The regulatory exemption that allows banks to provide financial services to financially sophisticated and high-wealth corporate clients—commonly referred to as the “Merchant Banking Exemption”—has been extended once again. FAIS Notice 57 of 2025 now extends this exemption until 27 February 2026.
In addition to the extension for banks, the Exemption Notice also extends specific exemptions held by certain financial institutions, particularly those specialising in corporate finance and investment activities. These institutions benefit from exemptions that are aligned in content and scope, to the Merchant Banking Exemption.
The exemptions allow banks, mutual banks, branches of foreign banks or representative offices as defined in section 1(1) of the Banks Act, 1990, and the financial institutions concerned, to provide financial services to “sophisticated” clients, without having to perform the services in the manner required by the Financial Advisory and Intermediary Services Act, 2002 (FAIS Act). The exemptions recognise that these clients have an appropriate level of financial know-how and expertise, negating the need for financial advice and the other consumer protections afforded by the FAIS Act. The clients covered under the exemption include other banks, central banks, insurers (life and non-life insurers), asset managers who have confirmed to the satisfaction of the bank/financial institution that the market value of the assets managed by them will exceed R1 billion, and other persons (included in the definition of client in section 1(1) of the Banks Act but excluding individuals, pension funds, friendly societies and medical schemes) whose net asset value exceeds R20 million.
As an aside, we note that the Conduct of Financial Institutions Bill (COFI Bill) is likely to lead to a review of the Merchant Banking Exemption, with a focus on harmonising conduct standards and ensuring appropriate client protections. Given the uncertainty regarding when the COFI Bill will be enacted and whether the final form of the legislation will differ from current drafts, there is uncertainty about its precise impact on the Merchant Banking Exemption. While it is unlikely that the COFI Bill will come into effect before the expiry of the current exemption, institutions relying on the exemptions should monitor developments closely and prepare for potential changes to the regulatory landscape once the COFI Bill is enacted.