FSB responds to our Dealstream newsletter
Our newsletter of 25 September 2008 "Another so-called financial services company bites the dust" regarding Dealstream Securities has elicited a response from the FSB.
The response can be read below and you are welcome to submit any comment you may have on the response by clicking the link below or responding directly to me via gareth@fanews.co.za
Dear Mr Stokes,
THE REGULATORY RESPONSIBILITY OF THE FINANCIAL SERVICES BOARD AND THE COLLAPSE OF DEALSTREAM
I refer to your article published on 25 September 2008 under the caption “Another so-called financial services company bites the dust”. Regrettably, the information contained in this article with regard to the FSB is factually incorrect.
Authorisation in terms of the Financial Advisory and Intermediary Services Act, 2002, (the FAIS Act)
When a prospective applicant for a licence contacts the FSB for the first time such applicant is provided with a reference number which is to be used in the application process. This process commences with the applicant submitting the prescribed application form. The FSB’s website (on its FAIS pages) will reflect that a reference number has been allocated to such prospective applicant using the indication “FSP number allocated”. The other fields will indicate to any interested party at this stage that no licence has yet been authorised.
Once an application has been received in respect of the prospective applicant the indication on the website will change to indicate the status “applied”. Again the other fields will indicate that no licence has been authorised and the system will later on, using the annotation “authorised” indicate whether a licence is valid or not. Other self-explanatory annotations are “suspended”, “withdrawn” or “lapsed”.
Elsewhere on the website it is clearly indicated that the issuing of a reference number is in no way an authority to provide financial services in terms of the FAIS Act. In many cases an application is never submitted, therefore, after a reasonable period has expired the annotation will change from “number allocated” to “number cancelled”. It must be borne in mind that in terms of section 7 of the FAIS Act no person (includes juristic entities) may provide financial services in respect of the financial products covered by the Act, unless a licence has been authorised.
Dealstream
Dealstream applied for an application form and was provided with a reference number in 2006 (probably with the intention to apply for authorisation as a financial services provider). No application was submitted and from February 2007 the annotation “FSP number allocated” was altered to “number cancelled” in line with the process set out above.
In a recent interaction with Dealstream, the entity again confirmed to the FSB that it did not provide services that required it to be authorised in terms of the FAIS Act (nor did it claim to be an authorised financial services provider). In fact, the entity again reiterated that as an authorised user of a licenced exchange (which is exempted from the FAIS Act as such entities are regulated by the licensed exchanged concerned) it only provides services that fall under the regulation of the JSE Limited (the JSE) and therefore was not required to be authorised as a financial services provider. The JSE has subsequently informed the FSB that they had interaction with Dealstream about this claim by it (to the effect that its trading activities fell under the supervision of the JSE) which was contained on Dealstream’s website. Nevertheless, after being informed about the collapse of Dealstream, the FSB is investigating the matter as one of urgency in order to consider whether any action by it is required. Now that the facts have emerged as to what Dealstream’s activities were, it is the FSB’s view that Dealstream did require authorisation by the FSB in terms of the FAIS Act and that its assurances to both clients and the FSB about the nature of its activities were incorrect.
In your article you mention the following pertaining to the FSB as a watch dog:
- Dealstream’s website proudly announced that it is a licensed Financial Services Provider. This is incorrect, Dealstream did not purport to be an authorised Financial Services Provider.
- You further state that the status of Dealstream was at some stage reflected as “applied” on the FSB website and was recently changed to “FSP number cancelled”. This is not true, the status of Dealstream has been “FSP number cancelled” since February 2007.
- You also mention that the FSB would have to police the financial services environment to make sure no licence applicant advertises its licence until it is granted. Regulation 3(b) in terms of the FAIS Act states:
“No person who is not an authorised financial services provider or a representative of such a provider, may in any manner or by any means –
(i) publish any advertisement, communication or announcement directed to clients; or
(ii) use any name, title or designation,
which implies that such person is an authorised financial services provider or a representative of such a provider.
- You also mention that you have not seen any communication that Dealstream’s license had been cancelled. As stated above, Dealstream was not issued with a license and therefore no license had to be cancelled, in fact licences are not cancelled but are voluntarily lapsed, suspended or withdrawn.
- Your insinuation that the FSB tends to focus on smaller providers is misleading and incorrect. The penalty for contravention of the regulation referred to above by any party is a maximum fine of R500 000. The FSB regards the misleading of consumers by claiming to be an FSP when this is not the case, as a material contravention and will rigorously pursue such perpetrators. There is no suggestion that the blame is shifted to the consumer as is sensationally claimed in your article.
- As in the case of Theresa Fourie, when the FSB became aware of the problems in Dealstream, a media release was issued.
Yours sincerely,
GERRY ANDERSON
DEPUTY EXECUTIVE OFFICER: MARKET CONDUCT AND CONSUMER EDUCATION
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