A FSCA media release on 15 October 2020 contained details of the withdrawal of an FSP licence, the debarment of the sole director, key individual and representative for 10 years as well as the imposition of a massive administrative penalty in excess of R58 million.
The media release lists five contraventions of the FAIS Act, the General Code of Conduct and the Forex Code. In the period 1 January 2019 to 30 August 2019, clients of the FSP suffered losses amounting to R58 608 810.
An administrative penalty, equal to this amount, was imposed on the FSP, in addition to the other sanctions listed above.
Tribunal issues Consent Order
The matter was referred to the Financial Sector Tribunal on 13 November 2020 for reconsideration of the FSCA decisions. In the interim, the Tribunal ruled that both the penalty order by the FSCA and the debarment be set aside and referred back to it for reconsideration. No reasons for this decision were published in the consent order. A reconsideration hearing was scheduled for 29 June 2021.
Parties agree to an enforceable undertaking
On 29 April 2021, the FSCA issued a media release confirming its decision following its reconsideration of the matter. The Regulator notes that the key individual, in its appeal to the Tribunal, had indicated that the debarment was excessive as there was no evidence of dishonesty or fraud on her part.
In summary, the FSCA reconsidered its initial decision and came to an enforceable agreement with the parties concerned which, in essence, means that the penalty was remitted and the debarment set aside, but under very strict conditions.
The parties also agreed that the key individual would liquidate the FSP and provide the liquidators with about R17 million inter alia for distribution to creditors, including investors.
Enforceable undertaking
In a recent matter involving Sanlam Collective Investments (RF) (Pty) Ltd, the FSCA also concluded such an agreement. In the agreement, section 151 (4) of the Financial Sector Regulation Act indicates the implications if the undertaking is not adhered to:
If a financial institution, licensed under a specific financial sector law, that gave an enforceable undertaking breaches a term of the undertaking, the responsible authority may suspend or withdraw the licence.
In the case discussed above, the Key Individual was allowed to continue practicing via another FSP, subject to a number of conditions, including the appointment of an external compliance officer who will be required to submit a full compliance report twice a year, specifically certifying that the FSP did not exceed its licensing parameters in any manner. Furthermore, it undertakes not to apply for relaxation of the terms and conditions of the enforceable agreement for a period of ten years.
Click here to view the consent order.
Click here to read the Enforceable Undertaking.
