Financial Services Regulations - Monthly Update: March 2022

​​Keep up to date on the most important Financial Services Regulation developments in South Africa during March 2022.


Financial Sector Regulation Act, 2017: Amendment of Notice of Commencement

The Minister of Finance has amended the commencement date of Chapter 16 of the Financial Sector Regulation Act, 2017 (FSR Act). Chapter 16 of the FSR Act is sections 237 to 249 of the statute.

The Minister of Finance has, in terms of section 305 of the FSR Act, amended General Notice No. 169 of 29 March 2018 (Notice) to make 1 April 2022 the commencement date of certain sections of the FSR Act.

Chapter 16 of the FSR Act deals with the finances of a financial sector body, as well as the fees and levies that may be imposed by relevant financial sector laws. The Notice provides the commencement date for section 302 of the FSR Act, which dealt with the treatment of levies during the transitional period of the Act. In particular, section 302 provides that a levy imposed in terms of section 15A of the Financial Services Board Act continues in force subject to the FSR Act, until a date fixed by the Minister of Finance. A levy referred to in section 302, from the date on which the section takes effect, is taken to mean a levy for the purposes of the FSR Act.

Draft Conduct Standards - Requirements relating to the provision of a benchmark

Globally, there have been concerns regarding the accuracy and integrity of benchmarks and the way benchmarks are determined. "Benchmark" and "provision of a benchmark" are defined in section 1(1) of the FSR Act. Benchmark is defined to mean any index:


  • by reference to which the amount payable under a financial instrument or a financial contract, or the value of a financial instrument, is determined; or
  • that is used to measure the performance of an investment fund with the purpose of tracking the return of such an index, defining the asset allocation of a portfolio, or computing the performance fees.

Benchmarks play an important role in the financial system's function of pricing and allocating capital and risk. The provision of a benchmark is not currently regulated in terms of any financial sector law.

The Financial Sector Conduct Authority (FSCA) has published draft conduct standards on benchmarks, proposing the regulatory framework for supervising benchmark administrators and how the provision of a benchmark will be regulated. This follows the FSCA's request, in December 2019, to the Minister of Finance to designate the provision of a benchmark in terms of section 3(3(a)(iii) of the FSR Act. In September 2021, National Treasury published the draft regulations to this effect, and specified that the FSCA will be the responsible authority for the regulation, supervision and oversight of the financial service of the “provision of a benchmark,” in accordance with section 3(5) of the FSR Act. Once the regulations take effect, new and existing benchmark administrators will be required to apply for a licence in terms of the FSR Act and comply with the requirements in the draft conduct standard.

In order for a benchmark or a combination of benchmarks provided by a foreign benchmark administrator to be used in South Africa, the regulatory framework of that jurisdiction must be equivalent to the regulatory framework established for the provision of a benchmark in the Republic. The draft conduct standard also set outs considerations to be taken into account when assessing the equivalence of the regulatory framework of a foreign country. The draft conduct standard stipulates that a benchmark administrator may apply to the FSCA for approval to endorse a benchmark or a family of benchmarks provided in a foreign country, for use in South Africa.

The proposed conduct standard is expected to achieve, among other things, increased integrity and accuracy of benchmarks. In turn, this would increase investor protection and market confidence and increase transparency, resulting in better management of conflicts of interest and fewer incentives and opportunities to manipulate benchmarks. With the incorporation of the International Organization of Securities Commissions (IOSCO) Principles for financial benchmarks (IOSCO benchmarks principles) in the regulatory instrument, the regulatory frameworks alignment to international standards may increase investment in South Africa.

It is envisaged that the draft Conduct Standard will be implemented during the first quarter of 2023, which will enable the FSCA to consider licence applications from benchmark administrators.

Interested parties are invited to submit comments in writing on the draft conduct standard and supporting documents, using the comments template, on or before 12 April 2022, to FSCA.RFDStandards@fsca.co.za.

Financial Sector Conduct Authority strategy for promoting financial sector transformation

During the first half of 2017, parliamentary hearings were held on transformation in the financial sector. The submissions from the public revealed, among other things, concerns that the financial sector is heavily concentrated, and that there is a strong prevalence of poor market conduct practices and financial exclusions that impede on the transformative effects of the sector. It was recognised that state organs such as National Treasury and financial sector regulators need to play a more active role in driving transformation in the financial sector.

In light of the above, one of the objectives of the FSR Act is to promote the transformation of the financial sector. Transformation of the financial sector is defined as transformation envisaged by the Financial Sector Code (FS Code) for Broad-Based Black Economic Empowerment (B-BBEE) issued in terms of section 9 (1) of the B-BBEE Act.

The proposed Conduct of Financial Institutions Act (COFI Act), currently a draft Bill, will provide the transformation requirements for all financial institutions, to be supervised by the FSCA. In line with the proposed COFI Bill and amendments to the FSR Act, the FSCA could potentially take actions such as: requiring financial institutions to have a transformation plan targeted at achieving the objectives and requirements of the FS Code; supervising the progress of financial institutions against their plan; considering transformation plans during the licensing stage; requiring progression through the levels of transformation over defined periods of time; and taking action when there is a lack of commitment to or achievement of targets set in transformation plans.

The legislative framework that empowers the FSCA to promote transformation is still being developed. However, the FSCA will be following a two-phase approach to promoting transformation. The first phase focuses on the existing legislative frameworks (the FSR Act, FS Code and B-BBE Act) and the role the FSCA will play. The second phase focuses on the role the FSCA will play within the COFI Act legislative framework.

Comments on this strategy may be sent to fsca.policy@fsca.co.za by 29 April 2022.

The Comments Template can be found here:

Exemption of Independent Intermediaries from Regulation 5.4 of the Regulations under the Short-term Insurance Act, 1998

Regulation 5.4 of the Regulations under the Short-term Insurance Act 53 of 1998 states that where a premium is refunded by an insurer to a policyholder, for any reason, the commission paid by the insurer to the independent intermediary in respect of the refunded premium must be returned to the insurer.

Following enquiries regarding the fairness of the recovery of commission required by Regulation 5.4, the Financial Sector Conduct Authority released FSCA Communication 9 of 2022 (INS) on 18 March 2022. Communication 9 includes a Draft Exemption of Independent Intermediaries from Regulation 5.4 of the Regulations under the Short-term Insurance Act, 1998 (the Draft Exemption).

The Draft Exemption addresses the situation where a policyholder obtains an insurance policy through material misrepresentation or non-disclosure that was neither the fault of, nor within the control of, the independent intermediary. In such a case, the insurer will void the policy and refund the premiums to the policyholder. Under Regulation 5.4, the independent intermediary must pay the commission earned on the voided policy back to the insurer.

The Draft Exemption exempts independent intermediaries from having to pay commission back to an insurer when an insurer has voided a policy based on a material misrepresentation or non-disclosure by a policyholder, provided that the following conditions are met:


  • the policy must have been entered into 12 months or more before the date on which the policy was voided;
  • the independent intermediary must be able to demonstrate that it engaged regularly, but no less than once every six months, with the policyholder during the term of the policy; and
  • the independent intermediary must demonstrate to the satisfaction of the insurer that it was not aware, or could not reasonably have been expected to be aware, of the material misrepresentation or non-disclosure by the policyholder that resulted in the policy being voided.

The FSCA is accepting comments from the public on the Draft Exemption until 22 April 2022.

No relief from Pension Funds Adjudicator for employees whose employers fail to register with a prescribed fund

Two recent decisions by the Financial Services Tribunal (the Tribunal) have clarified that the Pension Funds Adjudicator (PFA) lacks the jurisdiction to grant relief to employees whose employers have failed to register them with a prescribed fund.

In Sabelo Norman Bulose v Pension Funds Adjudicator and Others (PFA75/2021), the applicant (Mr Bulose) was employed as a truck driver from February 2013 to January 2020. His employer was legally bound under a collective agreement governing the freight industry to register him with a prescribed fund.

When Mr Bulose sought payment of severance benefits from the Transport Sector Retirement Fund (the Fund), it emerged that he was never a member of the Fund and that the employer was not a participating employer of the Fund. Mr Bulose had not known whether his employer was a participating employer, whether contributions had been deducted from his salary, or whether any contributions had been paid to any fund on his behalf. He consequently laid a complaint with the PFA in terms of section 30A of the Pension Funds Act 24 of 1956, asking the PFA to order the employer to register with the Fund, to provide particulars of all contributions that should have been paid to the Fund, to pay over those contributions, and finally for the Fund to pay over his withdrawal benefit. The PFA declined to make the order sought, on the basis that she did not have the jurisdiction to do so, and stated this was in fact a labour matter which should be raised in a different forum. Mr Bulose subsequently applied to the Tribunal for reconsideration.

The Tribunal dismissed Mr Bulose’s application on the grounds that his complaint to the PFA did not meet the definitional requirements of a “complaint” as per section 1 of the Pension Funds Act, which contemplates that complaints made to the PFA are made by employees who are members of a fund and whose employers are participating employers of a fund. Given that Mr Bulose’s employer had never been a participating employer of the Transport Sector Retirement Fund, and that he was therefore never a member of the Fund, he could not complain to the PFA on the basis that his employer had failed to comply with the rules of that Fund.

In Erick Sibusiso Hlongwane v Pension Funds Adjudicator and Others (PFA85/2021), a decision handed down by the Tribunal one week later, another aggrieved employee who was also employed as a truck driver by a different employer raised exactly the same concern. With reference to the Bulose matter, the Tribunal found again that, because the applicant had not been a member of the Fund, and his employer had not participated in the Fund, he did not meet the definitional requirements to make a complaint to the PFA. Accordingly, the PFA’s decision that she lacked jurisdiction to decide the matter was correct.


Webber Wentzel > News > Financial Services Regulations - Monthly Update: March 2022
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