Understanding BBBEE Reporting Requirements for Financial Institutions

In the financial sector, transformation and compliance with BBBEE (Broad-Based Black Economic Empowerment) codes play a significant role in promoting economic inclusion and diversity. Recently, we've been receiving queries from clients about BBBEE communication related to the Financial Sector Transformation Council (FSTC) and the Financial Sector Conduct Authority (FSCA). To clear up any confusion and provide clarity, let's delve into the key requirements and application of BBBEE reporting for financial institutions.
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What is the FSTC and its Mandate?

The FSTC, or Financial Sector Transformation Council, is tasked with obtaining BBBEE statistical data from entities operating in the financial services sphere. Their objective is to monitor and assess progress concerning BBBEE within the financial sector. Annually, the FSTC sends out requests for statistical data to compile a comprehensive report on the advancement of financial institutions with respect to the Financial Sector BBBEE codes.

Applicability: Who Needs to Report?

Various sectors and companies within the financial domain are required to report their BBBEE progress to the FSTC. The entities asked to report include, but are not limited to:
• Banking institutions
• Long-term and short-term insurance companies
• Re-insurance companies
• Retirement fund administrators
• Collective investment scheme asset managers
• Financial services intermediaries and brokerage firms (FSP's)
• Public entities involved in the financial sector (e.g., DBSA, Land Bank)
• Asset management, consulting, and administration firms
• Private equity, venture capitalist, and impact investor firms
• Entities managing investments on behalf of the public (including those listed in financial indexes)

The reporting scope also encompasses underwriting management agents and industry trade associations operating within the financial sector.

What are the Penalties for Non-Compliance?

There are currently no financial penalties or criminal sanctions if you do not comply. However, If BBBEE compliance is important to you it's crucial for financial institutions to meet the reporting requirements on time. Failure to submit the necessary reports to the FSTC will result in an automatic discount of one BEE level in the next rating period. Although the Council has the right to name non-compliant institutions, there has been no such action taken yet. 

Any Exclusions from the Amended FSC?

There are certain exemptions from the Amended FSC (Financial Sector Charter) reporting. It does not apply to: 

• natural or juristic persons who do not have trading operations within the Republic of South Africa
• trading operations of such persons outside South Africa 
• managers of investments on behalf of the public who are not subject to regulation by the FSCA (such as lawyers who hold money in intermediate trusts etc.)

Reporting Process: How to Comply

The reporting process varies depending on the size and status of the financial institution:

1. Exempted Micro Enterprises: These enterprises must submit an affidavit confirming their annual turnover and level of black ownership to the FSTC. Furthermore they must submit the completed CEO questionnaire.
2. Qualified Small Financial Institutions (QSFI): If a financial institution qualifies as a QSFI with an annual turnover exceeding R10 million but less than R50 million, and is more than 50% black-owned (with an existing equity deal) or at least 51% black-owned (for deals concluded after the commencement date of the amended Code) or 100% black-owned, they must submit an affidavit confirming their annual turnover and BBBEE status to the FSTC.  Furthermore they must submit the completed CEO questionnaire.
3. Financial Institutions with Turnover over R50 Million: Financial institutions with an annual turnover of R50 million or more are required to have their BBBEE status verified by a Verification Agent. The Verification Agent must then submit a verification certificate and full verification report to the FSTC within 30 days of issuing the verification certificate.  Furthermore they must submit the completed CEO questionnaire.

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Deadline and Contact Information
Full and final verification reports must be submitted to the FSTC no later than the end of the business day on Friday, 13 October 2023. The submission is to be done electronically via email to reporting@fstc.org.za with the subject line: "FSTC 2021/22 Reporting – (name of entity])." While entities have sometimes been allowed to submit after this date in the past, it's essential to adhere to the specified deadlines.

Should any entity face difficulties in providing the requested information, they can reach out to the FSTC at reporting@fstc.org.za or call (011) 838 6696 or call us for assistance.