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South African Insurance Association

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Joint Standard on Fit and Proper Requirements for Significant Owners (So Js 1) - SAIA Bulletin November 2018

The Prudential Authority (PA) and the Financial Sector Conduct Authority (FSCA) jointly published a consultation paper titled draft Joint Standard on fit and proper requirements for significant owners (SO) (SO JS 1).

The Financial Sector Regulation Act, 2017 (FSRA) provides that a person is a significant owner of a financial institution if that person, directly or indirectly, alone or together with a related or inter-related person, can control or influence materially the business or strategy of the financial institution.

The purpose of the consultation paper is to:
a. Introduces the SO JS 1 which aims to establish consistent fit and proper person requirements for SOs of specific financial institutions including insurers.
The SO JS 1 provides that SOs must have integrity, be competence and the financial resources commensurate with supporting the financial institutions’ business. The SO JS 1 provides guidelines for the establishment of integrity and competence of SOs.

b. Explain what an increase or decrease in the SO’s ability, alone or with another related party to control or materially influence the business or strategy of a financial institution means.
The SO JS 1 proposes that any increase or decrease in excess of 5% in the interest that constitutes the significant ownership of a person or any increase or decrease which results in that person becoming the majority shareholder of the financial institutions constitutes an “increase or a decrease in the extent of the ability of the person, alone or together with a related or interrelated person, to control or influence materially the business or strategy of the financial institution” for purposes of sections 157(1) and 158(4) of the FSRA.

c. Make the necessary amendments to Prudential Standard GOI 4: Fitness and Propriety of SOs and Key Person of Insurers as a result of the making of SO JS 1.
Prudential Standard GOI 4 is amended by removing all references to significant owners. The proposed effective date of SO JS 1 is 1 January 2019 or soon thereafter to enhance the implementation of chapter on SOs in the FSRA.

For more information contact:
Mashudu Mabogo, SAIA Legal Manager
Mashudu@saia.co.za