Secondary

Harsher Measures for Non-Compliance

While this heading may initially raise a collective sigh of exasperation, those who operate within the law should actually heave a sigh of relief.

At the FSB’s annual Conference in Cape Town yesterday, advocate Matome Thulare, head of the Enforcement Department, indicated that the time has come to review their policy on transgressors of the FAIS regulations. Thus far, the enforcement committee followed a a Mr. Nice Guy approach, as evidenced in the latest publication of a ruling.

In this particular case, the respondent pleaded guilty to the following transgressions of the FAIS Act: failure to disclose to its clients, whom the Respondents had advised to replace their insurance policies, the actual and potential financial implications, costs and consequences of the replacement policies and a failure to disclose a conflict of interest.

In its findings, the committee said:

The Registrar took into account, amongst others, that the Respondents accepted responsibility for the contravention and fully co-operated with the Registrar’s investigation and the enforcement action. Consequently, the Registrar agreed to a penalty of R50 000 in respect of each Respondent, which penalty was imposed by the Enforcement Committee…

Research by the regulator has shown that violators obtain an economic benefit from breaking the law by delaying or avoiding compliance, or by achieving an illegal competitive advantage.

Up to now, they have heeded claims of poverty and all kinds of excuses why high penalties should not be prescribed, but this is going to stop.

“It cannot be business as usual when offenders get away with non-compliance. There must be serious consequences. We now want to ensure that we not only remove the economic benefit derived from non-compliance, but that we also institute a further gravity penalty. This will take into account the severity of the non-compliance and will act as a further deterrent to offenders,” said Thulare.

He added that the light sentences meted out, to date, gave transgressors an “illegal” advantage over those who bear the cost of compliance, and work within the law. For this reason, they should be taught that crime does not pay.

Future penalties will consist of two elements: the first to recover any financial gain from the transgression, and the second a penalty that will reflect the severity of the transgression.

If one studies the recent findings by the enforcement committee, it is evident that ignorance, whether real or pretended, was the main reason why there was leniency. This too, discriminated against those who studiously applied themselves to study and pass the regulatory exams.

As we all know, ignorance of the law does not excuse anyone from compliance with it.

With the new stance adopted by the regulator, it may very well be that compliance, rather than crime, pays.

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