FSCA cracks the enforcement whip … 1 668 times

It’s been a busy year for the Financial Sector Conduct Authority (FSCA), with 1 668 enforcement actions related to regulatory compliance over the past financial year – a third more than in 2022.

There were also 210 debarments, up from 197 in 2022. All this is detailed in the FSCA’s integrated annual report for the year to March 2023. Many of the debarments resulted from the submission of fabricated policies by representatives.

A total of 984 licences were suspended and 420 withdrawn over the past year, representing yearly increases of 37% and 70% respectively.

“The majority of the suspensions and withdrawals relate to the non-submission of statutory returns and/or nonpayment of levies, while most of the debarments involved dishonest conduct,” says the report.

Administrative penalties of R153.8 million were levied on 44 investigated entities.

Some of these were set aside by the Financial Services Tribunal, reducing the penalties payable to R100.6 million. Most of these penalties relate to non-compliance with the Financial Advisory and Intermediary Services (Fais) Act.

Also worth noting is that 522 suspensions were lifted during the year, more than double that of 2022, suggesting an accelerating rate of rehabilitation among errant licence holders.

This brisk workload does not count the number of court actions involving the FSCA, often at the instigation of licence holders and individuals on the receiving end of regulatory action.

A total of 47 public warnings were issued during the last financial year.

Close to 100 media releases have been issued since January this year to keep the public on high alert over dodgy investment outfits and recent developments in the sector.

In September, the FSCA announced the withdrawal of Salt Asset Management for ”significant compliance deficiencies and a poor level of understanding” by the firm of its “money laundering and terrorist financing risks.”

Read:
FSCA temporarily withdraws Salt Asset Management’s licence
FSCA strips Salt Asset Management of its operating licence

Also in September, the regulator warned the public about a WhatsApp group run by individuals purporting to be from Ashburton Investments.

Just last week, the FSCA imposed administrative penalties on Allard Funeral Fund for running an unlicensed funeral fund.

The regulator also took on Steinhoff’s former CEO Markus Jooste, slapping him with a revised R20 million administrative penalty in December 2022 for encouraging three individuals via SMS to sell Steinhoff shares to avoid the inevitable share crash which he suspected was coming.

Jooste’s application for reconsideration of the penalty was dismissed by the Financial Services Tribunal, though it conceded that Jooste did not personally benefit from the SMSes.

ODPs a recurring problem

One of the problems highlighted in the FSCA Regulatory Actions Report issued earlier this year was the number of over-the-counter derivatives providers (ODPs) who continued operating in SA without registering with the regulator in the belief that they did not require a licence. In other instances, operators simply ignored the regulations.

These are mainly online trading firms offering contracts for difference (CFDs), which are derivative instruments on stocks, indices and other traded assets that given the trader exposure to price movements in the underlying asset without actually owning it.

Listen/read: What is an ODP licence, and why is it important?

“Because [the] ODP business is a zero-sum game (the losses of the clients are the gains of the unlicensed ODP provider posing as an intermediary), some operators carried on business to maximise their profits at the expense of their clients – sometimes misrepresenting the true situation to their clients,” says the regulatory actions report.

Scams

Much of the FSCA’s work involves investigating scams, such as the “advance fee” fraud where a scamster offers a substantial sum of money in return of upfront payments.

These scams, the FSCA explained, are not limited unclaimed inheritances or business deals.

“Fraudsters often request for an advance fee from victims to pay, for example, clearance certificates, insurance costs, courier services or registration fees,” wrote the FSCA in a warning in March.

They often start with spam emails or text messages that offer unrealistic returns in return for an upfront payment.

Read:
We track down funds scammed from a Moneyweb reader
FSCA warns ‘money mule’ bank account scams are on the rise
A warning the FSCA shouldn’t have needed to issue

It’s clear from the volume of warnings emerging from the FSCA this year that there appears no slowdown in the volume or ingenuity of scams.