EXEMPTION FROM CERTAIN FINANCIAL SOUNDNESS REQUIREMENTS, 2020

The Financial Sector Conduct Authority (“FSCA”) has announced some welcome relief for Financial Services Providers (“FSPs”), Key Individuals and juristic representatives in the form of an exemption from certain financial soundness requirements contained in the Fit and Proper Requirements, 2017.  

The exemption is only applicable for the period 1 April 2020 to 31 March 2021 (“the exemption period”) and is subject to certain conditions, explained below.  

The exemption

  • Category I FSPs that do not hold, control or have access to client monies or collect, hold or receive premiums are exempt from section 45(2) of the Fit and Proper Requirements. In other words, for the exemption period, assets do not have to exceed liabilities.  
  • Category I FSPs that hold, control or have access to client monies or collect, hold or receive premiums as well as Category II and IIA FSPs and juristic representatives are exempt from section 48(1) and 48(2) of the Fit and Proper Requirements, 2017. In other words, for the exemption period, assets do not have to exceed liabilities and the FSPs do not have to comply with the additional asset,working capital and liquidity requirements.  

The conditions 

The above exemptions are subject to the following conditions: 

  • Liabilities must not exceed assets by more than 20% and current liabilities must not exceed current assets by more than 20%. 
  • Additional assets, where applicable, must not be less than 50% of the additional assets ordinarily required in terms of the Fit and Proper Requirements, 2017.  
  • Liquid assets must not be less than 50% of the liquid assets ordinarily required in terms of the Fit and Proper Requirements, 2017. 
  • An FSP that relies on this exemption must, within 7 days of starting to rely on this exemption, submit to the FSCA, Annexure 6 (Form A)  together with an action plan setting out its plans to restore its assets and liquid assets to the level required by the Fit and Proper Requirements, 2017 and how it will ensure business continuity until such time. 
  • An FSP that relies on this exemption must submit Form A as well as management accounts to the FSCA every 6 months. 
  • An FSP that relies on this exemption must not make any payment by way of a loan, advance, bonus, dividend, repayment of capital or any other payment or other distribution of assets to any director, officer, partner, shareholder, related party or associate without the prior written approval of the FSCA
  • These conditions apply with the necessary changes to juristic representatives, who must submit returns to the FSP and not the FSCA. 

The exemption aims to alleviate some of the pressure on FSPs and juristic representatives caused by the COVID-19 pandemic and the national lockdown, however, you must familiarise yourself with the exemption conditions. 

To read the full FAIS Notice, click here

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