MEMORANDUM OF UNDERSTANDING (MoU)

between

The Prudential Authority
(PA)

and

The Financial Sector Conduct Authority
(FSCA)

(together hereinafter referred to as the “Parties”)

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Contents

1. Introduction ...................................................................................................................3
2. Purpose .........................................................................................................................3
3. Interpretation ................................................................................................................3
4. Information sharing .....................................................................................................4
5. Minimising duplication of effort and expense ...........................................................4
6. Specific areas of co-operation and collaboration ....................................................4
7. Actions of the FSCA that do not require concurrence of the PA ...........................5
8. Actions of the PA that do not require concurrence of the FSCA ...........................6
9. Actions of the FSCA that require concurrence by the PA ......................................6
10. Delegation of powers .................................................................................................7
11. Resolution of conflicts ...............................................................................................8
12. General Provisions .....................................................................................................8
    Annexure 1: Consistent policy positions, regulatory and supervisory strategies and international representation ...................................................................................................................10
    Annexure 2: Regulatory Instruments ...........................................................................14
    Annexure 3: Licensing of Financial Institutions and granting of exemptions ...........18
    Annexure 4: Supervisory onsite inspection and investigations .................................22
    Annexure 5: Enforcement and administrative action .................................................25
    Annexure 6: Designation of Financial Conglomerates ...............................................27
    Annexure 7: General Matters relating to the Regulation and Supervision of Market Infrastructures .................................................................................................................................29
    Annexure 8: Delegation of Powers – Framework and System of Delegation ...........33
    Annexure 9: Supervision of accountable institutions in terms of Financial Intelligence Centre Act ...............................................................................................................................38
    Annexure 10: Minimising the duplication of effort and expense ..............................41

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1. Introduction

1.1 Sections 76 and 77 of the Financial Sector Regulation Act, 2017 (Act No. 9 of 2017) (FSR Act) require financial sector regulators (defined in the FSR Act to include the PA and the FSCA) to cooperate and collaborate when performing their functions in terms of financial sector laws and to enter into one or more Memoranda of Understanding (MoUs) to give effect to such co-operation and collaboration. This MoU is entered into between the Parties as so required.

1.2 The FSR Act generally governs the relationship between the Parties and this MoU will seek to achieve the required co-operation and collaboration.

2. Purpose

2.1 This MoU is intended to –
2.1.1 strengthen and formalise a relationship of trust, good faith, mutual co-operation, support, assistance, information sharing, and appropriate co-ordination of actions in terms of relevant financial sector laws between the Parties;
2.1.2 enable the Parties to reach a common understanding on areas where their respective regulatory and supervisory objectives and responsibilities may overlap;
2.1.3 identify matters where concurrence or notification between the parties is or is not required; and
2.1.4 provide for delegations of authority between the Parties.

3. Interpretation

3.1 Words and/or expressions used in this MoU that are defined in the FSR Act shall have the same meaning as in the FSR Act, unless the context indicates otherwise.

3.2 The singular includes the plural and vice versa.

4. Information sharing

4.1 The Parties will, on an ongoing basis, and with due regard to the provisions of section 251 of the FSR Act, share information.

4.2 The Parties will proactively identify types of information which, if shared, would enhance appropriate cooperation and collaboration between them, including but not limited to information obtained or in the possession of one Party that would be likely to assist the other Party in administering, supervising or enforcing financial sector laws.

4.3 Any means of communication will be acceptable, but communication should preferably be in writing, or subsequent to communication be reduced to writing and transmitted by electronic means.

5. Minimising duplication of effort and expense

The Parties, through the mechanisms outlined in this MoU and in general, will make every effort to minimise the duplication of effort and expense in the performance of their functions, both between the Parties and also in relation to any obligations they respectively impose on financial institutions.

6. Specific areas of co-operation and collaboration

6.1 Without limiting the generality of this MoU, the Parties agree to specifically cooperate and collaborate on the following matters, in the manner set out in Annexures 1 to 9, which form part of this MoU:
6.1.1 Consistent policy positions and regulatory strategies (Annexure 1);
6.1.2 Regulatory instruments (Annexure 2);
6.1.3 Licensing of financial institutions and granting of exemptions (Annexure 3);
6.1.4 Supervisory on-site inspections and investigations (Annexure 4);
6.1.5 Enforcement and administrative action (Annexure 5);
6.1.6 Designation of financial conglomerates (Annexure 6);
6.1.7 Regulation and supervision of market infrastructures (Annexure 7);
6.1.8 Delegation of powers (Annexure 8); and

6.1.9 Supervision of accountable institutions in terms of the Financial Intelligence Centre Act (Annexure 9).
6.1.10 Minimising the duplication of effort and expense (Annexure 10).

6.2 The Parties agree that, in order to facilitate the implementation and execution of this MoU, additional or supplementary processes and procedures between the Parties may be documented in Protocols, which will prescribe detailed practical steps and/or arrangements between the Parties. The Protocols will not form part of this MoU.

6.3 Recovery and Resolution of Financial Institutions
6.3.1 The Parties are responsible for the recovery and resolution of financial institutions for which they are the responsible authority.
6.3.2 The Parties agree that they will cooperate and collaborate at an early stage when dealing with the recovery and resolution of both systemically important financial institutions (SIFIs) and non-SIFIs.
6.3.3 The Parties further agree that the recovery and resolution of financial institutions designated as SIFIs may only happen in terms of their respective MoUs with the Reserve Bank (SARB).

6.4 Financial Stability
6.4.1 The Parties undertake to promptly and reasonably cooperate, collaborate, and share relevant information with the SARB and each other to maintain, protect and enhance financial stability.
6.4.2 It is further envisaged that the SARB will in accordance with the FSR Act take the lead on external communication in the event of a systematic event.

7. Actions of the FSCA that do not require concurrence of the PA

7.1 The PA hereby agrees that the FSCA may take any actions which it is empowered to take under any financial sector law for which it is the responsible authority, without the concurrence, other than the actions specified in paragraph 9 of this agreement or the Annexures to this agreement as requiring concurrence.

7.2 The PA hereby specifically agrees that the FSCA may make a debarment order in respect of a natural person without giving the PA a draft of the debarment order as required by section 154(1) of the FSR Act.

7.3 The PA is satisfied that its concurrence is not necessary in relation to actions by the FSCA other than the actions specified in paragraph 9 of this agreement as requiring concurrence and that this agreement does not prejudice the achievement by the PA of its objectives under the FSR Act.

8. Actions of the PA that do not require concurrence of the FSCA

8.1 The FSCA is satisfied that its concurrence is not necessary in relation to actions by the PA in the conversion of registrations to licences in accordance with Item 6 of Schedule 3 to the Insurance Act, 2017, (Act No. 18 of 2017) (IA) subject to the following conditions:
8.1.1 no conversion shall be completed until the FSCA’s draft amendments to the Policyholder Protection Rules and Regulations under the LTIA and the STIA (Board Notice 30 of 2018 (Government Gazette No. 41473) which was published on 2 March 2018 and Notices 357 and 358 published in Government Gazette No. 41523 on 23 March 2018) have been promulgated;
8.1.2 the PA undertakes to, on an ongoing basis, inform the FSCA in writing of the initiation of the conversion process of any insurer and, within five (5) business days of the completion of any conversion, provide the FSCA with a copy of the relevant licence and any directive that may have been issued in terms of item 6(5) of Schedule 3 to the IA.

9. Actions of the FSCA that require concurrence by the PA

9.1 Subject to paragraph 9.2, the concurrence of the PA is required in respect of the issuing, variation, suspension or revocation by the FSCA of any licence issued under a financial sector law for which the FSCA is the responsible authority and the financial institution whose licence is to be issued, varied, suspended or revoked is:
9.1.1 also licensed by the PA as a bank, mutual bank, cooperative bank, cooperative financial institution or an insurer;
9.1.2 a financial institution that is part of a group of companies of which a licensed financial institution referred to in 9.1.1 is a part; or
9.1.3 a market infrastructure.

9.2 The concurrence of the PA is not required in respect of the variation by the FSCA of a licence of a financial institution referred to in paragraph 9.1 in terms of the Financial Advisory and Intermediary Services Act, 2002 (2002 (Act No. 37 of 2002)).

9.3 The concurrence of the PA is required in respect of any action taken by the FSCA as contemplated in sections 144(6) and 157(4) of the FSR Act.

9.3 The concurrence of the PA is required in respect of the granting of exemptions by the FSCA to financial institutions referred to in paragraphs 9.1.1 and 9.1.3, under financial sector laws for which the FSCA is the responsible authority.

9.5 A reference to a “licence” in this MoU–
9.5.1 refers to a licence of a financial institution to act as a financial institution under a financial sector law; and
9.5.2 excludes any other registration, approval, recognition, permission, consent or other authorisation granted in respect of the financial institution.

10. Delegation of powers

10.1 Sections 48(4) and 71(5) of the FSR Act provide that either Party may delegate any power or duty to the other Party in terms of a section 77 MoU.

10.2 The FSCA hereby delegates the following powers to the PA:
10.2.1 Collection of the PA’s levies in accordance with sections 237(1)(b) and 246(2) of the FSR Act;
10.2.2 The supervision of, and regulation of compliance by, insurers with the Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001) (FIC Act) as set out in Part 4 of annexure 8; and
10.2.3 Matters relating to supervision and regulation of market infrastructure as set out in part 2 of Annexure 8.

10.3 The PA hereby delegates to the FSCA powers relating to supervision and regulation of insurance as set out in part 3 of Annexure 8.

10.3 The delegated powers in paragraph 10.2 and 10.3 will be exercised in accordance with a framework and system of delegation set out in Part 1 of Annexure 8 to ensure that such delegations do not constrain the relevant Party from achieving its objectives.

11. Resolution of conflicts

11.1 The Parties will maintain open communication between one another in accordance with the purpose of this MoU and strive to ensure early resolution of any points of disagreement arising out of the interpretation, operation and implementation of this MoU.

11.2 The Parties understand and acknowledge that they have a mutual interest in resolving disagreements in a timely and efficient manner.

11.3 If a disagreement between the Parties cannot be resolved through the mechanisms and principles provided for in this MoU, the Parties will each ensure that appropriate escalation mechanisms are in place within their respective organisations, with the CEO of the PA and the Commissioner of the FSCA respectively being the highest levels to which resolution of a disagreement are to be escalated.

12. General Provisions

12.1 The Parties agree to secure and maintain sufficient and appropriate resources in order to implement this MoU.

12.2 No provision of this MoU shall directly or indirectly confer a right on any person or entity other than the Parties, to obtain any information, to demand any action or to challenge any act performed in the execution of this MoU.

12.3 The terms, operation and implementation of this MoU will be subject to periodic review by the Parties at least every three years, in accordance with subsections