We recently approached the FSB for clarity on how, and by whom, the quantum of an Enforcement Committee penalty is determined, and what options respondents, who elect not to enter into a settlement agreement, have.
We referred to three recent cases where there appeared to be different sanctions for relatively similar offences:
- Doves was fined R100 000 for contravening the Long-term Insurance Act (LTIA) by marketing long-term insurance policies and collecting premiums over a period of 17 months whilst a long-term insurer did not underwrite these policies. The profit over this period only came to R4 000. In addition to the fine, they also agreed to pay costs amounting to R50 000.
- The Lawyer’s Voice was given an administrative penalty of R600 000 for a similar offence, albeit it over a four and a half year period. They marketed three different types of short-term policies and collected premiums without being registered as a short-term insurer. Premiums collected were not paid over to an insurer, but was used to pay business expenses and pay claims.
- Netcover received a R50 000 admin penalty for providing cell phone insurance without being licensed as a short-term insurer. Over this period, they made a profit of just over R67 000.
The FSB responded as follows:
The appropriateness of an administrative sanction depends on the specific facts and circumstances relating to a specific contravention. Accordingly, matters referred to the Enforcement Committee by the Registrars of the Financial Services Board (including the Registrar of Short-term and Long-term Insurance) are assessed on a case by case basis. When considering the appropriateness of the administrative sanction, the Registrar concerned takes into account, inter alia, the factors referred to in section 6D(3) of the Financial Institutions Act 28 of 2001 (“FI Act”) which could serve as either mitigating or aggravating circumstances.
In respect of your question pertaining to settlement agreements, please note that the Registrar (applicant) recommends the settlement amount (after taking into account the factors alluded to above). A respondent may choose to either accept the settlement amount, and settle the matter in accordance with section 6B(7) of the FI Act, or oppose the matter which will result in the Enforcement Committee (if it finds that the respondent contravened legislation administered by the FSB) imposing a penalty (in accordance with section 6D(2)(a) of the FI Act) which it deems appropriate.
A settlement agreement concluded between the Registrar and a respondent must be filed with the chairperson of the Enforcement Committee to be made an order of the Committee.
All of the examples mentioned above were settled in accordance with section 6B(7) of the FI Act.
