Subject Title - INSETA

A key individual, in respect of an FSP, must have and be able to maintain theoperational ability to fulfill the responsibilities imposed by the Act on FSPs,including oversight of the financial services (regarding the giving of adviceand rendering of intermediary services) provided by the representatives ofthe FSP.13.2 FINANCIAL SOUNDNESS REQUIREMENTS OF THE FSP13.2.1 Financial soundnessAnother requirement for applicants (of an FSP licence) is that they must meetcertain financial soundness requirements before they will be authorised to actas FSPs. (Applies to FSPs only – not to representatives.)The financial soundness requirements are as follows:1. A FSP must not be an unrehabilitated insolvent or under liquidationor in provisional liquidation.2. A Category I FSP that does not hold client assets or receivepremiums or money must AT ALL TIMES have assets (excludinggoodwill, other intangible assets and investments in related parties)that exceed the FSPs liabilities (excluding loans validly subordinatedin favour of all other creditors).3. A Category 1 FSP that holds client assets or receive premiums ormoney must AT ALL TIMES: have assets (excluding goodwill, other intangible assets andinvestments in related parties) that exceed the FSPs liabilities(excluding loans validly subordinated in favour of all othercreditors); maintain current assets which are at least sufficient to meetcurrent liabilities; and maintain liquid assets equal to or greater than 4/52 weeks ofannual expenditure.The importance for this type of FSP is to ensure that there are adequatesystems and procedures in place so that these requirements are met AT ALLTIMES – not only on application for a licence. The risk lies in the fact thatthe FSP holds or receives clients‟ money, therefore the more stringentrequirement to meet current and liquid asset ratios.232 © INSETA - Section 1 12a