FINANCIAL SOUNDNESS: AMENDMENT TO ALLOWABLE DEDUCTIONS UNDER ‘ANNUAL EXPENDITURE’

On 26 June 2020, the Financial Sector Conduct Authority (FSCA) amended the Fit and Proper Requirements with immediate effect.

One of the amendments was the removal of the word ‘contractor’ from the definition of ‘annual expenditure’ as follows:
‘ “annual expenditure” means –

(a) the expenditure set out in the latest set of financial statements of an FSP; or
(b) in the case of an applicant commencing business, the budgeted expenditure as expressed in the budget or financial accounts;
less

(i) staff bonuses;
(ii) employees’ and director, partner or members share in profit;
(iii) emoluments of directors, members, partner or sole proprietor;
(iv) other appropriation of profits to directors, member and partners;
(v) remuneration that is linked to-
(aa) a percentage of the FSPs revenue;
(bb) a percentage of the revenue generated by an employee or representative;

and in the absence of such revenue the FSP has no obligation to pay the remuneration.’

Please keep this new definition in mind for purposes of calculating financial soundness and liquidity.

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