5.1 Suspension, Withdrawal & Lapse of Accreditation

5.1 Suspension, Withdrawal & Lapse of Accreditation

Quick Answer: If an accreditation under the Medical Schemes Act 131 of 1998 (or other enabling legislation) is suspended, withdrawn or lapses, the FAIS licence linked to that product line is at risk under section 8(7) themes — the Authority may treat the FAIS authorisation as suspended or withdrawn for the related services. Separately, the FAIS Act itself provides for suspension/withdrawal of authorisation (section 9) and lapsing of a licence (section 11). Representatives cannot keep rendering health-service-benefit (or other dual-regulated) services once the enabling accreditation falls away.

Task 2 of RE5 (contribute towards maintaining an FSP licence) includes qualifying criteria on what happens when accreditation falls away. Candidates often confuse three different “stop trading” pathways:

1. Dual accreditation linkage (Medical Schemes Act / other enabling law ↔ FAIS) under section 8(7) themes.
2. Authority-driven suspension or withdrawal of the FAIS licence under section 9.
3. Automatic or voluntary lapsing of the FAIS licence under section 11.

This section unpacks all three so you can answer scenario questions without mixing them up.

Why dual regulation exists for health service benefits

Health service benefits (medical scheme benefits) are financial products under FAIS section 1. Rendering advice or intermediary services on them requires FAIS authorisation and representative appointment. In parallel, the Medical Schemes Act 131 of 1998 and its regulations require accreditation of brokers / broker organisations (and related roles) with the Council for Medical Schemes (CMS) before certain health-broker activities may be performed.

So for medical-scheme business there is a double gate:

Lose either gate and you cannot lawfully keep doing the dual-regulated work as if nothing happened.

Board Notice 194 of 2017 (fit and proper) reinforces this for Health Service Benefit: to qualify for authorisation as an FSP or appointment as a representative for that product, a person must be accredited as a broker or apprentice broker under the Medical Schemes regulations (commonly discussed with regulation 28B frameworks). Dual compliance is not optional window-dressing — it is a condition of operational ability for that product line.

Section 8(7) themes — Medical Schemes (and other enabling) accreditation

Section 8 of the FAIS Act deals with application for and issue of licences. Within that architecture, section 8(7) (as taught in RE5 materials) addresses persons who are also accredited under the Medical Schemes Act (and, by the QC wording, any other enabling legislation that works the same way).

Core implications RE5 expects you to state:

The mirror also works the other way for medical-scheme dual players:

Exam phrasing that scores: “If Medical Schemes accreditation is suspended, withdrawn or lapses, the FSP/representative may no longer render the related financial services as if still fully authorised — the FAIS licence for that business is compromised under section 8(7) themes.”

Exam trap: Saying “nothing happens because FAIS and the Medical Schemes Act are completely independent.” They are separate statutes, but FAIS expressly links them for dual-regulated health-benefit business.

“Any other enabling legislation”

The Task QC does not limit the idea to medical schemes only. Wherever another statute requires a separate accreditation, approval or licence as a condition of rendering certain financial services, loss of that enabling status can undermine the FAIS authorisation for those services. Medical schemes is the classic classroom example because health service benefits sit in the FAIS product list and CMS accreditation is well known. Apply the same logic carefully if an exam scenario mentions another dual-gate regime.

Section 9 — suspension and withdrawal of FAIS authorisation

Even without Medical Schemes issues, the Authority may suspend or withdraw a FAIS licence under section 9 when, on available facts, the licensee (among other grounds as set out in the Act as amended):

• no longer meets fit and proper requirements (including where a key individual fails those requirements);
• has materially failed to comply with the Act;
• has failed to pay levies, penalties or administrative sanctions when due;
• does not have an approved key individual where required;
• has failed to comply with a directive; or
• has failed to comply with conditions or restrictions on the licence.

Procedural fairness themes (know the shape)

Before ordinary suspension/withdrawal, the Authority must generally:

1. Inform the licensee of the intention, grounds, intended period (for suspension), and proposed terms.
2. Give a reasonable opportunity to respond.
3. Consider the response and decide.
4. Publish the suspension/withdrawal (or lifting) — typically by notice in the Gazette and other media if needed.

Provisional action may be taken urgently where substantial prejudice to clients or the public may occur, with a later decision to lift or finalise.

Effect during suspension (critical)

During any period of suspension (provisional or final), the licensee is regarded as a person who is not authorised to act as a financial services provider. Practical consequences for representatives:

• You cannot keep taking new business for that FSP as if the licence were live.
• Terms of suspension often prohibit concluding new business and may set rules for unconcluded business to protect clients.
• Continuing to hold yourself out as authorised during suspension is a licence-display / section 8(8) / offence risk theme (see section 5.4).
• Your appointment as a representative sits on an FSP that is, for FAIS purposes, not authorised for the suspended period — you do not have a personal “floating” licence.

Withdrawal is more permanent than suspension: the licence is removed. A person whose licence is withdrawn may be debarred from applying for a new licence for a period specified by the Authority (with possible variation on good cause). Representatives of a withdrawn FSP cannot continue rendering financial services under that dead licence.

Section 11 — lapsing of a licence

Lapsing is different from suspension/withdrawal. Suspension/withdrawal is typically Authority-driven regulatory action. Lapsing arises from status events set out in section 11, including themes such as:

The licensee, a key individual, or another person in control must advise the Authority of the lapsing and the reasons. The Authority may publish the lapsing.

Rep takeaway: If the FSP’s business has become dormant or the licence has been surrendered, you cannot treat the firm as a live authorised provider. Dormancy is not a quiet parking bay for “occasional weekend advice.”

Implications for representatives (Task 2 skill criteria)

Representatives do not hold the FSP licence, but accreditation and licence status control what you may do:

1. Stop out-of-scope rendering immediately — If CMS accreditation for medical-scheme broking falls away, stop rendering health-service-benefit financial services until lawful dual status is restored.
2. Do not invent a workaround — Moving the same clients “under another hat,” using a colleague’s accreditation without proper appointment, or pretending only “admin” work remains when you are still advising, creates offence and debarment risk.
3. Escalate inside the FSP — Inform the key individual and compliance function at once. The FSP must manage client communications, register updates, and any Authority notifications.
4. Protect clients — Suspension terms and good practice require orderly handling of existing business; abandonment of clients is not a compliance strategy.
5. Check your register entry — Product subcategories on the register of representatives must match live authorisation. Rendering services outside live scope is a classic RE5 failure scenario.
6. Honesty and integrity — Continuing to market yourself as accredited/authorised when you are not goes to fit and proper honesty/integrity and can trigger debarment under section 14 themes (later chapter).

Worked scenarios

Scenario A — CMS withdrawal: Zanele is a representative appointed for health service benefits. CMS withdraws her broker accreditation for misconduct.
Correct response: She may not continue medical-scheme advice/intermediation. Under section 8(7) themes, FAIS status for that dual-regulated work is compromised. The FSP must update the register and stop the activity; Zanele faces possible debarment pathways depending on the misconduct.

Scenario B — FSP suspension for unpaid levies: The FSP’s licence is suspended under section 9 for non-payment of levies.
Correct response: During suspension the FSP is regarded as unauthorised. Representatives must not take new regulated business under that licence. Clients and product suppliers must be handled per suspension terms and compliance instructions.

Scenario C — Natural-person sole proprietor dies:
Correct response: Section 11 lapse themes apply. The licence does not magically pass to a family member who is not authorised. Clients need lawful continuity arrangements through another authorised FSP/representative.

Scenario D — “Only FAIS matters” myth: A rep says Medical Schemes accreditation lapsed but “my FAIS appointment is still on the website so I can keep selling medical aids.”
Correct response: False. Dual-gate product lines require both statuses. Website listings do not cure a lapsed accreditation.

Link forward to undesirable practices and offences

Licence risk is not only about section 8(7)/9/11. If the firm keeps using practices the Authority has declared undesirable (section 34), or commits offences (section 36), suspension/withdrawal and criminal exposure stack on top of dual-accreditation failure. Sections 5.2–5.4 cover those tools.

RE5 exam tips for this QC cluster

• Memorise the double-gate medical schemes story and the s 8(7) linkage phrase.
• Distinguish suspend / withdraw (s 9) from lapse (s 11) from debarment (s 14 — person-level).
• Remember: during suspension the FSP is treated as not authorised.
• Never claim a representative holds a personal FAIS licence independent of the FSP.
• If the exam reproduces a section, read the printed text — application beats memorised paraphrase.