Interview by Nomthandazo Mtshweni – Communications and Language Services (FSCA)
From its early days in the 90’s, South Africa’s financial sector conduct regulator has been home to some of the country’s most brilliant minds across the field of law, finance, policy, compliance & enforcement. One such individual has been serving the country and the industry since 1996, amassing such a wealth of knowledge and unparalleled experience along the way. Through his calm demeanor and charisma, he is one of the key collaborators who have helped to establish the Financial Sector Conduct Authority’s Enforcement Division into the formidable force we know it to be today. That man is non-other than Mr Gerhard Van-Deventer.
1. You have been with the Financial Sector Conduct Authority since its FSB days 27 years ago and have recently been appointed as Divisional Executive for the Enforcement Division. Give us a brief background of your role.
I am responsible for the investigation and enforcement function at the FSCA. Our focus is on visible enforcement and credible deterrence. The Enforcement Division was created on 1 April 2018 when the FSCA came into existence. It is a combination of the previous Inspectorate Department and Directorate of Market Abuse. The Division contributes mainly towards the second strategic objective of the FSCA Regulatory Strategy (Dec 2021 to March 2025), i.e., to act against misconduct and to support confidence and integrity in the financial sector. The FSCA’s enforcement effort is therefore focused on discouraging poor outcomes for clients. It recognises that effective enforcement is an essential component to protect the integrity of, and consumer confidence in the financial system. My role is to ensure that our enforcement approach is outcomes-based, and that our enforcement sanctions have real impact and are leveraged to provide best results.
2. Since your appointment into the position, what are some of the notable successes in terms of enforcement?
I believe an important project that we concluded was the publication of our first Regulatory Actions Report that speaks to the enforcement sanctions that the FSCA imposed in the last financial year. It was an opportunity for the FSCA to point out trends and emerging risks, and provide some insight into areas of concern such as platform trading, copy trading, circumvention of maximum commission regulations, fictitious policies, unregistered guarantee policies etc. I am very happy that we have managed to create a special unit for funeral parlour investigations with capable investigators led by a very able team leader. We are making inroads into the very difficult problem of unregistered insurers in the funeral parlour industry, with a focus on regularisation. It is area of concern because of the vulnerability of specific sections of the community. That is why we have also set up an external social media monitoring function to proactively identify contraventions and scams.
Another recent focus point has been platform trading and unregistered over-the-counter product providers because unregistered operators present a substantial risk to the public. We have been able to finalise several investigations in this area and imposed sanctions on the investigated parties. I believe we have been successful in communicating the right message changing the way in which business is conducted in this part of the industry.
I am further delighted with the fact that we have established a much-improved working relationship with the law enforcement agencies, and that we are engaged in ongoing discussions with them on the way forward.
3. One must admit, those are very commendable interventions. To date, how many cases have been finalised in total, with the penalties amounting to how much?
Since the start of the previous financial year (April 2022) we have finalised 416 cases and imposed a total of R100 746 300 in administrative penalties. We have also debarred 210 persons from conducting financial services business.
4. The FSCA has recently published its first ever Regulatory Actions Report. What sort of response and concerns have you received thus far from industry, and how do you plan on addressing them?
The positive response from the media, industry and the public has been overwhelming. It has been humbling to learn from this that it is not good enough to do the job; you also to tell people that you have done the job. In a modern world where people are bombarded with information every minute the message sometimes get lost in the sea of misinformation, disinformation and fake news. A remarkable concern that was raised by the funeral parlour associations was in response to the news that the FSCA created a special unit to deal with the compliance failures in that space. Many clients pay monthly premiums to funeral parlours, but those premiums are not transferred to insurance companies. The risk for this particularly vulnerable section of our citizens is obvious. Hence the special unit has been working tirelessly on the drive to regularise that space with the FSCA engaging the associations to find solutions.
5. Which brings to the FSCA Integrity Roadshow in the pipeline to dissect the enforcement report findings further and to engage the industry and consumers. Which places will you be targeting and what do you hope to achieve through these engagements?
We will engage with the industry nationally starting in Pretoria, at the offices of the FSCA, Cape Town, Durban, PE and Bloemfontein. We will also host virtual meetings for those members of the industry not able to attend any of the in-person presentations. And with the help of our friends in the Communications Department of the FSCA, we hope to spread across the industry the message that misconduct has grievous consequences; and that the financial welfare of the client must always be of primary concern. I believe that because we have a committed industry that works hard to protect the reputation of the financial sector, the reassurance that enforcement is real will complement efforts to address inequality and uneven playing fields at the expense consumers.
6. Financial technology (Fintech) is rapidly making waves within the financial space, particularly with the rise of crypto currencies and their acceptance in certain businesses. What strides have the FSCA made to ensure that consumers are not taken advantage of?
Consumers are always at risk, unfortunately: sometimes from the regulated industry, but mostly from the unrelenting attack of unregistered operators selling unrealistic returns. My view is that crypto investments (whether as the primary or underlying product) are a high-risk investment suitable only to a very small part of the community, i.e., those sophisticated investors who can afford to take risks and who practise advanced risk management to protect their investments. The Enforcement Division has focused on trading platforms conducting unregistered business in SA and has successfully brought a number of these entities to book. The sanctions imposed were widely published to dissuade unregistered operators and expose the risk to potential investors. In cases where the investigated parties acted bona fide and no harm came to clients, the enforcement effort focused on regularisation. Moreover, the FSCA has declared crypto to be a financial product, thereby providing the FSCA with jurisdiction to properly regulate the market.
7. With regards to regulation of crypto assets in the future, what can consumers expect in the next five years?
From an enforcement perspective, I think I can summarise the future as follows:
- More effective enforcement will focus on the impact of our effort on the outcomes for customers;
- More selective enforcement to ensure that our limited resources are prioritised on areas of most need and for maximum impact;
- More digitally driven processes to improve efficiency, accuracy and responsiveness;
- Greater effort to publicise enforcement actions, methods and focus areas in order to empower the public.
8. How do you envision the future of regulatory enforcement in South Africa?
The FSCA has a sound Digital Transformation Strategy to take us into the future. The Enforcement Division will feed off of that strategy and synergise to create more effective investigations and enforcement systems that, most of all, leave no place for miscreants to hide.
9. Mr Gerhard, given your formative years on the ground and vast experience, it is clear you have played and continue to play a crucial role in financial regulation. Hats off to you. But of all your accomplishments thus far, what are you most proud of?
I believe a very crucial advancement was the improved design of the FSCA enforcement processes. In the redesign, not only did we pay attention to efficiency, but also to ensuring that the process is a fair administrative process. I have been a lawyer for 35 years and I am very aware of the importance of fair process and objective decision-making, but what I am most proud of is my enforcement team of hard-working and energised individuals with sound moral compasses. They operate in a high-conflict environment every day – sometimes in actual dangerous situations, and they do so with unwavering focus, courage and integrity. Most of all, they understand the importance of being human and sympathetic when it is called for. A big plus is that I also have a strong management team that I can trust implicitly. |
