What is the FSCA?

The Financial Sector Conduct Authority or FSCA, is the local regulator of all non-banking-related activities and has oversight over all regulated brokers in South Africa. 

Previously known as the Financial Services Board (FSB), the FSB changed its name to the FSCA or the Financial Sector Conduct Authority in 2018. It is responsible for the market conduct regulation and supervision of financial service providers like Forex brokers, investment funds, and investment managers.

The Financial Sector Conduct Authority has the following four goals:

• Protect customers of financial services.
• Improve efficiency and integrity of financial markets.
• Promote financial stability.
• Increase financial inclusion.

To achieve these goals, it also creates regulations in the interest of the public and publishes warnings of illegal schemes.

Internationally, the Financial Sector Conduct Authority is a recognised member of the International Organization of Securities Commissions (IOSCO) and takes a leading role in regulation in the SADC block.

FSCA Strategy 2018-2023

Central to the mission of the FSCA is four core statements, which together form the reason why residents want to trade with an FSCA-regulated Forex broker.

The FSCA improves the efficiency and integrity of the South African financial markets. By monitoring the whole financial market and not just any particular entity, it ensures the safety of the entire market and, in doing so, can protect all market participants, including retail Forex traders.

In addition, the FSCA ensures that regulated brokers treat all clients fairly. A client of a regulated brokerage who feels they have been cheated has a legally defined process to resolve their issue.  All regulated brokers must have this process available to potential clients.

FSCA-regulated brokers must present written material in a way that does not confuse or mislead the reader. They are required to provide financial education and promote the financial literacy of potential clients. As financial products can be complicated, it is the obligation of all regulated members to explain all products and their associated risks.

Finally, the FSCA assist in maintaining financial stability in South Africa by supervising the registered entities.

A client trading with an FSCA-regulated broker should expect to be treated fairly, expect to be educated on financial products whenever needed, and can rest assured that the government is monitoring their broker’s activities to ensure they are safe and secure.

History of the FSCA

Previously known as the Financial Services Board (FSB), the FSCA opened in 1991 following the recommendations of the Van der Horst committee. The committee had recommended the creation of an independent body to oversee or supervise and regulate the non-banking financial services sector in South Africa.

After the Van der Horst committee, various acts have increased and expanded the mandate of the Financial Services Board. In 2001, the Financial Intelligence Centre Act and the subsequent amendments that followed later increased the FSB mandate to include issues of combating money laundering.

Later in 2004, the Financial Advisory and Intermediary Services, also known as FAIS, expanded the role of FSB to include, among other things, the conduct of the market in the banking sector.

As of April 1st, 2018, the FSB changed their name to the FSCA or the Financial Sector Conduct Authority, which is responsible for market conduct regulation and supervision.

The Structure of the FSCA

A board oversees the Financial Sector Conduct Authority, which executes its mandate through divisions. The FSCA has the sole mandate to select its own Commissioner, making the organisation less of a target of financial politics and pressures. Apart from overseeing the day-to-day running of the institution, the Commissioner acts as the Registrar of the Non-banking Financial Institutions in South Africa.

The authority of the Commission is distributed to Deputy Commissioners appointed by the Minister of Finance and is supported by the Chief Risk Officer, General Counsel, and Media Liaison Officer.

Key Financial Sector Conduct Authority Responsibilities

As part of its mission of ensuring that the investment environment in South Africa is sound and conducive, the Financial Sector Conduct Authority has built a strong reputation for its regulatory framework in the following sectors:

• Capital Markets
• Insurers
• Financial Services Providers
• Collective Financial Schemes
• Nominee Companies
• Friendly Societies
• Retirement Funds

The FSCA ensures the cooperation of regulated entities and has the power to impose compensation orders, unlimited penalties and cost orders for those who do not comply.  These orders are adhered to as though they are a judgment from South Africa’s Supreme Court and are a matter of public record.

A customer complaints service is effective in fielding complaints, plus a separate self-policing appeals board which any aggrieved entity can approach should they feel like they might have been aggrieved by either the regulator or any of its executive officers.

Summary

The FSCA is credited for bringing stability and transparency to South Africa’s investment industries.  Forex traders who want to have protection can find brokers that are locally regulated and who comply with South African law.  In some cases, South African clients can keep their funds locally, further increasing trust with the brokerages.