The Financial Sector Conduct Authority (FSCA) has launched an investigation into BFG Engineering Brokers (Pty) Ltd regarding allegations of conducting unlicensed insurance business, a potential violation of key insurance legislation in South Africa.
BFG Engineering investigated for flouring insurance legislation
In a statement, the financial sector authority confirmed it’s launched a probe into BFG Engineering’s activities, which centre around claims the company offers clients insurance policies without proper registration or licensing.
On its website, BFG Engineering Brokers boasts itself as a specialist firm in the engineering insurance sector, particularly for all government and tender contracts.
Although BFG Engineering is authorised by the FSCA as a Category I financial services provider, it is not licensed to conduct non-life or life insurance business.
The company’s current license allows it to advise or provide intermediary services for insurance products but prohibits it from offering or underwriting these products.
According to the FSCA, a similar case involving Fern Finance can be used as a pretext for the investigation. The latter-mentioned firm, following an investigation by the financial sector authority, was barred from acting as an FSP, fined R3.5 million and disbarred from providing “or being involved in the provision of financial service for 10 years.”
In its judgment, delivered on 13 October 2022, the Gauteng High Court upheld the Financial Services Tribunal’s findings that Fern Finance and its managing director Anda Lumkile Sikuza were “engaged in the business of issuing guarantee policies without being authorised thereto by the Short Term Insurance Act 53 of 1998 [STIA].”
Despite Fern Finance’s argument that their service offerings were founded on the prescripts of the National Credit Act 34 of 2005 — in other words, their suretyship was more of a credit facility than insurance — the court determined that if “the service rendered fell under STIA, registration with the NCA, did not exclude registration with STIA.”
Pending the outcome of the FSCA’s investigation, BFG Engineering could be barred from operating in the financial sector. The company had not issued a statement when this article was published.