For people who work in the financial advisory and intermediary industry, sequestration is more than a private financial event. It is a regulatory one. The Financial Advisory and Intermediary Services Act 37 of 2002 — universally referred to as FAIS — and the fit and proper requirements administered by the Financial Sector Conduct Authority (FSCA) treat insolvency as material to a person’s standing as a key individual or representative.

This article explains how rehabilitation under section 124 of the Insolvency Act 24 of 1936 interacts with FAIS fit-and-proper status, and where it ends.

A short preliminary on scope

This article is general orientation. It is not a substitute for advice on any specific FSCA matter. The fit-and-proper regime has its own detailed published requirements that are updated from time to time, and FSCA practice on individual matters is not uniform. If you are FAIS-regulated, the regulator’s view of your specific facts is what counts. We work with regulated clients on the legal status side; the regulator decides the regulatory side.

The general structure of the fit-and-proper regime

FAIS requires both financial services providers (FSPs) and the key individuals and representatives acting under those licences to meet ongoing fit-and-proper requirements. The requirements cover:

• honesty and integrity, including a person’s history in relation to financial probity;
• competence, including qualifications and experience; and
• operational ability and financial soundness, where applicable.

Within the honesty-and-integrity component, the regulator considers, among other things, insolvency status — both historic sequestration and current unrehabilitated insolvency.

What unrehabilitated insolvency typically means in practice

A person whose estate is sequestrated and who has not been rehabilitated faces a significant practical problem with FAIS fit-and-proper status. The regulator generally treats unrehabilitated insolvency as a fact that requires explanation, mitigation, and often regulatory steps before the person can act as a key individual or representative.

This is not unusual. The FAIS regime is designed to protect the public interacting with financial advisers and intermediaries. A person without legal capacity to contract in their own name, and who is subject to the disabilities of an insolvent, sits awkwardly with the role.

The exact consequence — debarment, conditional registration, deferred re-registration, refusal of new appointments — depends on the regulator’s view of the specific facts.

How rehabilitation changes the position

Rehabilitation removes the legal status issue. After grant of a section 124 order, or after section 127A automatic rehabilitation, you are not an unrehabilitated insolvent. The status disability is gone.

For FAIS purposes, this typically:

• removes the insolvency-status barrier in the honesty-and-integrity assessment;
• supports an application or re-application for registration; and
• gives the regulator a clean status point from which to consider the rest of the file.

What it does not do is settle every question the regulator may have about an applicant. Fit-and-proper is a holistic assessment. Rehabilitation deals with the insolvency line. It does not deal with:

• conduct issues that may have surrounded the insolvency;
• separate findings against the person under FAIS or related legislation;
• competence requirements;
• continuous professional development gaps that opened during the period of insolvency;
• conviction-related matters under section 124(2)(d) that are independent of regulatory misconduct; or
• any Companies Act delinquency or disqualification that is independent of insolvency.

The order in which to do things

For FAIS-regulated clients planning a return to industry, the sequence we recommend is:

1. Confirm the rehabilitation pathway. Section 124 application or section 127A automatic rehabilitation, depending on facts.
2. Bring the application or produce the section 127A confirmation pack. Without a clean legal status, the FSCA application has a built-in problem.
3. Update the credit bureaux. Discussed in our separate article. Regulators do their own checks. A bureau still showing insolvency creates avoidable friction.
4. Address competence and CPD. Time spent outside the industry typically means catching up on qualifications and CPD, which is an industry process, not a legal one.
5. Engage the regulator. With a clean legal status pack, an honest narrative, and current CPD, the regulatory engagement is a substantive but proportionate exercise.

Doing these in the wrong order — most often, engaging the regulator before rehabilitation is settled — is a recurring mistake we are asked to fix.

What to put in the application

Where we are involved in the rehabilitation step for a FAIS-regulated client, the founding affidavit typically deals candidly with:

• the regulated role the applicant intends to return to;
• the time spent outside the industry;
• the conduct of the applicant during the administration of the estate;
• any FAIS-related history; and
• the steps the applicant intends to take with the regulator on rehabilitation.

The High Court is not the regulator. But the candour with which the applicant deals with these matters in the affidavit is itself relevant to the rehabilitation decision and tends to produce better outcomes both at court and at the regulator afterwards.

A common misconception

The misconception we encounter most is that rehabilitation, by itself, restores a person to FAIS-regulated practice. It does not. Rehabilitation removes the status barrier. The regulator’s processes still have to be navigated. The good news is that a properly handled rehabilitation usually shifts that conversation from one about insolvency to one about competence and conduct, which is the conversation the industry knows how to have.

Where we can help, and where we cannot

We help with the legal status side: rehabilitation, section 127A confirmation, bureau updates, status documentation that the regulator will accept. Where the regulatory side has its own legal issues — debarment proceedings, regulatory enforcement, internal compliance complications — we will refer or coordinate with experienced FAIS counsel as needed. The objective is a clean status pack and the right team in place by the time the regulatory application is made.

Next step

If you are FAIS-regulated, currently sequestrated, and planning a return to industry, the legal status side is where to start. Send a confidential enquiry. We will scope the rehabilitation step and outline how it fits into the broader regulatory journey.

This article is general information about South African law as we understand it on the date of publication. It is not legal advice. Each matter turns on its own facts. Speak to a legal practitioner before acting.