What does it mean to be a registered FSP?

Registered financial services providers (FSPs) can offer various types of assistance, depending on your financial needs and goals. They can help you grow wealth, protect your assets, borrow appropriately, plan for retirement, and assist with tax and estate planning.

Their insight, experience, and objectivity can help you manage complex financial matters and make informed decisions to work more effectively towards your financial goals.

We explain what registered FSPs do, how to identify them, and what recourse you have if they neglect their fiduciary responsibilities – that is, the legal and moral obligation they have to act in your best interest.

Tip: Taking out a personal loan with a registered FSP can help you avoid falling victim to unethical lending practices.

What is an FSP?

An FSP is a company licensed with the Financial Sector Conduct Authority (FSCA) to render financial services to the public, explains Devon Card, a director at Crue Invest.

It’s illegal to operate as an FSP in South Africa without being registered and licensed.

Examples of FSPs include banks, credit providers, insurance companies, and investment firms, among others. “Independent financial adviser practices are also FSPs, providing clients with financial advice regarding some of the products mentioned above,” notes Card.

It’s important to be aware that there are also unregistered, unauthorised FSPs operating in South Africa. These may include:

• Unlicensed microlenders, also known as “loan sharks”
• Entities conducting forex and crypto trading scams
• People operating pyramid schemes
• Insurance providers who are not registered or licensed by the FSCA or the Prudential Authority (PA)
• Asset managers or stockbrokers who operate without licences from the FSCA or Johannesburg Stock Exchange (JSE)
• Illegal deposit-taking or banking operations

Before you consult any FSP, verify their registration and licensing status, and check their credentials with the relevant regulators – the FSCA, PA, National Credit Regulatory, or South African Reserve Bank.

What types of services do FSPs offer? 

FSPs include banks, insurers, asset managers, collective investment schemes, stockbrokers, credit providers, and microlenders, offering a variety of services.

The FSCA has also authorised certain crypto asset service providers. You can find an approved list on the FSCA website.

Some registered FSPs offer personal loans

You can take out a personal loan from FSPs such as banks and other registered lenders.

Regulation helps to protect borrowers through several measures:

• Fair lending practices. You can’t be denied a loan based on factors such as your race, gender, age, marital status, and more.
• Affordability assessments. The National Credit Act (NCA) protects consumers by requiring lenders to determine whether a borrower can afford to repay a loan before it is granted.
• Fee restrictions and interest-rate caps. The NCA sets maximum fees and interest rates on different types of credit agreements.
• Disclosure requirements. Lenders must provide clear, understandable loan terms that detail the total cost of credit, among other factors.

What are the benefits of consulting a registered financial services provider? 

There are several advantages to working with registered FSPs.

“When engaging with a registered FSP, you can take comfort in knowing there’s legal recourse in the event of misconduct,” says Card. 

“These providers are regulated by legislation and will be fined if the products and services they provide are not in the best interest of their clients.”

Card adds that FSPs are required to conduct due diligence checks on their service providers, adding an extra layer of reassurance for clients.

Registered FSPs must provide clear, accurate information about products and services, including fees, risks, and terms and conditions. They’re subject to regular compliance audits, and monitored by regulatory bodies.

“FSPs are also required to maintain certain levels of capital and liquidity, which contributes to their financial stability,” says Card. This means they’re unlikely to fail as businesses, swallowing up your funds in the process.

Why should an FSP have a unique number?

Every FSP is allocated a number by the FSCA. 

“This number is essential for identification and must be reflected in all your documents,” says Card. 

Having an FSP number means the FSP meets the stringent requirements set out by the FSCA.

How are FSP licences obtained?

A financial services provider must follow a formal process to obtain the status of a registered FSP, says Card.

“Depending on the type of licence you apply for, the process can take about three months if all requirements are met upfront. Once your application has been approved, you will be issued an FSP number.”

The process involves:

1. Determining the category of financial services the FSP falls into. The category could, for example, be advice and intermediary services relating to banking, insurance, or investing.
2. Meeting the FSCA’s requirements. This means having the appropriate qualifications, financial stability, experience, and operational ability to provide the stipulated financial services. “If an FSP fails the fit and proper requirements, they would need to cease practising and could be penalised for non-compliance,” says Card.
3. Submitting an FSP licence application. The FSCA will review the application before approving it.
4. Complying with operational requirements. These include having professional indemnity insurance, adhering to conduct rules, and more.

How to verify an FSP number

You can verify an FSP’s number on the FSCA website, where you can also check its name and representatives.

An FSP’s licence must be renewed every year, so be cautious if an entity’s licence has lapsed.

Reporting non-compliance 

If an FSP does not meet the stipulated legal and regulatory requirements, it may be reported to the FSCA, which has a web page for complaints, enquiries, and questions.

The FSCA has also established a Treating Customers Fairly (TCF) framework to ensure that customers are treated fairly and equitably, whether receiving advice or products.

Customers may need to make a complaint due to issues such as poor service, unsuitable advice, inadequate post-sale assistance, bias, or non-payment of claims.

Your FSP should have a complaints process, but if approaching them directly fails to resolve the problem, you can contact the National Financial Ombud or the FSCA.

Safety when working with FSPs

It’s important to verify an FSP’s credentials before handing over any funds.

The FSCA warns about criminals who impersonate authorised financial institutions to solicit investments.

If you notice any suspicious financial services-related activity, especially on social media, where fraudsters commonly make bogus investment and trading offers, contact the FSCA.

It’s wise to visit the FSCA’s website regularly for updates on individuals or entities claiming to represent legitimate businesses registered with the authority, scams, and red flags to look out for.

Tip: A poor credit score limits access to registered financial products. View your score now.