Can FAIS FSP's Still Operate During Lockdown?

*This post is updated as and when information changes or regulations are added. Latest Update: 04/22/2020.

In this post we tell you all about how financial services companies can operate lawfully and safely during the lockdown. We are all aware of the lockdown currently implemented in South Africa due to the COVID-19, and even though we are in a lockdown, we should not confuse this period for a complete shutdown for financial services. Businesses that produce, distribute and deliver essential services are allowed to continue operations if necessary, whilst adhering to the correct health and hygiene procedures during this time.

There was a release of a third amendment which brings greater clarity to what is regarded as essential services in the financial sector. This amendment is the third amendment to the Regulations to the Disaster Management Act 2002, published by Government Notice No 318 of 18 March 2020, as amended by Government Notice No 398 of 25 March 2020 and Government Gazette Notice No 419 of 26 March 2020 (Regulations).

What is regarded as essential services in the financial market?
Essential Services in the financial market includes the following services necessary to maintain the functioning of a financial system as defined in section 1(1) of the Financial Sector Regulation Act, only when the operation of a place of business or entity is necessary to continue to perform those services:
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• the banking environment (including the operations of mutual banks, cooperative banks, co-operative financial institutions and the Postbank);
• the payments environment;
• the financial markets (including market infrastructures licensed under the Financial Markets Act, 2012 (Act No. 19 of 2012);
• the insurance environment;
• the savings and investment environment;
• pension fund administration;
• outsourced administration;
• medical schemes administration; and
• additional services designated in terms of regulation 11B(4A)(c)(i)'.

• FSP's need to have a permit issued by the CIPC to render essential services.
• All the staff of the FSP need to have a permit to perform essential service Regulation 11B (3) issued by the FSP if they are travelling.

What is our interpretation of FSP's rendering services during lockdown period?
We would argue the services that FSP's render fall under the essential services definition as mentioned above and can therefore continue operations if necessary to service current clients. This does not mean you should go out and canvass for new clients face to face. The essential services exemption is there to assist current clients in need that have no other option but to see you in person - i.e. vulnerable persons and those of little means. The FSP needs to have a CIPC certificate to continue operations and the staff need a permit issued by the FSP itself if they are traveling to and from clients.

Important information for FSP's during this lockdown period:

• If your FSP can continue servicing and acquiring clients in a non-face to face manner, great! Please continue business.
• Avoid seeing clients face to face at all costs. If you cannot, then operate under the following rules below.
• FSP's need to have a permit issued by the CIPC to render essential services in person to clients when doing so face to face.
• All the staff of the FSP need to have a permit to perform essential service Regulation 11B (3) issued by the FSP if they are travelling.
• FSP's need to adhere to health and hygiene protocols during this period, and therefore rather make use of video conferencing to communicate with clients where possible, such as Skype, Google Hangouts, Zoom or MS Teams. Phone calls are also an option if it is not necessary to see a client in person. 
• FSP's should remind clients of the potential consequences that could result in canceling their financial products. This reminder should be in written format to keep it as proof of informing clients of the potential consequences of termination. (This can be done via email.)

Where do I request a permit issued by the CIPC for my FSP?
The permit for an FSP to render essential services can be requested online, and is issued by the CIPC. Follow this link to request a permit or click on the "Request a CIPC permit" button below: bizportal.gov.za/essential_service.aspx

CLICK HERE to Request a CIPC Permit

Where do I get a permit for the staff of my FSP if they are traveling to clients?
The permit to render essential services for staff of an FSP can be issued by the FSP. Use the form in this link, or click on the "Issue a Permit for my staff" button below: guideline_permit_essential_services.pdf

CLICK HERE TO Issue a permit for my staff

Are there any exemptions to provide relief to my FSP during the pandemic?
Annual Financial Statement submission dates are usually 4 months after the financial year end, it has now been extended by 4 months, therefore submissions are due 8 months after your FSP's financial year end.

An exemption for compliance with Financial Soundness Requirements was also issued and can be summarised as follows:

GENERAL SOLVENCY REQUIREMENT (Assets must exceed Liabilities) 
Exemption: Liabilities may exceed Assets by no more than 20%
Applies to: All Cat 1’s / Cat 2 / Cat 4

WORKING CAPITAL REQUIREMENT (Current Assets must exceed Current Liabilities) 
Exemption: Current Liabilities may exceed Current Assets by no more than 20%
Applies to: Cat 1 Holding Funds / Cat 2 / Cat 4

LIQUIDITY REQUIREMENT (Maintain Liquid Assets equal or greater than X/52 weeks of Annual Expenditure) 
Exemption: The Liquid Assets may not be less than 50% of the specified Liquidity Requirement:
Applies to:

• Cat 1 Holding Funds (where X = 4)
• Cat 2 (where X = 8)
• Cat 4 (where X = 4)

If you decide to rely on the exemption for Financial Soundness Requirements, there are certain conditions to be met. For more details, please refer to FAIS Notice 21/2020 on the FSCA website.

Note that there are also no Compliance Reports due for 2020.

Practical measures you must comply with
The FSCA and Prudential Authority also issued a joint Directive to state that those financial services businesses that are operating need to comply with the following:

"Financial institutions are hereby directed as follows:
A head of a financial institution must, where that head determines staff as essential as contemplated in Regulation 11B(2), endeavour to limit these members of staff to as small a number as possible and, as far as possible, enable remote working, including working from home to support essential services.

A financial institution must take appropriate precautionary measures to reduce the risk of exposure, transmission and spread of the COVID-19, including to limit the number of staff required to be at offices in order to provide the elevant required essential financial services to a minimum and must put appropriate measures in place to promote minimum physical contact between staff, by-

• replacing face-to-face contact with virtual communications where possible;
• implementing a spacing policy that requires a safe distance of no less than one and a half meters between employees at workstations where possible, including spaces in areas such as cafeterias or break rooms;
• arranging seats or meeting room layouts so that participants are at least one and a half meters apart, if a physical meeting is necessary;
• avoid face to face meetings where possible, and where not possible, providing facilities that increase physical distance between persons(e.g. drive through windows, or partitions), but always ensuring that they are at least two meters apart;
• and where possible, providing employees with sufficient personal protective supplies and materials, including tissues and hand sanitizers to employees and other persons that visit the site, and, where possible requiring the wearing of surgical masks.

A financial institution must-

• establish the necessary protocols for temperature screening of all persons entering and leaving their business premises and take reasonable steps to ensure that staff with COVID-19 like symptoms, including a mild cough or a low grade fever (37.3°C or more), are identified, tested and are required to stay at home;
• require that employees must stay home even if they only have mild
• symptoms of COVID-19;
• maintain a register of the names and contact details of all the staff working on site and persons visiting on site, including those attending meetings, for a period of at least a month, to assist with contact tracing as contemplated in Chapter 3 of the Regulations;
• establish procedures for staff who are sick at work, including identifying a room or area where someone who is feeling unwell or exhibits COVID-19 symptoms can be safely isolated, and planning procedures for keeping a staff member who becomes sick separate from others until such staff member is able to leave for home, which, should occur as soon as possible; 
• if a staff member has come into contact with a confirmed COVID-19 case, require them to self-quarantine at home for 14 days while being monitored for symptoms and otherwise comply with Department of
• Health directives and guidelines;
• encourage respiratory etiquette, including covering coughs and sneezes with a tissue or elbow;
• appropriately inform or educate employees about how they can reduce the spread of COVID-19, including steps that they can take to limit their risk at work and at home, the importance of social distancing, and the importance of following the policies and procedures specified by their employer related to hygiene, cleaning and disinfecting, and physical distancing;
• discourage employees from using other employees’ phones, desks, offices, or other work tools and equipment;
• ensure that hand soap is available along with running water or, where this is not possible, alcohol-based hand-rub containing at least 70% alcohol;
• provide the workplace with surface disinfectants and disposable towels for staff to clean their hands and their work surfaces;
• require and promote regular hand washing or using of alcohol-based hand rubs; and
• maintain regular housekeeping practices, including routine cleaning and disinfecting of frequently touched surfaces such as desks, handrails and doorknobs, and equipment such as telephones and keyboards, and other elements of the work environment.

A financial institution must develop and implement an infectious disease preparedness and response plan that can help guide protective actions gainst COVID-19, which must include plans and policies aimed at compliance with this Directive.

A financial institution must identify a workplace coordinator who will be responsible for COVID-19 related issues and their impact at the workplace and for timeously responding to the Authorities upon request for information."
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