The Financial Sector Conduct Authority (FSCA) and the Prudential Authority (PA) Joint Standard 1 of 2020 sets out the requirements on fitness, propriety and other matters relating to significant owners of financial institutions and the financial institutions themselves. It is worth reminding ourselves of the requirements.
Prudent business management of financial institutions is dependent on the fitness and propriety of persons who influence materially the business or strategy of these financial institutions. In the case of significant owners, fitness and propriety is linked to financial standing, competence and integrity.
The Joint Standard applies to significant owners who directly or indirectly, alone or together with a related or inter-related person, have the ability to control or materially influence the business or strategy of a financial institution (including a financial product provider, financial service provider, market infrastructure, holding company of a financial conglomerate, and other persons licensed in terms of a financial sector law). Section 157(2) of the Financial Sector Regulation Act, 2017 (FSRA) specifically includes the following persons:
- a person, directly or indirectly, alone or together with a related or inter-related person, who has the power to appoint 15% of the members of the governing body of the financial institution;
- a person whose consent, alone or together with a related or inter-related persons, is required for the appointment of 15% of the members of a governing body of the financial institution; or
- a person, directly or indirectly, alone or together with a related or inter-related person, who holds a qualifying stake (for a company at least 15% of the issued shares, or voting rights, the ability to control the disposal of at least 15% of the financial institution’s securities, or other similar controlling rights).
A significant owner must be honest and have the necessary integrity, competence and financial standing required to support the business of the financial institution of which it is a significant owner.
The Joint Standard places reporting obligations on significant owners and financial institutions including:
- a significant owner must have procedures in place for annually assessing, and attesting to upon written request by the FSCA or PA, its fitness and propriety;
- a financial institution must notify the FSCA or PA within 30 days of it becoming aware of significant ownership or potential significant ownership of a financial institution;
- a significant owner must notify the FSCA or PA within 30 days of it becoming aware of non-compliance with the Joint Standard or a change in the fit and proper status of the significant owner;
- a financial institution must notify the FSCA or PA within 30 days of it becoming aware of non-compliance with the Joint Standard by a significant owner; and
- a significant owner or financial institution must, upon written request by the FSCA or PA, provide independent confirmation to the FSCA or PA on any matters related to compliance with the Joint Standard.