Secondary

FSB Enforcement Committee

Other than what the name suggests, this is not the kind of entity that will pitch up in the middle of the night with a baseball bat to test your reflexes by beating a rhythm on your knee caps.

A lack of understanding of how this arm of the FSB operates can lead to unnecessary hardship and expenses for those unfortunate enough to come into their sights.

While doing research over the weekend for an article I am working on, I read the section on the FSB website concerning this facility. It contains important information for those who may one day have to consider their options in view of an alleged contravention of any of the Acts administered by the FSB.

I extracted the information below as an introduction to an article to be published on Thursday:

The Enforcement Committee is an administrative body established to adjudicate on all alleged contraventions of legislation, regulations, codes of conduct, etc. administered by the Financial Services Board. The Committee may impose unlimited penalties, compensation orders and cost orders. Such orders are enforceable as if it was a judgment of the Supreme Court of South Africa.

Which cases may be referred?

If the registrar is of the opinion that any provision of any Act administered by the FSB has been contravened, he may refer the case to the EC. However, if the registrar himself is by law empowered to impose a penalty, such case may not be referred to the EC. In other words, the registrar and the EC do not have dual jurisdiction.

In simple cases of late submissions and returns, the registrar retains his authority to impose penalties. Every other case of non-compliance with FSB legislation (and subordinate legislation), may be referred to the EC.

Referral process

A matter is referred to the EC by the serving of the following documentation by the applicant on the respondent at his residential address, registered office or principal place of business:

  • A notice in terms of section 6B(1)(a) of the FI Act (“a section 6B notice”) setting out the detail of the alleged contravention and the penalty to be imposed; and
  • An affidavit setting out all the necessary facts and documents in support of the allegation(s) and the relief sought.

Audi alteram partem

After the delivery of the FSB pleadings, the respondent has 30 days to file his answering affidavit with the FSB.

After delivery of the answering affidavit, it is possible to determine the points in dispute, as opposed to the points that are common cause to the parties.

We regularly see media releases which intimate that “…the Registrar agreed to a penalty of Rxx”. It is what happens before this, which is important.

The documentation which is sent to the respondent includes a recommended settlement penalty. If it is accepted, this is sent to the Enforcement Committee who treats this as a simple acknowledgement of guilt, and confirms the penalty imposed.

Many respondents, after considering the cost and possible reputational damage, agree to the penalty without realising the options available to them.

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