The Financial Sector Conduct Authority (FSCA) in South Africa has reported a substantial increase in penalties imposed on financial entities and individuals. According to the FSCA's Integrated Report, the regulator imposed R2.8 billion in administrative penalties and fines during the year to March. This represents a significant increase from the R119 million imposed in the previous year. The FSCA also finalised 678 investigations during the year, a 7.1% increase from 633 in the previous year.
The FSCA's Regulatory Actions Report provides more detailed information on the penalties imposed. The report shows that the value of penalties increased to R2.89 billion, compared with R119.8 million in the previous year. This represents an increase of approximately 2,310%. The penalties were imposed on 76 people and entities across 62 cases. The FSCA attributed the sharp increase to material contraventions of the Financial Advisory and Intermediary Services (FAIS) Act, market abuse, and failures to comply with anti-money laundering requirements.
The bulk of the penalties fell under financial advice and intermediary services, with FAIS Act contraventions accounting for R2.48 billion. This is compared with R82.4 million in the previous year. Market abuse was the second-largest category, with four cases resulting in penalties totalling R361.5 million. In contrast, no market abuse penalties were recorded in the previous year. Insurance penalties also increased, with Insurance Act penalties totalling R24.9 million, up from R17 million.
The FSCA's investigation into online trading platform Banxso and associated parties resulted in penalties exceeding R2 billion. The investigation found that the matter involved deepfake advertising, misleading information, and the misappropriation of client funds. Another R212 million in penalties arose from the Medbond matter, which involved a fictitious investment product and large-scale investor losses.
Despite the significant increase in penalties, the FSCA's investigative workload did not increase at a comparable rate. While finalised investigations increased from 633 to 678, the number of new investigations fell from 767 to 524. The number of investigations still under way declined from 494 to 340. FAIS Act matters accounted for 515 of the investigations finalised, compared with 347 in the previous year.
The FSCA also stepped up its public warnings during the year. The Integrated Report showed that the FSCA issued 140 scam alerts during the year, up from 107. Additionally, 46 matters were referred to law enforcement agencies. The regulator identified online financial harm, unauthorised intermediaries operating under the guise of referral models, and unlicensed guarantee-type products as areas requiring continued attention.
Looking ahead, the FSCA will focus on several key areas, including online financial harm, examination fraud, misuse of client information, and anti-money laundering failures. The regulator will also examine trading signals provided without authorisation and the non-payment of retirement fund contributions. FSCA commissioner Unathi Kamlana noted that the regulator operated in an increasingly complex and rapidly evolving financial sector during the year.
Key points
- The FSCA imposed R2.8 billion in administrative penalties and fines during the year to March.
- The increase in penalties was largely driven by material contraventions of the Financial Advisory and Intermediary Services (FAIS) Act.
- The FSCA issued 140 scam alerts during the year, up from 107 in the previous year.
