The Financial Sector Conduct Authority has extended until 30 June 2029 an exemption for certain Category I financial services providers from the section 19(3) auditor’s report on client money and assets and from specified liquidity requirements under the Fit and Proper framework.
FAIS Notice 42 of 2026, published on 30 June and effective from 1 July, extends the existing exemption by replacing its previous expiry date of 30 June 2026 with 30 June 2029.
The exemption, introduced in 2017, originally expired on 31 December 2019. It was subsequently extended in 2019, 2021, and 2023. Notice 42 does not alter the scope or conditions of the exemption; it simply extends its operation for a further three years.
Section 19(3) of the FAIS Act requires an authorised FSP that holds money or assets on behalf of clients to maintain records relating to those money and assets and to submit, together with its annual financial statements, an auditor’s report confirming the amount of client money and financial products held at year-end, whether they were kept separate from the FSP’s own assets throughout the financial year, and any other information required by the FSCA.
Qualifying FSPs are exempt from this additional reporting requirement, as well as specified liquidity requirements under the Fit and Proper framework, subject to the conditions set out in the exemption notice.
The exemption applies only to an authorised Category I FSP whose business is limited to collecting, accounting for, receiving, holding, or otherwise dealing with insurance premiums on behalf of an insurer under a written mandate. The FSP may not collect, account for, receive, or hold premiums or other monies relating to financial products outside the scope of that specified financial service.
The exemption is narrowly defined. The specified financial service is limited to collecting, accounting for, receiving, holding or otherwise dealing with premiums on behalf of an insurer in respect of insurance products issued by that insurer. It does not provide a general exemption from the FAIS Act or from the audit-report and liquidity requirements that apply to FSPs.
The exemption is subject to several conditions.
The FSP must:
- continue to comply with the Fit and Proper Requirements to the extent that they are not covered by the exemption;
- have a written mandate from the insurer to render the specified financial service;
- obtain annual written confirmation from the insurer that it continues to meet the prescribed qualifying criteria;
- submit that confirmation annually to the FSCA, together with its annual financial statements; and
- comply with the applicable disclosure requirements in the General Code of Conduct relating to the exemption.
The written mandate must expressly provide that payment of a premium to the FSP is deemed to be payment to the insurer.
The insurer, in turn, must be satisfied that the arrangement will not materially increase its risk, impair its governance framework or regulatory oversight, or compromise the fair treatment of or continuous and satisfactory service to clients. The insurer must also monitor, manage, and regularly review the FSP’s performance and compliance with its written mandate.
Failure by either the FSP or the insurer to comply with the applicable conditions will result in the exemption no longer applying to that FSP.
