretoria
The FSCA acknowledges receipt of financial statements within 120 days of receipt.
Extensions
If you are unable to submit your annual financial statements by the due date, you may request an extension. In terms of section 4(1) of the FAIS Act, applications for a deadline extension must be submitted to the Registrar of the FSCA.
The FSCA prefers requests for extensions to be submitted electronically via its FAIS Online system. Alternately, you can email your request to faisfins1@fsca.co.za with ‘Extension’ and your FSP number in the subject line.
Requests for extensions must be submitted at least 15 days prior to the submission date so the Registrar has sufficient time to process the application. You will also need to state why your financial statements cannot be submitted in time.
Extensions will not be granted if you have outstanding financial statements or compliance reports. In addition, proof of payment must accompany all applications.
Audited financial statements
In terms of section 19 of the FAIS Act, all annual financial statements must be audited. However, in terms of FAIS Notice 82 of 2015, the Registrar has exempted certain FSPs from the audit requirements.
The following annual 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 FN82 of 2015. Unaudited financial statements are required, accompanied by Annexure A of FN82 of 2015, 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 receive or hold client funds or premiums are defined as eligible FSPs limited by product in terms of FN82 of 2015. Unaudited financial statements are required, accompanied by Annexure A of FN82 of 2015, unless otherwise required by law or agreement.
- Category I FSPs that receive or hold client funds or premiums and are not eligible FSPs limited by product: audited financial statements are required. They also need to comply with section 19(3) of the FAIS Act and report accordingly.
The purpose of Section 19(3) is to confirm the amount of monies and/or assets a provider held on behalf of clients and if these were held separately from the FSP’s business funds. The report is also for the auditor to express a limited assurance conclusion and report on any instances of non-compliance with the requirements of the Act.
- Category II, IIA, III and IV FSPs: audited financial statements are required.
Non-submission of financial statements
Failure to submit annual financial statements by the deadline or the extension granted by the FSCA has consequences for FSPs. Under section 41(2) of the FAIS Act, you may be liable to pay a penalty of up to R1 000 per day from when your financial statements were due until the Registrar receives them.
Your FSP licence may also be suspended if your financial statements are not submitted and/or penalties are not paid. Suspension would impact your ability to do business and have reputational repercussions, as this information is published on the FSCA website.
Other benefits of financial statements
Other than complying with these regulatory requirements, financial reporting and financial oversight can benefit your business. This is because annual financial statements provide critical and detailed information about business health and activities.
Specific, measured financial performance indicators offer insight to the alignment between your business objectives and clients’ needs, which can inform your business plans. They can help you implement a relevant financial management strategy, make more informed business decisions, keep track of all financial activities and assess your progress towards achieving business objectives.
Importantly, you can also monitor and respond to financial instability or threats to business continuity. In this way you can avoid compromising on security for your clients.
If your financial year ended on 28 February, be sure to start preparing your annual financial statements so the FSCA can receive them by 30 June. You can also then assess if you need to focus on any specific aspect of your business to ensure you achieve your objectives.
If you have concerns or questions about submitting your annual financial statements, please contact your regional Masthead Compliance Officer for assistance.