SUSPENDED FINANCIAL SERVICES PROVIDER LICENCE

What It Means When a Financial Services Provider’s (FSP) Licence Is Suspended

Article by: Cape Town/Paarl Attorney: NICOLENE SCHOEMAN-LOUW

Financial Services Providers (“FSPs”) play a crucial role in delivering financial advice and intermediary services. To operate legally, they must hold a license issued under the Financial Advisory and Intermediary Services Act, 37 of 2002 (“FAIS Act”).

It is essential for the public to understand the impact of a FSP license suspension, as it directly affects their financial security and decision-making. A suspended FSP is not legally authorised to provide advice, intermediary services, or conclude new business, and any dealings with such a provider during this period are unlawful and could expose clients to unnecessary risk.

Public awareness ensures that consumers can take timely steps to protect their interests—such as transferring policies or funds to another authorised provider—while also fostering transparency, accountability, and trust in South Africa’s financial sector.

Legal Basis for Suspension under the FAIS Act

Under Section 9(1) and 9(2) of the FAIS Act, the FSCA (acting as Registrar) has the authority to suspend an FSP’s license if:

• The FSP fails to meet fit and proper requirements, or
• The FSP has contravened any provision of the Act, including failing to pay levies, appoint a compliance officer, or comply with regulatory directives.

Before imposing a suspension, the registrar must:

• Inform the FSP of the intention to suspend, including the grounds, period, and terms of the suspension, and
• Provide the FSP with a reasonable opportunity to respond

In urgent circumstances—such as to protect clients or the public—the registrar may impose a provisional suspension without delay but must still inform the FSP and allow a response thereafter.

Once the suspension is finalised (or withdrawn), the registrar must publicly announce the reasons and terms, typically via the FSCA website or the Government Gazette.

Effect of Suspension

While suspended—whether provisionally or finally—the FSP is deemed unauthorised to render any financial services under the FAIS Act. This includes performing any of the following:

• Providing financial advice
• Offering intermediary services
• Marketing or selling regulated financial products
• Concluding new business or onboarding new clients

Operating in any of these capacities during suspension is illegal and may result in further regulatory penalties.

Key Compliance Obligations During Suspension

Consistent with FSCA Suspension Notices (e.g., Notice No. 4 of 2025), the suspended FSP is legally required to:

1. Notify affected clients and product suppliers, and copy the FSCA on such communication.
2. Take reasonable steps, in consultation with clients and product suppliers, to transfer outstanding business to another licensed FSP in clients’ best interests.
3. Return client funds, where applicable.
4. Continue servicing existing clients only, without onboarding new ones.
5. Work to resolve compliance issues within the suspension period, typically set at three months.
6. If compliance is achieved, the FSCA will lift the suspension; otherwise, the FSP’s license may be withdrawn.

Reasons for Suspension or Withdrawal

The FSCA may suspend—or ultimately withdraw—a license under Section 9(1) of the FAIS Act if the FSP:

• Does not meet or no longer meets the fit and proper requirements
• Made a false or misleading disclosure during license application
• Failed to comply with any FAIS Act provisions, FSCA directives, or prudential/levy requirements
• Failed to pay levies or administrative penalties, or
• Violated conditions or restrictions imposed under the Act

License withdrawal permanently bars the FSP from operating and may include a debarment period during which the FSP cannot reapply.

The suspended FSPs must:

1. Notify clients and product suppliers, copying the FSCA.
2. Transfer outstanding business to another licensed FSP where appropriate.
3. Return client funds if required.
4. Continue servicing existing clients without onboarding new ones.
5. Resolve compliance issues within the suspension period to avoid permanent license withdrawal.

Consequences for Clients

When an FSP’s license is suspended:

• Clients may need to transfer their accounts, policies, or investments to another authorised FSP.
• The FSCA typically publishes suspension notices publicly, alerting affected parties.
• Underlying financial products (e.g., investments or policies) with product providers generally remain valid, but the suspended FSP may no longer act as the intermediary.
• Solvency requirements serve to protect client funds, but clients are advised to seek prompt clarity regarding the status of their arrangements.

License withdrawal permanently bars the FSP from operating and may include a debarment period.

Conclusion

A suspended FSP license is a serious regulatory intervention—not merely administrative. It signifies that an FSP is unauthorised to conduct new financial services and must comply with strict mitigation steps to protect clients and resolve the underlying issues.

Clients should:

• Verify the suspension on the FSCA FSP register.
• Obtain written confirmation of how your policies or investments will be managed.
• Lodge complaints with the FAIS Ombud if disputes or losses arise.
• Report any suspected unlawful activity to the FSCA.

Both the FSP and its clients are strongly advised to seek legal and regulatory guidance without delay to safeguard their rights and interests. If your FSP has been suspended—or if you are an FSP facing suspension—act quickly: verify your position, understand your obligations, and get professional advice to prevent financial or reputational harm. Contact an expert at SchoemanLaw Inc for assistance.

For more information, please visit our website schoemanlaw.co.za or give us a call on 021 425 5604