Buying a South African FSP: the key individual is the real gate

Start with the statute buyers assume applies. Chapter 11 of the FSR Act requires prior written approval before becoming a significant owner of a financial institution - control or material influence, including a qualifying stake of 15% or more of the shares or voting rights (section 157). That is the gate a buyer of a South African bank or insurer runs through.

It does not reach an FSP. Section 158(1) confines its own scope: for the purposes of the section, "financial institution" refers only to an eligible financial institution, a manager of a collective investment scheme, and a financial institution prescribed in Regulations. Section 1 defines an eligible financial institution as, in substance, a bank, a long-term or short-term insurer, a market infrastructure, and anything prescribed. A FAIS FSP is none of these, and no Regulations prescribing FSPs exist as of July 2026 - so the section 158(2) approval duty never attaches to the purchase of an FSP's shares.

That is the inverse of the UK section 178 regime, where the FCA approves the buyer on a 60-working-day statutory clock and completing early is a criminal offence. South Africa has no clock because there is no approval. What it has instead is people-gates that bite just as hard - and a lapse rule that can leave a buyer holding an empty company.

Section 8(4)(b) of the FAIS Act is the operative gate: where a key individual is replaced or a new one is appointed or assumes office, that person may not take part in the conduct, management or oversight of the licensee's business until the registrar has, on application, approved them as compliant with the fit and proper requirements for key individuals - and the FSP must keep at least one approved key individual per authorised class of business (BN 194 section 36). Operating without one is itself a ground for suspension or withdrawal under section 9(1)(e). The approval is a substantive assessment against Board Notice 194 of 2017, and no adviser can guarantee it - what a buyer controls is the candidate and the file.

Two further approvals ride alongside. An FSP with more than one key individual or with representatives must have a compliance officer, approved by the registrar under section 17; the auditor appointment sits behind registrar approval under section 19. A buyer replacing the whole management layer runs three approval tracks at once, none tied to the share transfer.

One error worth killing: BN 194's financial-soundness chapter does not apply to natural-person key individuals (section 43) - the solvency tests sit on the FSP, while a candidate's financial history is assessed under the honesty and good-standing chapter.

Directors, members, trustees or partners who are not key individuals go through notification rather than approval: the FSP must inform the registrar within 15 days of the appointment (FAIS Act section 8(10)(a)) and must at all times be satisfied that they meet the honesty and integrity requirements - if not, the FSCA may suspend or withdraw the licence (section 8(10)(b)).

The buyer, as significant owner, is a notification case too. Joint Standard 1 of 2020 requires notification within 30 days of becoming aware of an actual or potential change in significant ownership, with periodic fitness attestations. FSP significant owners were originally exempted, but General Notice 1 of 2022 removed the exemption as regards honesty and integrity - an FSP's incoming owner must meet those requirements; the residual scope of the exemption is one to confirm on the current instrument text.

The licence profile - the shareholding details recorded against the licence - changes by variation through the FAIS e-portal. No statutory deadline governs any of this: the FSCA's Service Level Commitments of 26 March 2024, published and non-binding, put licence variations at 30 working days on a complete application.

No share-sale approval does not mean a safe shortcut: the FAIS Act removes value in quieter ways. First, dormancy: under section 11(1)(c) a licence lapses where the business of the licensee has become dormant, and the licensee must advise the registrar. A "shelf" FSP that stopped trading may have nothing left to sell - genuine, current trading history is a value driver, not a nice-to-have.

Second, the people decay with the paper: experience lapses after five consecutive years out of the activity (BN 194 section 16), so a target whose key individuals have been nominal for years offers no continuity.

Third, the early-warning lock: an FSP that has breached the financial-soundness early-warning thresholds may not pay dividends or make any distribution without prior written FSCA approval (BN 194 section 49(4)). Model post-completion dividend flow only after reading the latest Form A return.

Fourth, the licence you buy is not guaranteed to be the licence you keep: section 8(5)(b) lets the FSCA amend conditions or impose new ones pursuant to an evaluation of a new key individual - present a marginal candidate and the conditions can be re-set around their weaknesses.

The practical consequence is a sequencing rule: line up the approvable key individual before signing. The exams cannot be crammed after completion (section 26(6) requires them before approval); the experience either exists or it does not; and the section 8(4)(b) prohibition means nobody from the buy side may run the business while an application is pending. Well-structured deals make key individual approval a condition precedent, keep the seller's approved key individuals in place through handover, and run the compliance officer and auditor tracks in parallel.

One perimeter note for crypto-scoped targets. In South Africa a CASP is a crypto asset service provider licensed as an FSP under the FAIS Act and supervised by the FSCA - not an EU MiCA crypto-asset service provider, and neither regime passports into the other. The same key individual mechanics apply, with one dated wrinkle: the exemption that let CASP key individuals defer the regulatory exams expired on 30 June 2025 with no further extensions - an incoming candidate needs the exams in hand.

This is the market our two live South African lots sit in: the Cat II lot is a Category II discretionary FSP - discretionary intermediary services under mandate, not an advice licence (advice sits in Category I) - and the dual CASP lot holds Category I and II with a crypto asset scope. The wider market is deep: 12,401 authorised FSPs at 31 March 2025 and 779 new licences in FY2024/25, per the FSCA Integrated Report 2024/25 - re-check against the next report before relying.