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Financial Services Regulator issuing unauthorised BEE notices (again)

The FSTC demands BEE reports, despite having no authority to do so.
March 19, 2025

The FSTC is currently demanding BEE reports from financial services providers for a 13 month period ending 31 December 2024.

This is an apparent continuation of the FSTC’s unfounded demands last year. It remains a prime example of the third wave of BEE, in which the state attempts to extend its regulatory reach with a view to restricting private business operations based on BEE levels.

Sakeliga points out that the legal reality remains unchanged: The FSTC has no authority to demand BEE reporting and has no statutory powersto sanction FSPs that do not participate in BEE. Not responding to the FSTC’s annual reporting notices or a failure to meet procurement targets outlined by the 2017 Financial Sector Code is not a violation by FSPs of their professional and legal duties.

The implied threat of being classified a “non-compliant” financial institution, the innuendo that non-participation in BEE may lead to sanctions, and a clear escalation on the side of the FSTC to expand government’s policy of BEE into the financial sector, is at best opportunistic on the part of the FSTC. It seeks to intimidate businesses into adopting unnecessary, harmful, and costly BEE structures.

FSPs not participating in BEE should ignore the FSTCs reporting notice. FSPs that do participate should carefully consider the trade-offs of a possible one-level BEE downgrade, as set out below, and compare it to the moral, legal and business risks associated with complying with the request.

Legal position and FSTC admissions

PAIA records (link below), legal advice, and multiple reports from industry players now conclusively demonstrate that the FSTC was bluffing last year – just as it is continuing to do  now – leading to a false impression by businesses of their obligations.

According to the FSTC’s reply to our PAIA request, its only basis for a claim to authority and ability to sanction lies with the Financial Sector Code. However, the code does not make participation and reporting compulsory. In fact, the FSTC expressly admits that it has “no other sanctions”, neither “financial penalties” nor “professional sanctions”.

Even FSPs that do participate in BEE can at most be downgraded one BEE level for not submitting a report in time or not meeting some Sector Code priority element score. For FSPs not participating in BEE or FSPs no longer caring to try to comply with a rigged and unethical regulatory game, this is of no consequence.

Indeed, multiple businesses not participating in BEE have now reported to us that the FSTC has not acted against them even though they ignored or expressly declined to comply with the FSTC’s demands.

An option for FSPs

FSPs that notwithstanding the above nevertheless seek further information or clarity from the FSTC may use the template message below, modified as they see fit.

FSPs who wish to provide Sakeliga with record of such correspondence may blind copy (bcc) us by adding help@sakeliga.org.za to the bcc address field, or forwarding it to us separately.

Template message to FSTC

To whom it may concern at the FSTC,

We refer to your Reporting Notice 02 of 2024, issued on 11 December 2024 and your reminders by email in the course of 2025.

The Notice calls on all financial institutions to submit B-BBEE Reports and questionnaires for the 13 month period of 1 December 2023 to 31 December 2024. The Notice appears to create the impression that reporting is required under section 10 (4) of the B-BBEE Act 53 of 2003, as well as Statement FS 000, paragraph 8.5 of the Financial Sector Code. However, it is unclear to us how these or other provisions in the Act or Code authorises the FSTC to impose such requirements.

We therefore request that you provide us with:

  1. The reasons for deeming Reporting Notice 2 of 2024 within your power, with reference to empowering legislation and/or regulation; and

  2. Information about what actions, if any, might be taken by the FSTC against financial institutions that are unable to or do not comply with Reporting Notice 2 of 2024.

Sincerely,

{sender’s name}

Links to further resources