FSCA Has No Power To Impose Penalties Jointly And Severally

In two recent decisions, the South African Financial Services Tribunal (“the Tribunal”) held that the Financial Sector Conduct Authority ("FSCA") may not impose administrative penalties on two or more persons jointly and severally under section 167 of the Financial Sector Regulation Act, 2017 ("FSR Act"). The Tribunal also emphasised that when a debarment period is selected, the FSCA must furnish reasons for its choice. A mere recitation of jurisdictional grounds for a debarment is insufficient.

Background 

The matters concerned two investment clubs, Khanyazania Holdings (Pty) Ltd (“Khanyazania”) and Azania Investors (Pty) Ltd (“Azania”), that pooled members' contributions and used some of the funds to trade shares and exchange-traded funds on the Easy Equities platform. Neither company held a financial services provider licence under the Financial Advisory and Intermediary Services Act, 2002 ("FAIS Act") to provide these services.

Mr Manatha and Mr Hlatshwayo were directors of Khanyazania., After Khanyazania was wound up, Mr Manatha went on to incorporate Azania as its sole director. Mr Hlatshwayo's involvement was confined to Khanyazania and spanned approximately seven months, after which he resigned.

Following a complaint in July 2023, the FSCA investigated and found that there had been a contravention of section 7(1) of the FAIS Act as financial advice and the provision of intermediary services was being given, without the required license. In its notice of sanction dated 17 March 2026, the FSCA debarred Mr Manatha for 15 years and Mr Hlatshwayo for 10 years. The FSCA also imposed administrative penalties of ZAR 200 000 each on a joint and several basis on Khanyazania, Manatha and Hlatshwayo, and another penalty also on a joint and several basis on Azania and Manatha.

The issues

The Tribunal had to determine whether section 167 of the FSR Act authorises the FSCA to impose a single administrative penalty on multiple persons, jointly and severally. The second question before the Tribunal was whether the FSCA had adequately exercised its discretion in selecting the debarment periods, and whether it provided reasons for the debarment periods 

The FSCA also considered whether the penalty had been determined on the basis of an individualised assessment of each person's conduct, as is required by section 167(2) of the FSR Act.

Tribunal’s findings

The Tribunal held, in what appears to be the first decision directly on the point, that an administrative penalty may not lawfully be imposed on two or more persons jointly and severally under section 167 of the FSR Act.

The Tribunal’s reasoning rested on several pillars:

• The statutory language is singular and personal: Section 167(1) authorises the imposition, "by order served on a person", of an "appropriate" penalty"on the person" for that person's contravention. The unit of liability is one person and one contravention.
• The statutory factors are irreducibly individual: The factors in section 167(2) – including co-operation, submissions in mitigation, benefit derived, prior contraventions and whether the conduct was deliberate or reckless – require consideration in respect of each person individually. A single global figure fixed for several persons cannot be the product of that exercise.
• Chapter 13 does not confer the power to impose joint and several liability: Joint and several liability is not a default incident of statutory liability, which must be specifically conferred, and the FSR Act does not make provision for joint and several liability.
• The broader statutory structure confirms this reading: Section 173, which permits for the remission of a penalty, contemplates an application by the individual person penalised. Section 174, which renders void any undertaking to indemnify another person against an administrative penalty, presupposes a penalty personal to the person on whom it falls.

The Tribunal observed that the FSCA itself recognised materially different levels of culpability when it imposed debarment periods of 15 and 10 years, yet its penalty orders drew no distinction between the monetary liability of the respondents.

In respect of Mr Manatha, the Tribunal set aside the 15-year debarment and remitted the matter to the FSCA for reconsideration. The Tribunal found that the FSCA gave no reasons for the debarment period. The Tribunal found that the FSCA’s decision devoted only two short paragraphs to section 153 and did no more than recite the jurisdictional grounds. It offered no explanation for why Mr Manatha received 15 years and Mr Hlatshwayo 10 years, or why the periods originally proposed had been reduced. Mr Hlatshwayo did not challenge his 10-year debarment in his application, which was directed primarily at the administrative penalty. 

The Tribunal emphasised that the selection of a debarment period is the exercise of a discretion that determines whether a person may earn a living in the financial services sector. It therefore requires reasons. It also recorded that debarment protects the public rather than punishes, and that the FSCA's own published decisions reserve the longest debarments for repeat offenders.

Since administrative penalties are Chapter 13 decisions, the Tribunal had the power to substitute its own order rather than merely remit the matter to the FSCA. For Mr Manatha, the Tribunal replaced the two joint and several penalties of ZAR 200 000 each with individual penalties of ZAR 60 000 in respect of Khanyazania and ZAR 100 000 in respect of Azania. For Mr Hlatshwayo, the Tribunal substituted the ZAR 200 000 joint and several penalties with an individual penalty of ZAR 40 000.

Conclusion

These decisions establish important principles for the FSCA's enforcement practice. The Tribunal has made it clear that the FSCA cannot impose administrative penalties on a joint and several basis under section 167 of the FSR Act. Each penalty must be determined individually, on the basis of the statutory factors as they apply to the specific person concerned. Equally, when the FSCA exercises its discretion to debar, it must furnish reasons that explain the period selected, particularly where different periods are imposed on different individuals arising from the same investigation.