FSCA sends clear signal on its future enforcement focuses
Brokers and financial advisers don’t need to be Nostradamus to see where regulation is heading. The reason: South Africa’s financial sector regulators are among the world’s most transparent, clearly signalling their upcoming regulation and enforcement focuses for all to see.
Scrutinising the murky fringes
The media release accompanying the Financial Sector Conduct Authority (FSCA) Regulatory Actions Report 2024-25 shared a bullet-point-list of enforcement priorities for the coming year. In a move that many licensed financial services providers (FSPs) and intermediaries might celebrate as a win, the regulator announced that it would turn the screws on entities and individuals operating at the margins.
To begin, they want to clamp down on the on-line harm caused by social media scams and the many finfluencers and signal providers who are crossing over regulatory boundaries by offering financial advice or recommendations without authorisation. They have also promised to deal with the growing cohort of firms misusing financial licences to front unauthorised operations. The mostly law-abiding crowd can expect tougher supervision around regulatory exams (RE), misleading advertising and / or product claims and non-compliance with AML/CFT risk and control frameworks.
“This report is a key part of our strategic commitment to transparency and accountability in general, and specifically in terms of how we exercise our enforcement powers as the conduct regulator, in terms of the law,” said FSCA Commissioner, Unathi Kamlana, during the media launch of the report. He deflected from the big dip in administrative penalties levied in 2024-25 compared to the prior year on the basis that the 2023-24 Steinhoff fine skewed the number to the tune of over R400 million.
Proactive, risk-based regulatory posture
“The information we share with you today is even more meaningful in terms of our broader enforcement reach, and what we consider as a much stronger deterrence impact and effect [that accompanies our] more proactive, risk-based regulatory posture,” the Commissioner said.
He explained that the FSCA was leveraging its limited resources to the greatest possible effect. As such, the future enforcement focus is on practices that cause the most harm to vulnerable financial customers, on one hand, and those posing the greatest risk to the integrity of financial markets on the other.
FSCA Divisional Executive: Enforcement, Gerhard van Deventer, was on hand to present a summary of the main enforcement interventions. The headline number was the almost R120 million in administrative penalties issued over the period, which (as explained) was substantially lower than the R943 million plus change in the prior year. Over the past 12 months the authority also embarked on 14 enforceable undertakings; finalised 633 investigations; suspended 24 licenses; and withdrew 382 licences. FSCA-led debarments got a mention too, with 131 in the current year compared to 156 for 2023-24. FAnews will highlight this aspect in another newsletter.
Commenting on the investigation’s workload, Van Deventer said that over 70% of cases received during the review period related to unregistered financial services and insurance businesses. Drilling into the stats, the presenter revealed the usual dominance of FAIS Act related matters (481 new cases, 347 finalised) and an alarming 134% spike in cases involving unregistered insurance businesses. These are stark statistics that stand alongside the 107 public warnings issued by the FSCA over the latest year, many of which relate to firms operating in areas they believe are free from regulatory supervision.
A big dip in licence suspensions
The breakdown of licence suspensions and withdrawals offered a fascinating look through into local compliance practises. Licence suspensions decreased from 1061 in 2023-24 to just 24 in the current year compared to licence withdrawals, up from 75 to 382. “The FSCA may suspend a licence where non-compliance is remediable,” Van Deventer said, adding that over 90% of the licence withdrawals were due to non-submission of returns, and the balance due to serious misconduct. Only 58 licences were reinstated in the period.
There were just over a dozen regulatory directives issued, including nine in response to anti-money laundering (AML) contraventions; three to funeral parlours; and one to a licensed FSP. The FSCA instructed the funeral parlours in question to “regularise their operations” while the FSP was instructed to “enhance its internal systems and controls to mitigate the risk of client losses due to fraud, misconduct or negligence.” The AML-related directives were accompanied by substantial administrative penalties, no doubt in keeping with South Africa’s focus on exiting the global Financial Action Task Force (FATF) grey list.
This explains Kamlana’s earlier reference to the various enforceable undertakings during the latest period “as tools to address misconduct.” He said the FSCA would continue to act decisively against unauthorised or unlicensed entities: “Our message is clear. A licence comes with responsibilities, and where those responsibilities are not held, we need to be seen to act and will not hesitate to act. Financial customers have to be able to trust and rely on the integrity of an FSCA-issued licence.”
Ramping up crypto assets oversight
Crypto Asset Service Providers (CASPs) featured in the closing slide of Van Deventer’s presentation, with the FSCA setting up a dedicated investigation team to investigate unlicensed businesses in this space. By 12 May 2025, the FSCA had received 453 CASP licence applications of which 264 were approved and 109 voluntarily withdrawn. Only 11 applications have been outright declined to date, though there are 15 ongoing investigations in this segment.
One of the most fascinating explainers contained in the 2024-25 Regulatory Actions Report dealt with the subject of online harm, which the FSCA said encompasses a wide range of fraudulent and deceptive practices proliferating across digital platforms. “These include scams hosted on social media, harmful financial products offered through online trading platforms and misleading advertisements,” the regulator wrote. Unfortunately, more and more cash-strapped consumers are falling victim to these schemes, losing substantial sums of money.
Too many scams to mention
FAnews wonders how many of the following issues our readers encounter on the daily: paid-for advertisements that promote fraudulent investment ‘opportunities’; scams promoted on social media platforms; individuals impersonating legitimate financial entities; finfluencers peddling inappropriate advice; and copy trading and signal providers operating without authorisation. The FSCA’s response includes the aforementioned public warnings; consumer education; monitoring and enforcement; and collaboration and regulatory action.
The FSCA continues to work closely with its domestic and international counterparts and with law enforcement agencies to tackle evolving and increasingly global financial misconduct. “We rely on the vigilance and courage of whistleblowers who come forward with critical information … we have put in place robust measures to support protected disclosures and recognise the need to safeguard whistleblowers’ interests and identities where this is requested or required,” Kamlana concluded.
The FSCA operates a dedicated whistleblower hotline and offers multiple secure channels for the submission of information to the relevant FSCA enforcement teams. These channels will hopefully help to identify and take down some of the worst offenders. Consumers must be accountable too, by remaining vigilant and seeking advice from financial advisers before parting with their hard-earned cash.
Writer’s thoughts:
The FSCA’s sharper focus on unauthorised advice and licence misuse could be a win for compliant advisers, provided its enforcement actions deliver real deterrence. Do you think the regulator is succeeding in rooting out the bad actors damaging trust in the advice profession? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
