Cautionary tale of illegal commission

A recent Johannesburg High Court judgment has raised important questions around referral commissions, lead generation, and where the line is drawn between marketing activity and intermediary services under FAIS.

The case, Raspberry Academy (Pty) Ltd v Oaksure Financial Services (Pty) Ltd, is likely to resonate with insurers, brokers, and service providers that rely on referral-based business models. At the centre of the matter was whether a lead-generation arrangement effectively crossed into regulated intermediary activity.

This article, Authored by Ayanda Nondwana, Partner, and Jade Werner, Associate at Eversheds-Sutherland (SA) Inc., explores the court’s findings on commission-based lead referral agreements, the risks of non-compliance with the Financial Advisory and Intermediary Services Act 37 of 2002 (FAIS Act), and the critical lessons for insurance industry participants.

We believe FAnews readers will find this analysis particularly insightful, as it highlights the importance of structuring marketing and referral arrangements carefully to ensure regulatory compliance and protect businesses from potential financial and legal exposure.

Court questions agreement legality

The Johannesburg High Court’s decision in Raspberry Academy (Pty) Ltd v Oaksure Financial Services (Pty) Ltd 2026 JDR 1647 (GJ) reiterates that the substance, and not the form, of a commercial agreement determines its legality. The judgement offers valuable guidance to the insurance industry role players that rely on commission-based lead referral remuneration models.

Raspberry Academy instituted legal proceedings against Oaksure for payment of R1 214 698.62 in respect of underpaid referral commission. Oaksure failed to defend the proceedings. Ordinarily, this would have paved the way for default judgement. However, when the application came before the presiding judge, the court raised concerns on its own accord regarding the legality and enforceability of the agreement, given the regulatory landscape of financial service providers, specifically the Financial Advisory and Intermediary Services Act 37 of 2002 (FAIS Act). Accordingly, the judge requested short heads of argument from Raspberry Academy in order to determine the default judgement application.

Intermediary or agent?

Raspberry Academy’s claim was premised on a 2019 “Lead Referral Agreement” (“the Agreement”) in terms of which Raspberry Academy referred potential client’s to Oaksure and marketed Oaksure’s short-term insurance products, namely its passenger liability insurance. Following a successful lead, Oaksure would pay Raspberry Academy a referral fee based on a percentage of the revenue Oaksure derived from the successful lead. The referral fee would remain payable to Raspberry Academy for as long as the lead maintained their policy and paid their premiums to Oaksure, regardless of whether the Agreement subsisted when the premium was paid.

In terms of the Agreement, Raspberry Academy was described as a “marketing agent and lead referrer only, for the purposes of effecting an introduction between the Lead and Oaksure only” yet Raspberry Academy’s role went beyond mere introductions.

The central issue before the court was whether Raspberry Academy’s activities constituted the rendering of “intermediary service” as defined in the FAIS Act. If so, Raspberry Academy would have been required either to have been a licensed financial services provider or to act as a duly appointed representative of one. It was common cause that Raspberry Academy was neither.

Commission defines role

The FAIS Act defines a financial services provider as someone (other than a representative) who provides advice or renders intermediary services or both. The court did not consider whether Raspberry Academy’s actions constituted the rendering of advice under the FAIS Act, instead the focus was on whether its actions constituted intermediary services, which the FAIS Act defines as “any act […] the result of which is that a client may enter into, offers to enter into or enters into any transaction in respect of a financial product with a product supplier”. The definition emphasises the causality effect of the act which must bring about, or potentially bring about, the transaction.

Applying this definition, the court found that Raspberry Academy’s role went well beyond passive or mechanical lead generation. The decisive factor was the basis of remuneration. Raspberry Academy was paid only when a policy was concluded and remained entitled to ongoing commission linked directly to premiums actually paid by policyholders.

This model established a clear causal link between Raspberry Academy’s conduct and the conclusion of insurance contracts. In the court’s view, this placed Raspberry Academy squarely within the statutory definition of an intermediary.

Importantly, the court rejected the notion that the parties could contract out of the FAIS Act simply by declaring that a service provider is “not an intermediary.” Regulatory compliance depends on what parties do in practice, not how they describe their relationship.

The court’s warning

Having concluded that Raspberry Academy rendered intermediary services without the required licence, the court held that the Agreement contravened the FAIS Act and was, therefore, illegal.

As a result, Raspberry Academy’s application for default judgment was dismissed, notwithstanding Oaksure’s failure to oppose the claim.  

The court’s warning is clear: in the provision of financial services, compliance is mandatory. Where marketing and referral agreements are structured to drive the conclusion of insurance contracts, they enter the arena for regulatory compliance, regardless of the title of the agreement. Businesses that ignore this reality risk more than regulatory censure, but financial loss.

Writer’s Thoughts

The Raspberry Academy case highlights the importance of ensuring that referral and marketing agreements align with FAIS requirements. Careful structuring and compliance help protect businesses and clients from unintended regulatory and financial risk. Do you agree? Please comment below, interact with us on X at @fanews_online or email me your thoughts.

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