FSCA fines rocket more than 2,300% to R2.9 billion – here’s what drove the surge

The FSCA's more detailed Regulatory Actions Report puts the value of the penalties at R2.89 billion, compared with R119.8 million the previous year – an increase of about 2,310%.

The Financial Sector Conduct Authority (FSCA) imposed almost R2.9 billion in penalties in the year to March, a massive increase from the R119 million imposed a year earlier.

The regulator's Integrated Report showed it finalised 678 investigations during the year, up 7.1% from 633, while imposing R2.8 billion in administrative penalties and fines.

While the FSCA invoiced R2.83 billion in penalties on behalf of National Treasury during the year, it received just R1.23 million on Treasury's behalf. Amounts recovered are paid into the National Revenue Fund.

At year-end, R3.98 billion remained receivable on Treasury's behalf, of which R3.97 billion had been impaired. The FSCA said recoverability remained uncertain because of ongoing legal processes and collection risks.

It also withdrew 14 licences, suspended 31 and debarred 68 people.

FSCA commissioner Unathi Kamlana said the regulator had operated in an increasingly complex financial sector during the year.

"Throughout the year, the FSCA operated in an increasingly complex and rapidly evolving financial sector, requiring us to respond to emerging risks, technological innovation and changing market dynamics while maintaining our focus on fair and effective regulatory outcomes."

The FSCA's more detailed Regulatory Actions Report puts the value of the penalties at R2.89 billion, compared with R119.8 million the previous year – an increase of about 2,310%.

The penalties were imposed on 76 people and entities across 62 cases.

The regulator said the sharp increase was largely driven by material contraventions of the Financial Advisory and Intermediary Services (FAIS) Act, market abuse and failures to comply with anti-money laundering requirements.

That increase shows up clearly once the penalties are broken down by law. The bulk fell under financial advice and intermediary services, with FAIS Act contraventions accounting for R2.48 billion, compared with R82.4 million the previous year.

Market abuse was the second-largest category, with four cases resulting in penalties totalling R361.5 million. No market abuse penalties were recorded in the previous year's comparative figure.

Insurance Act penalties totalled R24.9 million, up from R17 million, while penalties for anti-money laundering failures under the Financial Intelligence Centre Act increased to R20.1 million from just under R17 million.

Another R3.1 million was imposed across 26 Pension Funds Act cases, while penalties under the Financial Sector Regulation Act and Collective Investment Schemes Control Act amounted to R700,000 and R119,000 respectively.

Crypto assets were not separately identified as a penalty category in the FSCA's enforcement breakdown.

Two cases account for most of that FAIS Act spike. The huge increase in FAIS Act penalties was largely driven by enforcement action against online trading platform Banxso and associated parties, which resulted in penalties exceeding R2 billion.

The FSCA's investigation found the matter involved deepfake advertising, misleading information and the misappropriation of client funds.

Another R212 million in penalties arose from the Medbond matter, which involved what the regulator described as a fictitious investment product and large-scale investor losses.

Yet the surge in penalties did not come from a comparable surge in casework. The increase in the value of penalties was considerably greater than the rise in the regulator's investigative workload.

While finalised investigations increased from 633 to 678, the number of new investigations fell from 767 to 524. The number still under investigation declined from 494 to 340.

FAIS Act matters accounted for 515 of the investigations finalised, compared with 347 the previous year.

Alongside its enforcement work, the FSCA also stepped up its public warnings. The Integrated Report also showed the FSCA issued 140 scam alerts during the year, up from 107, while 46 matters were referred to law enforcement agencies.

The regulator said online financial harm remained a particular concern as consumers were increasingly exposed to scams and fraud.

It also received 7,842 complaints during the year and conducted 241 inspections.

Looking ahead, the FSCA identified online financial harm, unauthorised intermediaries operating under the guise of referral models, unlicensed guarantee-type products, and cross market manipulation.

This is in addition to examination fraud, misuse of client information, anti-money laundering failures and the non-payment of retirement fund contributions as areas requiring continued attention, alongside trading signals provided without authorisation.