Obtain a Financial License in South Africa

Investors who set up a company that provides financial solutions and services have to obtain a financial license in South Africa. The licensing process depends on the types of activities and includes certain requirements for submitting the applications.

A FSP in South Africa, that is, a financial services provider, conducts its activities under law, among which the Financial Advisory and Intermediary Services (FAIS) Act. Being duly licensed and observing the ongoing requirements is a key step for businesses that operate in the financial sector.

Our lawyers in South Africa assist businesses that require special licensing with complete compliance guidelines and representation for application, as needed.

Companies that require a financial license in South Africa

Licensing is a mandatory step for companies that will activate as financial services providers in South Africa. The Financial Sector Conduct Authority (FSCA) is the independent institution that ensures the adequacy of the financial market in the country.

The FSCA is responsible for regulating financial services providers, issuing the financial license in South Africa, protecting consumers, and issuing guidelines and warnings for service providers.

Our team lists some of the main regulated entities that are subject to regulation in South Africa by the FSCA (insurers are licensed by the Prudential Authority, with the FSCA supervising their conduct):

Insurers/micro-insurers;
Financial advisory and intermediary services companies (FAIS);
Collective investment schemes/hedge funds;
New retirement funds;
Securities exchanges, central securities depositories, clearing houses, etc.

Banks in South Africa are also subject to licensing and control according to the conditions set forth by the South African Reserve Bank Prudential Authority. The laws governing the functioning of banks and banking activities in the country include the Banks Act 1990 or the Mutual Banks Act. Our South African lawyers can give you more details.

Commercial banks are subject to licensing according to the Prudential Authority’s rules. In some cases, registration as a commercial bank is not appropriate for the activities of the company. The other options are the following:

Cooperative bank;
Mutual bank;
Cooperative financial institution.

The licensing process

Licensing requirements and conditions vary according to sector and industry specifics. As a result, there is no singular approach to financial licensing in SA. Rather, it is a case-by-case approach that is tailored according to the business activities of the entity that applies for the license.

Investors interested in company formation in South Africa for the purpose of setting up a business in the financial sector will have to determine their licensing requirements in a timely manner to ensure the streamlining of the process.

To obtain a financial license in South Africa for a bank the applicant will meet the Prudential Authority’s (PA) requirements and timeline:

Schedule an optional pre-application meeting with the Authority for the purpose of discussing the business plans and the authorization requirements;
Preparing and submitting the relevant documentation and information;
Application review which not only includes the PA’s evaluation but also a consultation with the Financial Sector Conduct Authority;
Issuing the license.

The overall process to obtain a financial license in South Africa for a bank can last between six and nine months and incomplete or insufficient submissions, as well as noncompliance with the PA’s requirements will further delay the response.

Licensing fees

To obtain a financial license in South Africa the applicant company will need to pay certain fees, as established by the FSCA.

Our attorney in South Africa lists some of these levies below:

R13,923,087 for an exchange licensed according to Section 9 of the Financial Markets Act;
R10,517 for a collective investment scheme declared according to Section 63 of the Collective Investment Schemes Control Act;
A base amount of R3,459 for each person authorized as a Category I or IV financial services provider.

Please note that these fees can be subject to change and should be used only for informative purposes. Other levies also apply according to the type of licensed activity.

Licensing and requirements for a FSP in South Africa

As previously mentioned, financial services providers, FSPs for short, are required to obtain a license that suits their object of activity. FSP licences in South Africa are divided into Categories I, II, IIA, III and IV; the main ones are:

Category I: businesses that offer intermediate or advisory services related only to financial products;
Category II: companies that offer intermediary discretionary services for a certain financial product;
Category III: administrative companies that offer intermediary services in respect to a certain financial product according to the instruction of another FSP.

For the purpose of licensing and the provision of services, a FSP in South Africa is deemed to act as an intermediary between a client and a product supplier when the client is not dealing directly with the said product supplier. Examples of intermediary services include:

Acts performed on behalf of a client or product supplier (other than offering advice);
Collecting premiums from clients on behalf of product suppliers;
Receiving a client’s claim against a product supplier and processing it accordingly;
Custodial services of a financial product in which the client has invested;
Administering a financial product that is used to maintain or service another financial product.

Some key licensing aspects are listed below by our lawyers in South Africa:

A company that applies for a FSP license must meet certain requirements concerning its directors and compliance officer;
The FSP licensee is required to pass the fit and proper test for good standing and competence, among other attributes;
The license application processing time for a FSP in South Africa can be around five months or more, as the evaluation is a thorough one. Please keep in mind that all submissions are treated accordingly.

The purpose of the licensing requirements and the legal provisions in force concerning FSPs in South Africa is to protect consumers by regulating the activities (including advice-offering services) provided by these types of companies in SA.

The experts at our law firm in South Africa can provide investors with in-depth information about the policies that apply to companies that offer financial advisory and intermediary services.

Alternatively, we also offer solutions for those who have questions about immigration to South Africa, residency in South Africa, or obtaining permanent residence in South Africa.

You can reach out to the experts at our law firm in South Africa for more details about the financial licensing process.