NEWS:

AMENDED FIT AND PROPER REQUIREMENTS: FINANCIAL SOUNDNESS
24th Jan 2018

The amended Fit and Proper requirements under the FAIS Act were recently published in Board Notice 194 of 2017.pdf (BN 194). It deals, among others, with the financial soundness requirements which no longer apply only to FSPs, but also apply to juristic representatives of FSPs. (The Fit and Proper requirements relating to financial soundness do not apply to key individuals or representatives who are natural persons).

Please click on the link above to familiarise yourself with the financial soundness requirements as set out in Chapter 6 of BN 194. For your convenience, we provide a summary of the more pertinent requirements:

Category I FSP and a juristic representative of a Category I FSP that does not hold, control or have access to client assets or that does not collect, hold or receive premiums or other monies in respect of a financial product:

– assets must at all times exceed liabilities;

– must at all times maintain financial resources that are adequate to carry out activities and supervisory arrangements and to ensure that liabilities are met as they fall due.

A Category I FSP that holds, controls or has access to client assets or that collects, holds or receives premiums or other monies in respect of a financial product, a Category II, IIA, III and IV FSP and their respective juristic representatives:

– assets must at all times exceed liabilities;

– must at all times maintain financial resources that are adequate to carry out their activities and supervisory arrangements and to ensure that their liabilities are met as they fall due;

– must at all times comply with additional asset requirements, working capital requirements and liquidity requirements referred to in Table B of BN 194;

– must comply with additional reporting requirements to the Registrar (submission of Form A) on a half-yearly or annual basis, as prescribed in BN 194;

– must comply with important early warning requirements.

Other important amendments:

– the range of assets that could qualify as “liquid assets” has been extended;

– the requirement that investments with or loans to persons to whom the FSP renders financial services be excluded from the assets of a FSP for purposes of determining whether or not the assets of the FSP exceeds the liabilities of the FSP, has been removed.

The financial soundness requirements of BN 194 come into operation on 1 April 2018, except for section 44(1) and (2), 45, 48 and 49 but only insofar as it relates to juristic representatives.

ICS will discuss the regulatory impact with clients at their upcoming compliance reviews.

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