The FSCA has published a draft exemption for public comment that proposes to exempt licensed crypto asset FSPs and their key individuals (KIs) and representatives from certain requirements of the General Code of Conduct for Authorised FSPs and Representatives and the Determination of Fit and Proper Requirements for FSPs.
The closing date for submissions on the “Draft exemption of persons rendering financial services in relation to crypto assets from certain requirements” is 1 December 2022.
Submissions on the draft exemption must be made using the submission template and emailed to FSCA.RFDStandards@fsca.co.za.
In addition to the regulations referred to in the exemption, stakeholders who intend to comment may benefit by reading section 5 of the FSCA’s policy document supporting the declaration of crypto assets as financial products, which will provide insight into the Authority’s thinking regarding the exemptions.
The draft exemption has two sections, one for crypto asset FSPs, their key individuals (KIs) and representatives, and the other specifically for “crypto asset supervised representatives”.
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Exemptions for crypto asset FSPs, KIs representatives
The FSCA is proposing to exempt crypto asset FSPs, their KIs and representatives from section 13 of the General Code of Conduct for Authorised FSPs (Board Notice 80 of 2003) and Representatives and Board Notice 123 of 2009.
The section requires providers to have guarantees, or professional indemnity or fidelity insurance, while Board Notice 123 sets out these requirements for the different FSP licence categories.
It is also proposing to exempt crypto asset FSPs, their KIs and representatives from the following provisions of the Determination of Fit and Proper Requirements for FSPs (Board Notice 194 of 2017):
Section 23, which requires FSPs, KIs and representatives to have a qualification recognised by the FSCA.
The proposed exemption from this section is subject to the crypto asset FSP, KIs and representatives meeting the “crypto asset academic credential requirement”, which the draft exemption defines as obtaining “adequate and appropriate academic credentials that focus on or specialise in crypto assets to such an extent that is necessary for the person to discharge his or her responsibilities” under the FAIS Act.
In its policy document, the FSCA said it will consider whether it is necessary to issue a guidance notice to clarify what academic credentials the FSCA would regard as “adequate and appropriate” in the context of rendering a financial service in respect of crypto assets.
Part 4, Chapter 3, which sets out the requirements for regulatory examinations.
The FSCA is of the view that applying the regulatory examination requirements immediately may cause significant disruption to existing crypto asset FSPs and representatives, and as such the FSCA is proposing to grant a temporary 18-month exemption to crypto asset FSPs and their representatives from the regulatory examination requirements. This will allow crypto asset FSPs and their representatives to continue rendering financial services in relation to crypto assets while they take steps to complete the regulatory examinations.
Section 33(1), which sets out minimum continuous professional development (CPD) hours that an FSP, KI and representative must complete in a CPD cycle. The FSCA’s CPD cycle starts on 1 June of every year and runs to 31 May of the following year.
The exemption is subject to the crypto asset FSP, its KI or representative completing a minimum of six hours of CPD activities relating to crypto assets.
Exemptions for crypto asset supervised representatives
The draft exemption defines a “crypto asset supervised representative” as a representative of a crypto asset FSP who:
- Renders financial services in relation to crypto assets;
- Does not meet one or more of the “crypto asset competency requirements”; and
- Renders financial services under supervision.
The “crypto asset competency requirements” mean the:
- Experience requirement (section 15 of the Determination of Fit and Proper Requirements);
- Crypto asset academic credential requirement; and
- Regulatory examination requirement (Part 4, Chapter 3 of the Determination).
“Supervision” is defined as “the guidance, instruction and oversight, by any means or medium, by a supervisor using a variety of assessment, observation and oversight methods or tools that are appropriate for the assessed level of competence of the crypto asset supervised representative”.
The proposed exemptions for crypto asset supervised representatives will apply as follows:
Section 15 of the Determination of Fit and Proper Requirements
A crypto asset supervised representative is exempted from the “general experience requirement” until the representative is assessed by the crypto asset FSP as being compliant with section 15.
Section 23 of the Determination of Fit and Proper Requirements
The exemption is on the condition that the crypto asset supervised representative, within six years from the date of his or her appointment as a crypto supervised representative, meets the “crypto asset academic credentials requirement” referred to for FSPs, KIs and representatives.
Part 4, Chapter 3 of the Determination of Fit and Proper Requirements
A crypto asset supervised representative who, before the date on which the final exemption notice is published, was never appointed as a representative of an FSP is exempted from Part 4 of Chapter 3 of the determination on the condition that the crypto asset supervised representative completes the relevant regulatory examination within two years from the date on which such a person was first appointed as a representative to render financial services in relation to crypto assets.
Section 33(1) of the Determination of Fit and Proper Requirements
A crypto asset supervised representative is exempted from section 33(1) of the Determination on the condition that he or she completes a minimum of six hours of CPD activities relating to crypto assets per CPD cycle:
- Starting from the date on which the crypto asset supervised representative meets the applicable regulatory examination requirement and crypto asset academic credential requirement; or
- After six years from the date on which the crypto asset supervised representative was first appointed as a crypto asset supervised representative, which occurs first.
FSCA contact information
Queries relating to the declaration should be sent to the FSCA’s Regulatory Frameworks Department via email to karien.nel@fsca.co.za or johannvanderlith@fsca.co.za.
Moonstone Compliance has been assisting FSPs to comply with financial services legislation and regulations for the past 20 years. To find out more about our services, visit www.moonstonecompliance.co.za, or phone 021 883 8000, or email support@moonstonecompliance.co.za
