Angela Itzikowitz, Executive; Era Gunning, Consultant; and Dylan Martheze, Candidate Legal Practitioner; in Banking & Finance at ENS

Lead generation has become an ordinary part of financial services distribution. Insurers, brokers, underwriting managers, affinity partners and platform businesses often rely on third parties to identify potential customers, introduce them to product providers and support customer acquisition. In many cases, these arrangements are treated as marketing or referral models rather than regulated financial services. A recent judgment of the Gauteng Division of the High Court, Johannesburg, suggests that the line may be less comfortable than many market participants assume.

In The Raspberry Academy (Proprietary) Limited v Oaksure Financial Services (Proprietary) Limited, the Court considered whether a lead-referral arrangement linked to short-term insurance policies amounted to the rendering of an intermediary service under the Financial Advisory and Intermediary Services Act, 2002 (“FAIS”). The matter arose in the context of an application for default judgment. Oaksure did not defend the action, but the Court raised its own concern about the legality and enforceability of the underlying agreement before deciding whether judgment could be granted.

A familiar commercial arrangement

The facts were commercially familiar. The Raspberry Academy had concluded a lead referral agreement with Oaksure in 2019. In terms of that agreement, the Raspberry Academy would refer potential customers to Oaksure and market Oaksure’s short-term insurance products. It would then receive referral fees calculated by reference to policies concluded and premiums received. The agreement also sought to characterise The Raspberry Academy as a marketing agent and lead referrer only, and not as an insurance intermediary.

That label did not save the arrangement. The Court looked at the substance of the agreement rather than the description the parties had chosen for it. What mattered was not that the agreement used the language of marketing, lead generation or referral. What mattered was what the Raspberry Academy was actually paid to do and how closely its role was linked to the conclusion of insurance transactions.

The remuneration structure was central to the Court’s reasoning. The Raspberry Academy was not paid a flat fee for passing on contact details. It was remunerated only where a referred lead took out a short-term insurance policy, and the amount payable was calculated by reference to premiums and commission flows. In the Court’s view, that indicated that the compensated activity was not merely mechanical lead generation, but conduct intended to result in the customer concluding a transaction in respect of a financial product.

How close is too close?

This is where the judgment raises a more difficult issue. The definition of “intermediary service” under FAIS is deliberately broad, but it is not unlimited. It captures acts, other than advice, performed for or on behalf of a client or product supplier, the result of which is that a client may enter, offers to enter into or enters into a transaction in respect of a financial product. The difficulty lies in determining how direct the connection must be between the act performed and the eventual financial product transaction.

That question is not academic. Many businesses perform activities that may indirectly support a financial product transaction. Advertising, brand awareness, call-centre activity, digital lead capture, comparison tools, client consent flows and customer handovers may all form part of a wider sales journey. If every activity that increases the possibility of a transaction were treated as intermediation, the concept could become too wide. Ordinary marketing would risk being pulled into the FAIS perimeter simply because it is commercially designed to generate sales.

The Tristar guardrail

The Supreme Court of Appeal’s decision in Tristar Investments remains important for that reason. It emphasised that an intermediary is a genuine “go-between” between a client and a product supplier and warned against interpreting “intermediary service” so broadly that any indirect activity connected to a transaction is captured. The relevant act must directly result in the statutory consequence. A broader interpretation would risk catching activities that are too remote from the actual transaction.

The problem with intermediary services, therefore, is a line-drawing problem. On one side of the line is a referrer who merely passes on contact details, perhaps for a flat fee, without engaging with the product, the client’s needs or the outcome of the transaction. On the other side is a person whose role is structured to move a customer towards a specific financial product and whose remuneration depends on that customer taking up and maintaining the product.

Raspberry Academy falls much closer to the second category. The Court placed weight not only on the payment structure, but also on the wording of the agreement, which linked the referral activity to the conclusion of policies. The arrangement was not simply about providing a name and phone number. It contemplated marketing Oaksure’s products, generating leads for the benefit of Oaksure, obtaining consent to pass information to Oaksure and being paid only where those efforts resulted in policies and premium flows.

Remuneration is not the whole answer

That does not mean remuneration alone should determine the issue. A success-based fee may be relevant evidence, but the statutory enquiry remains focused on the nature of the activities performed and whether those activities have the required causal relationship with the transaction. The danger of placing too much emphasis on remuneration is that it may collapse the distinction between commercial pricing and regulated intermediation. A referral fee calculated by reference to successful outcomes may raise risk, but it should still be assessed with reference to the full factual and contractual context.

That is why the judgment is both useful and unsettling. It is useful because it shows that courts will not allow parties to contract out of FAIS by labelling an arrangement as “marketing” or “lead referral” if the operative terms point in another direction. It is unsettling because many commercial distribution models sit in the grey area between advertising and intermediation. The more active the referrer’s role, and the more closely its remuneration is tied to policy conclusion or premium flows, the greater the regulatory risk.

The consequence in Raspberry Academy was severe. The Court concluded that the Raspberry Academy was rendering a financial service in the form of an intermediary service and that it was neither an authorised financial services provider nor a representative of Oaksure. The agreement was therefore found to be illegal and unenforceable. The application for default judgment was dismissed.

That outcome should be the real warning for the market. The risk is not only that the Financial Sector Conduct Authority (“FSCA”) may raise regulatory concerns. The risk is also that a party may be unable to enforce the very agreement on which its revenue depends.

What the market should do now

For insurers, brokers, underwriting managers, fintech platforms, comparison websites, affinity partners and other financial services businesses, the practical question is not what the agreement calls the arrangement. It is whether the structure, customer journey and payment model create a sufficient connection between the referrer’s activities and the customer’s entry into a financial product transaction.

The judgment should not be read as saying that all referral arrangements are unlawful. It should be read as a reminder that referral models in financial services need careful legal and regulatory design. Businesses should consider the actual activities performed, the client interaction, the nature of any product-related communication, the role of the product supplier, the basis of remuneration and whether the referrer is acting merely as an introducer or as a functional part of the sales process.

Raspberry Academy may still be distinguished in future cases, particularly because it arose in a default judgment context. But it would be risky to ignore it. For now, it introduces enough uncertainty for businesses to revisit existing referral, affinity and lead-generation models before a dispute arises. The cost of reviewing a referral model today is likely to be far lower than discovering later that the agreement underpinning it may not be enforceable.

ENDS