Commercial Law

 

 

Yes, commercial law, particularly under the FSR Act, extends to the regulation of financial markets and their infrastructures. The PA regulates the prudential soundness of market infrastructures like exchanges and clearing houses, while the FSCA oversees their conduct and ensures market integrity.

Several laws protect financial consumers. The FSR Act gives the FSCA the mandate to protect financial customers. The Financial Advisory and Intermediary Services Act 37 of 2002 (FAIS Act) regulates financial advisors and intermediaries to ensure they provide suitable advice and act ethically. The National Credit Act 34 of 2005 (NCA) protects consumers in credit agreements. The Consumer Protection Act 68 of 2008 (CPA) also provides overarching consumer rights that apply to financial services.

The Prudential Authority (PA), located within the SARB, is responsible for the financial soundness and stability of financial institutions like banks and insurers. Their focus is on ensuring these institutions are well-managed and have sufficient capital to meet their obligations.
The Financial Sector Conduct Authority (FSCA) is the market conduct regulator. Its main role is to protect financial customers and ensure that financial institutions behave honestly and treat customers fairly. They also supervise how financial markets operate.
 

Deposit insurance is a system designed to protect depositors' money in case a bank fails. In South Africa, the Corporation for Deposit Insurance (CODI), established under the FSR Act, manages the Deposit Insurance Fund (DIF). This fund will provide a certain level of protection for eligible deposits held in member banks, enhancing confidence in the banking system.

 

The primary framework is the "Twin Peaks" model, established by the Financial Sector Regulation Act 9 of 2017 (FSR Act). This model divides financial regulation between two main authorities: the Prudential Authority (PA) and the Financial Sector Conduct Authority (FSCA), with the South African Reserve Bank (SARB) overseeing financial stability.
 

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Finance Law

Finance law governs the regulation and operation of South Africa’s banking, insurance, and broader financial services sectors. It sets the rules that institutions must follow when accepting deposits, providing credit, transferring risk, advising clients, or participating in financial markets.

As part of Commercial Law, finance law ensures that financial activity is conducted lawfully, responsibly, and in a way that protects the public. It provides the legal foundation that enables financial institutions to operate with stability and integrity while giving customers confidence in the system.

Banking, Insurance and Finance Under Finance Law

Finance law is a collective framework for three closely connected areas. Each has its own statute and regulatory requirements, but they operate together within South Africa’s financial system.

Banking Law

Banking law centres on the Banks Act 94 of 1990, which regulates deposit-taking and the provision of credit. Only institutions licensed by the Prudential Authority may conduct banking business. The purpose is to protect depositors and ensure that banks remain financially sound.

Insurance Law

Insurance law is defined by the Insurance Act 18 of 2017, which regulates how insurers transfer risk in exchange for premiums. It sets standards for licensing, governance, financial strength, and conduct, with supervision shared between the Prudential Authority and the FSCA.

Financial Services Regulation

Beyond banking and insurance, finance law extends to a wide range of financial activities, including:

  • consumer credit under the National Credit Act
  • financial advice and intermediary services under FAIS
  • securities and derivatives markets under the Financial Markets Act
  • payment systems under the National Payment System Act

Together, these laws create the regulatory foundation that governs how financial products are offered, managed, and supervised.

The Regulatory Architecture

South Africa follows the Twin Peaks model, created by the Financial Sector Regulation Act. This system separates prudential oversight from market conduct to protect both the financial system and its customers.

Prudential Authority (PA)

The PA supervises the financial soundness of banks, insurers, and certain market infrastructures. Its focus is on capital adequacy, risk management, and overall institutional stability.

Financial Sector Conduct Authority (FSCA)

The FSCA regulates how financial institutions treat their clients. It oversees market conduct, product standards, disclosure obligations, and fairness in the financial sector.

South African Reserve Bank (SARB)

The SARB maintains overall financial stability, monitoring risks that could affect the broader economy and coordinating with the PA when intervention is required.

Deposit Insurance (CODI)

CODI manages the Deposit Insurance Fund, which protects qualifying deposits if a bank fails. This safeguard promotes confidence in the banking sector and strengthens consumer protection.

Core Themes of Finance Law

Certain themes appear across all major financial legislation. These principles shape how institutions operate and how the public is protected.

  • Financial Soundness - Institutions must maintain adequate capital and manage risks effectively to ensure they can meet their obligations.
  • Responsible Conduct - Fair treatment, clear disclosures, and suitable products are central requirements, particularly in consumer-facing services.
  • Systemic Stability - The regulatory framework monitors and manages risks that could disrupt the financial system as a whole.
  • Access to Services - Regulation aims to promote broader participation in the financial sector and ensure access to essential services.
  • Risk Management - Institutions must identify, monitor, and manage operational, credit, liquidity, and market risk.
  • Deposit Protection - Customer deposits below a prescribed limit are protected, reducing personal financial loss in the event of bank failure.
  • Market Infrastructure Integrity - Exchanges, clearing houses, and related entities must meet strict standards to ensure fair and efficient financial markets.

Finance Law Within Commercial Law

Finance law operates at the centre of commercial activity. Credit agreements, insurance obligations, investment decisions, payment systems, and the movement of funds all form part of everyday commercial transactions.

For businesses and individuals, understanding this overlap helps clarify when compliance is required and when legal advice becomes essential. Many commercial disputes involve financial considerations, making finance law an important component of broader commercial regulation.

This connection also provides a natural link to the firm’s broader services within Commercial Law, where financial compliance often intersects with contractual and corporate obligations.

VDM Attorneys – Finance Law Attorneys

VDM Attorneys advises clients on banking, insurance, and financial regulatory matters. Our focus is on clear guidance, compliance with regulatory requirements, and practical solutions within South Africa’s financial legal framework. Contact us to discuss your matter with an attorney experienced in finance law.