The FSCA has extended the exemption that allows banks to provide financial services to certain clients without having to meet the requirements of the FAIS Act.
What is referred to as the “merchant banking exemption” came into effect via Board Notice 103 of 2004, which was published in Government Gazette 26844 on 29 September 2004.
The exemption, which was due to expire on 30 June 2023, has been extended to 30 June 2025, according to FAIS Notice 35 of 2023.
The exemption allows banks, mutual banks, branches of foreign banks or representative offices as defined in section 1(1) of the Banks Act to provide financial services to high-wealth corporate clients without having to perform the services in the manner required by the FAIS Act.
The clients covered under the exemption include other banks, central banks, insurers (life and non-life insurers), asset managers that have confirmed to the satisfaction of the bank that the market value of the assets managed by them will exceed R1 billion, and other persons (included in the definition of client in section 1(1) of the Banks Act but excluding individuals, retirement funds, friendly societies and medical schemes) whose net asset value exceeds R20 million.
The exemption recognises that these clients have an appropriate level of financial knowledge and expertise, negating the need for financial advice and consumer protection as provided for in the FAIS Act.
