From CompliNEWS | Financial Service Intelligence Watch
FSTC BEE reporting demands deemed unlawful
In a groundbreaking development for the financial services industry, the Financial Services Transformation Council (FSTC) has admitted that it lacks the legal or statutory authority to enforce BEE reporting requirements. This revelation follows months of pressure from industry stakeholders, led by Sakeliga, culminating in the FSTC’s reluctant admission after a directive from the Information Regulator.
Background
In March 2024, the FSTC issued a notice requiring all financial service providers to submit detailed BEE status reports and plans by 30 June 2024. Many financial institutions, particularly smaller entities, felt compelled to comply under the assumption that failure to do so could result in blacklisting, reputational damage, or other penalties.
Sakeliga, challenging the legal basis for these demands, submitted a request for clarity on the FSTC’s authority. Despite initial resistance, the Information Regulator intervened, forcing the FSTC to release documentation that confirmed its lack of legal power to enforce such mandates.
Key Findings
No Legal Obligation:
There is no statutory or regulatory requirement for financial service providers (FSPs) to adhere to the annual BEE reporting demands or sector-specific targets issued by the FSTC.
Voluntary Participation:
Compliance with the Financial Sector Code remains a choice, not an obligation. Non-participating entities are not subject to penalties such as BEE level downgrades or legal sanctions.
Intimidation Exposed:
The FSTC’s actions appear to have been a tactic to pressure businesses into voluntary compliance with BEE policies. This has led to unnecessary costs and confusion within the financial sector.
Implications for FSPs
For non-participating FSPs, this admission confirms that choosing not to comply with FSTC reporting demands will not affect their legal or professional standing. The only sanction within the Sector Code is a potential one-level BEE downgrade, applicable solely to institutions already participating in the BEE framework.
This finding provides clarity and a path forward for FSPs previously burdened by the perceived obligations of BEE compliance.
Industry Response
Sakeliga has hailed this outcome as a victory against overreach by state-aligned institutions, describing it as a necessary check against the expansion of BEE policies that add layers of cost without clear economic benefit.
‘BEE policies, as implemented, impose structural costs that hinder economic cooperation and raise the cost of doing business in South Africa. This case underscores the importance of maximum appropriate non-compliance to safeguard the common good,’ Sakeliga stated.
The Road Ahead
Sakeliga plans to continue monitoring BEE-related developments and advocating against policies and institutions that unlawfully extend the scope of transformation frameworks. Their efforts aim to promote fair, non-coercive practices that support business sustainability and economic growth.
Supporting Change
Sakeliga’s work is funded by businesses and individuals aligned with its mission to challenge harmful policies and support the financial services sector. Interested parties can learn more about becoming a funding partner through their official website.
Conclusion
This case highlights the importance of legal clarity and resisting unwarranted demands from regulatory bodies. As we approach 2025, financial institutions are encouraged to review their BEE strategies and consult with compliance experts to ensure informed decision-making.