Companies and people who sell financial services must be licensed by the FSCA to provide financial service to operate legally..
The FSCA has fined an unauthorised financial services provider and its owner R9 million and fined someone who worked for him R50 000 for rendering financial services without authorisation.
The Financial Sector Conduct Authority (FSCA) announced in a statement today that it is taking regulatory action against Bhaca Green (Pty) Ltd, as well as Songeziwe Mbalo and Lungile Mgilane
In addition, the FSCA debarred Mbalo for 20 years and imposed administrative penalties of R9 million on him and Bhaca Green, jointly and severally. The FSCA also imposed a fine of R50 000 on Mgilane.
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Offering financial services without a licence
The regulatory action follows an FSCA investigation of Bhaca Green, Mbalo and Mgilane. The investigation found that Mgilane rendered financial services to clients on behalf of Bhaca Green and Mbalo.
At the time, the FSCA says, neither Mbalo nor Bhaca Green was authorised as a financial services provider (FSP). Therefore, Mgilane contravened section 13(1)(a) of the Financial Advisory and Intermediary Services (FAIS) Act.
According to section 13(1)(a), nobody is allowed to carry on business by rendering financial services to clients for or on behalf of anyone who is not authorised as a financial services provider and is not exempted from the application of this act relating to the rendering of a financial service.
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Mbalo and Bhaca Green also collected funds for trading forex
The FSCA also found that Mbalo and Bhaca Green collected funds from investors with a view to trade in forex on their behalf between January 2019 and December 2020. However, the FSCA points out, the majority of the funds received from investors were used to pay purported returns to other investors and cover Mbalo’s personal expenses, with only a small fraction used for trading purposes.
The FSCA says this conduct constituted a contravention of section 7(1) of the FAIS Act, as Mbalo and Bhaca Green acted as unauthorised Category II FSPs when they offered and/or rendered advice, as well as intermediary services in respect of forex products.
Section 7(1) deals with the authorisation of financial services providers and provides that nobody is allowed to act or offer to act as a financial services provider, unless a licence was issued to the person under section 8 or a representative, unless that person was appointed as a representative of an authorised financial services provider under section 13.
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Case so serious that FSCA is referring it to police
The FSCA says given the seriousness and extent of the misconduct, the authority decided to report the matter to the police and share all the evidence obtained during the investigation with them. The FSCA will also provide active assistance to the police if requested.
Mbalo’s debarment means that he is barred from providing, or being involved in the provision of financial services, acting as a key person of a financial institution and providing specified financial services to a financial institution, whether under outsourcing arrangements or otherwise.
The FSCA emphasises the risk associated with conducting financial services business with entities that may be operating without the necessary licenses and advises that consumers always check that an entity or individual is authorised by the FSCA and the PA to provide financial products and services.
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How to check if someone is registered and licensed
The FSCA says consumers should always check:
- that an entity or individual is authorised by the FSCA to provide financial products and services, including giving recommendations about how to invest
- what category of advice the person is registered to provide, as there are instances where companies or people are registered to provide basic advice for a low-risk product and then offer advice on far more complex and risky products
- that the financial services provider (FSP) number the entity or individual offering financial services uses matches to the name of the FSP on the FSCA database.
You can confirm the status and FSP number of a service provider or someone who claims to be an authorised service provider by calling the FSCA on its toll-free number at 0800 110 443.
You can also do an online check for an authorised financial institution by licence category at https://www.fsca.co.za/Regulated%20Entities/Pages/List-Regulated-Entities-Persons.aspx or an online search for a financial institution that is an authorised FSP in terms of the FAIS Act at https://www.fsca.co.za/Fais/Search_FSP.htm.
