Dormancy: Lapsing of a licence

This article focuses on the lapsing of a licence in terms of section 11(1)(c) of the FAIS Act.

Legal Requirements Section 11 of the FAIS Act states that:

  1. A licence lapses:
    1. where the licensee, being a natural person:
      1. becomes permanently incapable of carrying on any business due to physical or mental disease or serious injury;
      2. is finally sequestrated; or
    2. where the licensee, being any other person, is finally liquidated or dissolved;
    3. where the business of the licensee has become dormant; and
    4. in any other case, where the licensee voluntarily and finally surrenders the licence to the Registrar.

In instances where a natural person who is authorised as a FSP is unable to continue with the business of the FSP, dies or is finally sequestrated, then the FSP’s license lapses.

  1. The FSP is required to have procedures in place to notify the Registrar’s office of the situation. The FSP must also have procedures in place to notify all clients with unfinished business, and to notify all product suppliers.

The notification to the Registrar must be sent to: This email address is being protected from spambots. You need JavaScript enabled to view it.

What is a dormant licence?

Section 7 of the FAIS Act requires any person (natural or juristic) who intends rendering a financial service to be authorised as a FSP.

A licence becomes dormant when an authorised FSP’s business remains dormant as no activity in respect of the rendering of financial services has taken place.

Lapsing of a dormant licence

The FAIS Supervision Department embarked on an on-going project that sought to identify persons that are authorised as financial services providers but whose business remains dormant as no activity in respect of the rendering of financial services has taken place. The following three (3) sources of information were used to identify the dormant FSPs:

  1. Outcome of the analysis of compliance reports and financial statements; and

ii.   Dormancy letters received from auditors and/or FSPs for non-submission of financial statements.

Once the dormant FSPs are identified, the following process is followed:

  1. A notice of intention to lapse in terms of section 11(1)(c) of the FAIS Act is issued to an affected FSP.
  2. The Registrar reviews the submission of the affected FSP relating to their dormant status and makes a decision whether or not the licence should remain active or be lapsed.
  3. Should the FSP fail to respond to the notice within the prescribed period, the Registrar then proceeds with the lapse of the FSP’s licence in terms of section 11(1)(c) of the FAIS Act.
  4. Once the lapse is finalised, the Registrar informs the affected FSP accordingly.

Inheriting a FSP

What happens if a person inherits the 100% membership in a FSP that is a legal person (close corporation or private company)?

When a FSP is a legal person where one natural person holds the 100% membership or 100% shares, such person is by law, required to be authorised as a key individual. The definition of key individual in the FAIS Act states that: “key individual”, in relation to an authorised financial services provider, or a representative, carrying on business as:

  1. a corporate or unincorporated body, a trust or a partnership, means any natural person responsible for managing or overseeing, either alone or together with other so responsible persons, the activities of the body, trust or partnership relating to the rendering of any financial service; or
  2. a corporate body or trust consisting of only one natural person as member, director, shareholder or trustee, means any such natural person; It is thus very important for FSPs to conduct proper business continuity and/or succession planning.

Remember that the person who inherits the FSP (either as the 100% member or 100% shareholder) will be required to be approved as a key individual, and will have to meet the competency requirements as a key individual.