Any person who, or entity that, provides you with a financial product or service or advice about a financial product or service in South Africa must be registered as a financial services provider (FSP), or must be appointed as a representative of a registered FSP.
Financial advice and the selling of financial products is regulated for your protection by the Financial Advisory and Intermediary Services (FAIS) Act.
The FAIS Act requires any person or entity that provides you with advice or a service related to a financial product in South Africa to be registered with and obtain a licence from, the regulator of financial services, the Financial Sector Conduct Authority (FSCA). The person or entity is known as a financial services provider (FSP).
The FAIS Act covers a wide range of financial products, including:
A life or disability insurance policy (long-term insurance policy);
A short-term insurance policy that provides cover for your house, household contents, car, cell phone and business;
A funeral policy;
A bank deposit;
A money-market account or investment;
Retirement fund membership including membership of a retirement annuity fund, provident funds and pension funds;
Unit trusts or any other collective investment schemes;
Any securities or instruments such as shares (equities), derivatives, bonds or money market instruments;
A life insurance investment product such as an endowment;
Medical scheme membership;
A health insurance policy;
Debentures and securitised debt;
Friendly society benefits; and
Crypto-assets.
Although loans and credit agreements are also regarded as financial products, they are provided by credit providers. These products are not regulated by the FAIS Act but are regulated under the National Credit Act and credit providers must be registered with the National Credit Regulator.
Some products must also be registered with other regulators – medical schemes for example must be registered with the Council for Medical Schemes and healthcare advisers must be registered with both the council and as FSPs under the FAIS Act.
Some product providers must also be registered with other regulators under the applicable laws – for example, an insurer and the policies it issues are regulated by the Insurance Acts.
As the list of financial products that must be provided by a person or entity that holds a licence is comprehensive, it is highly unlikely that any claim by a person or entity that they do not need a licence to sell you a financial product will be correct.
Be wary of any person or entity making such a claim as it is a common tactic used by fraudsters in scams.
To protect yourself from fraud and the possibility of losing your money, you should only deal with registered FSPs who have an FSP licence as required by the FAIS Act.
In order to obtain an FSP licence, the providers must prove they can meet various legislated requirements, including:
A fixed business address;
Business communication and access to communication facilities;
A filing system and storage to ensure safe record keeping;
A bank account, including where necessary, a separate account for client funds;
Appointing appropriately qualified and competent managers who meet certain fit and proper requirements to manage the FSP and the activities it does, as well as managing its representatives who must also meet minimum fit and proper requirements; and
Financial soundness.
A licensed FSP, and its representatives, must abide by the General Code of Conduct under the FAIS Act which obliges the FSP, and its representatives, to:
Provide you with factually correct information;
Provide you with information in plain language that is adequate and appropriate so you can make an informed choice;
Not mislead you;
Avoid conflicts of interest;
Keep records of advice;
Disclose all material information about a financial product including:
The product name;
The name and contact details of the product supplier;
The key features and benefits of the product;
The material terms, conditions and exclusions of the product, including any future increases, waiting periods, excesses, exclusions or restrictions; and
The costs and how these will be applied.
If you have any concerns or complaints about the advice or services you have received or are receiving from a licensed FSP or its representatives, and the FSP fails to deal with the issues you raise to your satisfaction, you can take your complaint to the FAIS Ombud. See Where to complain
Before you engage with any FSP or its representatives, do some basic checks to ensure the provider or its representatives are legitimate:
Check that the FSP has a licence and that the licence number is given in all communication.
The licence number must be visible on all external communication including advertising.
Use this search tool provided by the FSCA to check that the licence number the FSP or representative has given you is in fact that of an entity that is properly registered with the regulator.
You can also call the FSCA on its toll-free number 0800 110 443 or check this list of regulated entities on the FSCA’s website.
Remember, a correct FSP number, while helping filter out the most obvious scams, is no guarantee that any communication you have received is genuine, as fraudsters could also misuse these numbers in their communications with a company name that is similar.
Look for any discrepancies in the name, contact details and services offered.
Use the contact details for the FSP provided in the FSCA search to contact the legitimate company to check the legitimacy of any product and the bank account details you have been given for investments or policies.
If you have invested or used services from an FSP previously, check their contact details before using them again.
Scammers often try to mimic the communication you are receiving, for example, an email from your FSP. However, they will change the contact and bank account details. Check the numbers and emails with those on the FSP’s website or contact the institution using the details on the FSCA’s website.
Check for spelling mistakes in any documentation and names, although these may be less obvious as more fraudsters make use of artificial intelligence.
A licensed FSP can authorise suitably trained representatives to act for them.
Before engaging with a representative of an FSP, ask for a written confirmation from the FSP that the person you are dealing with is in fact employed as their representative and what products they can provide or advise on. Check that the FSP confirms it is responsible for the actions of its employees within those parameters.
There have been cases of representatives providing advice and services for financial products that they are not authorised to provide.
It is very important that you educate yourself and do the necessary checks in order to avoid falling victim to a person or company who is not registered and licensed and who is out to scam you or sell you an inappropriate financial product.
