Chapter 4: Enforcement

Question 1

What may the Registrar do when receiving a complaint or allegation that a contravention of or failure to comply with the FMA took place?

Answer 1

The Registrar may investigate the matter by directing the regulated person to provide information and documentation or to appear before the Registrar. Alternatively the Registrar may order an inspection in terms of the Inspection of Financial Institutions Act, No 80 of 1998.

Question 2

Name the institutions that are subject to inspections by the Registrar?

Answer 2

A financial institution, associated institution or other person or organisation that the Registrar has reason to believe is carrying on the business of a financial institution without being registered or approved.

Question 3

An inspector entered the offices of XYZ investment managers without prior notice and without a warrant and broke open their safe to obtain certain documents relating to the contravention of a law. Is this legal in terms of the Inspection of Financial Institutions Act, No 80 of 1998?

Answer 3

Yes, a warrant is not required in respect of financial institutions, associated institutions and unregistered persons.

Question 4

What enforcement action can the Registrar take after an investigation or inspection?

Answer 4

The Registrar may
 apply under the Companies Act to the court for the winding up or judicial management of the regulated person;
 apply for the appointment of a curator;
 direct the regulated person to take any steps or refrain from performing an act, or to terminate or remedy any irregularity;
 direct the regulated person to prohibit or restrict specified activities of a director, executive, officer or employee if the Registrar believes that person is not fit and proper to perform such activities;
 refer the matter to the Enforcement Committee; and
 hand the matter over to the National Director of Public Prosecutions.

Question 5

What orders may the Enforcement Committee make?

Answer 5

An Enforcement Committee may make the following orders, which will have the same force of law as a High Court judgment:
 a penalty payable to the FSB;
 an order that a compensatory amount be paid to anyone who suffered damage or patrimonial loss; and
 an order that a compensatory amount be paid in respect of insider trading.

Question 6

Who may refer contraventions of the law to the Enforcement Committee?

Answer 6

The Registrar and the Directorate of Market Abuse.

Question 7

A financial institution includes among others the following:

Answer 7

 an exchange;
 a clearing house;
 an authorised user;
 a financial services provider or representative in terms of the FAIS Act;
 a central securities depository or participant;
 a settling party;
 a nominee;
 a credit rating agency;
 any other person who conducts the business of a financial institution

Question 8

An associated institution includes the following

Answer 8

 Any person (including legal persons) in which a financial institution or unregistered person conducting the business of a financial institution, has a direct or indirect interest.
 Any person that has a direct or indirect interest in the financial institution.
 A participating employer in a pension fund.
 Any person that controls, manages or administers the affairs or part of the affairs of a financial institution.

Question 9

Inspectors may with regard to an institution:

Answer 9

 summon any person who is or was a director, employee, partner, member trustee orshareholder of a financial institution and whom is believed to have control over documents relating to a financial institution, to lodge such documents with the inspector or to appear at a time and place to be examined or to produce such document and administer an oath or affirmation;
 without prior notice enter and search the premises of the institution and require the production of documents relating to the affairs of the institution;
 cause to be opened any strong room, safe or other container in which he or she suspects any documents are kept;
 examine and make extracts from and copies of any documents, or against a receipt, remove the document temporarily from the premises for that purpose;
 against the issue of a receipt, seize any document if the inspector is of the opinion that the document contains information relevant to the inspection;
 retain such seized documents for as long as they may be required for any criminal or other proceeding.

Question 10

On the authority of a warrant or with the consent of such other person, the inspector may, without prior notice:

Answer 10

 enter any premises and require the production of any document relating to the affairs of the institution under inspection;
 enter and search the premises for any document relating to the affairs of the institution;
 open any strong room, safe or other container which he or she suspects contains any document relating to the affairs of the institution under inspection;
 examine and make extracts from and copy any document relating to the affairs of the institution under inspection, or against the issue of a receipt, remove the document temporarily from the premises for that purpose;
 retain any seized document, as long it may be required for criminal or other proceedings.

Question 11

The Registrar has the following powers when conducting such an on-site visit:

Answer 11

 enter a regulated person’s premises and the regulated person must provide any business document requested,
 examine, make extracts and copy any business document,
 question any person the Registrar believes may have relevant information
 where a contravention has been detected, issue an instruction that prohibits the destruction of any business document
 against a receipt, remove any business document to prevent concealment, removal or destruction.
 instruct a regulated person or any other person to produce any specific business document under his or her control or furnish information with regard to such document at a specified time and place in the manner determined by the Registrar.