The FSB looks beyond a significantly challenging year
There is no doubt that 2013 was a challenging year for the financial services industry. Policyholders and the general public were doing their best to maintain any momentum that they might have gained in recovering from the global financial crisis, while the Financial Services Board (FSB) was on a mission to implement regulation which would offer better protection to the public.
This effort to ensure that stakeholders are extensively protected, posed both an opportunity and a challenge for the FSB. CEO Dube Tshidi points out that on the one hand, it allowed the Regulator to hear the views of all stakeholders who are directly affected by the move. On the other hand, however, the process resulted in some delays in meeting some of the targets the FSB had set itself.
The unemployment problem
Another challenge facing the FSB during the period under review, was the country’s economic performance, which had a bearing on consumers of financial services, particularly in the retirement fund space.
As the unemployment rate increased, many insurance policies lapsed and a number of consumers either cashed in their retirement savings or seemingly invested in unregulated entities. In response to this, the FSB stepped up its efforts to educate consumers about the dangers of engaging in these practices while, at the same time, strengthening its ability to weed out unsavoury elements in the financial services industry.
Another significant development was the promulgation of the Financial Markets Act, 2012 (Act No. 19 of 2012) and the Credit Rating Services Act, 2012 (Act No. 24 of 2012). Both these Acts are aimed at enabling the FSB to protect South African investors more effectively and align itself with international standards. This has necessitated the establishment of a new specialised unit within the FSB to regulate Credit Ratings Agencies.
"Furthermore, in our effort to maintain open communication channels with local and international peers in the financial services industry, we established a Local and International Affairs Unit that monitors developments by fellow-regulators both here at home and in other parts of the world,” says Tshidi.
All systems go for FAIS enforcement
A significant focus of the FSB during 2013 has been the enforcement of the Financial Advisory and Intermediary Services Act. This would ensure that the industry is filled with companies that are legally bound to the principles set out by the act. This would also offer consumers significant protection should a company be implicated in illegal practices.
There was significant buy-in to this process by companies during 2013. According to the FSB Annual Report, the total number of approved FSPs as at 31 March 2013 was as follows:
Category l 10164
Category II 585
Category IIA 117
Category lll 24
Category IV 68
The
total amount of assets under management by Category II, IIA and III FSPs
exceeded
R5 036 billion as at 30 June 2012. During the period under review, the
Registrar authorised 621 license applications received from FSPs,
bringing the total number of authorised FSPs to 10 268 as at 31 March 2013. A
total of 82 license applications were declined.
Ever since the FSB announced that it would be implementing Treating Customers Fairly (TCF), the Retail Distribution Review (RDR) and Solvency Asset Management (SAM), there has been an outcry from industry participants saying that the industry is over regulated. However, these numbers suggest otherwise and point to the fact that there is increased interest in the industry.
Held in high esteem
But overcoming the challenges highlighted by Tshidi has its advantages. FSB Chairperson Abel Sithole points to the 2012/2013 Global Competitiveness Report where the World Economic Forum (WEF) ranked South Africa first in the world in the regulation of securities exchanges and second when it comes to availability of financial services.
"The FSB’s task in this regard is to ensure that regulated entities demonstrate delivery of clearly articulated fairness outcomes to financial services customers through its TCF regulatory and supervisory framework. In addition, the FSB promotes financial education and literacy programmes aimed at consumers. These programmes work with financial services institutions to inform and educate users about different financial products as well as their rights and responsibilities,” says Sithole.
Editor’s Thoughts:
In a
recent statement to the media, Tshidi said that brokers and advisers will always
play an important role in the South African industry. He also said that the FSB
will do its best to support brokers and advisers in solidifying their roles in
the industry. Will the FSB be able to achieve this while trying to overcome its
own, industry based, challenges? Please comment
below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
Comments
Both the FSB and State seem oblivious to one fact :
Intermediaries all operate on fees and/or commissions. Whilst congratulating themselves on how many people have been flushed from the industry they blithely overlook the impact this has on license fees and VAT. To say nothing of income tax.
It is likely to become quite daunting in the future once this inevitably bloated employment provider attempts to fund itself out of the last remaining operatives.
And no matter how these expenses are recovered they will all ultimately be gouged from the consumer. and that they call 'protection' although to me it seems more the kind Chicago used to specialize in! Report Abuse
I am in complete sympathy with Alan's statements below. He is entirely correct.
You will come to learn that the very last thing on the minds of our dear 'brother leaders' at the FSB is the level of unemployment in our country. Mr Tsidi and his left hand man, the "insurance expert" from the LSE, have neither concern nor clue about how many people have been put out, kept out or discouraged from working in the industry by their shenanigans, both legal and extra-legal. On the contrary, I read that they recently had the temerity to brag to Parliament about how many people they had caused to leave the industry since they were handed FAIS with all its original and newly demanded "draconian and intrusive" powers.
I suggest that they are not aware of the number of statutes with which their flock, the insurers and FSPs, of whom they are supposed to be the shepherd, must comply.
I suggest that if you challenge them to give you a list of all the statutes (never mind the far more voluminous accompanying Regulations, board notices, interpretive notes, directives, etc, etc.) with which insurers and FSPs must comply, you will embarrass them. They only know of the handful of laws that they themselves administer and are really not at all concerned about the other 60 odd to be abided by. Indeed, I suggest that they have never so much as given them a moment's thought.
Power and empire building is all that really interests them it seems. It is all that they have so avidly lobbied for and been granted by their friends in Parliament. So they go on building what has become known as the "Monster of Menlopark" in Matroosberg Road, now with well over 500+ civil servants, (there were about 17 in 1990) all on the payroll of the industry, and now costing in excess of half a billion Rand every year. Retrenchment and unemployment is therefore not one of the experiences with which they grapple daily!
Report Abuse
Overregulation is killing to the thousands of FSPs who perform an honourable service.
Just because they do it in the EU does not mean that it has to happen here too.
Where is the South African solution? Or do we not have any local ability to create unique solutions for our industry?
Right now, unless the FSB changes tack, the future of this industry will be an extremely undesirable place to work in. Trust me, I will not allow my children to work in this industry in the foreseeable future. Report Abuse
In other words, the vast majority of FSP’s are small businesses. And the FSB wants them all to formulate and produce lengthy tomes and learned strategies for implementing enterprise wide risk management procedures and, if that isn’t enough, to have similar lengthy tomes and learned strategies for treating their customers (clients???) fairly!
I can see these small business closing down simply because they will have zero time available to actually produce any income or render any services.
To paraphrase HL Mencken: Those who can render financial services -- do. Those who can't -- regulate. Report Abuse