Chapter 3 Flashcards
What are the reasons for regulation acts?
- protect rights and interests of clients
- create access to financial services
- ensure FSPs and Representatives act with due care, skill and diligence
- financial soundness
- reduce unlawful activities
- create industry watchdogs
- provide guidelines and set service and practice standards for providers
What is FAIS?
Financial advisory and intermediary services act regulates financial services and protects consumers
Who are the role players who ensure compliance with FAIS Act?
- FSP: provides financial services
- Compliance Officer: Monitors compliance
- FSCA: oversees the SA financial services environment
- Key Individual: manages and oversees activities of the FSP
- Representative: renders financial services
- FAIS Ombud: investigates and resolves complaints
What are the requirements of representatives?
- comply with FAIS Act and relevant laws for business conduct
- must be fit and proper
- if debarred, the reappointment of debarred reps procedures must be followed for reinstatement
- may work under supervision
- KI also have the responsibilities of reps
- Must confirm to clients that they have an employment or mandate agreement
What are intermediary services?
An act other than the furnishing of advice, performed by a person for or on behalf of a client or product supplier. The facilitation of a financial transaction
Which records should FSPs keep?
For 5 years FSPs must keep records of:
- known premature cancellations of transactions or financial products
- complaints received and information on the resolution
- Ongoing compliance(licensing and fit and proper requirements)
- Non- compliance and reasons
- Ongoing rep compliance
What does the Ombud do?
Handle and considers complaints in a fair, fast, informal and economical manner
What are the powers of the Ombud?
- Settling a case through mediation and conciliation
- issuing a determination
When will the Ombud accept a complaint?
- The complaint falls within FAIS ambit
- complaint must have risen when FAIS was in effect(30 Sep 2004)
- FSP must have failed within 6 weeks of complaint receipt
- claim must not exceed R800 000
- complaint must not relate to investment performance
- complaint must not be subject of pending, current or part-court proceedings
What is the role of FSPs when handling complaints?
- Complainant lodges a complain in writing. The FSP records it.
- FSP has 6 weeks to resolve it
- If resolved by FSP complainant gets compensation
- If not resolved complainant can submit complain to Ombud within 6 months
- FSPs are required to:
- identify root cause of the complaint
- improve systems and procedures to avoid more complaints
- implement written complaints resolution
- train staff on complaint processes
What are the Fit and proper requirements?
- Personal character
- Competence
- Operational ability
- Financial soundness
- CPD
How does experience lapse?
If financial services have not been rendered for 5 consecutive years
What are the minimum entry requirements and qualifications?
- Rep, KI, FSP: Qualification recognised by Registrar
- Rep of CAT II, IIA or III FSP: Have at minimum a degree
- FSP, KI, Rep of LTI or friendly society benefits: no qualification
- Rep appointed for “execution of sales” only: Min a matric or equivalent
- Supervised Rep of CAT I or IV FSP: Matric, work under supervision until full qualification is obtained
- Supervised Rep of CAT I FSP: Grade 10, work under supervision until matric is obtained
What are the RE requirements?
FSP CAT I: RE 1
FSP CAT II: RE 1 & 3
FSP CAT IIA: RE 1 & 3
FSP CAT III: RE 1 & 4
FSP CAT IV: RE 1
KI CAT I:RE1
KI CAT II:RE1 and 3
KI CAT IIA:RE1 and 3
KI CAT III:RE 1 and 4
KI CAT IV:RE1
REP CAT I:RE5
REP CAT II:RE5
REP CAT IIA: RE 5
REP CAT III: RE 5
When should class of business training be completed?
Within 12 months under supervision
Who does the COB training not apply to?
CAT I FSP, it KI and Reps that render financial services of Long-term insurance sub-category A and Friendly Society Benefits
Reps of CAT I FSPs who deal with Tier 2 products or only perform execution of sales
What is Continuous Professional Development?
CPD activity is accredited by a professional body. Starts 1 June every year and ends 31 May
Who is liable for CPD activities?
Supervised reps from date they meet COB training requirements, RE requirements and qualifications or after 6 years of DOFA(whichever comes first)
Who is excluded from CPD training?
CAT I FSP, KI, Rep of Long-term insurance sub-cat A and Friendly Society Benefits
CAT I FSP Rep who renders tier 2 products and intermediary services in tier 1
Rep in CAT I FSP who performs execution of sales
When should CPD activities evidence be submitted to the FSP?
At the end of each cycle (31 May) within 15 days
What are the min CPD hours required?
- Single sub-class of business within single class of business= 6 hours
- More than 1 sub-class of business within single class of business= 12 hours
- More than 1 class of business = 18 hours
What is Operational Ability?
The ability to do what is legally required of you.
Reps must have the appropriate resources to perform duties.
The FSP must ensure that the Rep appointed is not declared insolvent, under liquidation or business rescue, or no pending proceedings for these
What is financial soundness?
Adequate resources and meets liabilities
What are the principles of the FAIS Act and The code?
FSPs and Reps must:
- Act honestly and fairly, with due skil, care and diligence, in the interest of clients and with integrity.
- Act with circumspection and treat customers fairly in situations of conflict of interest.
- Obtain from clients information relating to their financial situation, product experience, goals and intentions.
- Comply with legal requirements applicable to the conduct of business
- Have and maintain appropriate systems to ensure performance of professional activities
What are the requirements of the code of conduct?
- Making adequate disclosures to clients.
- Record keeping
- Fraudulent and misleading advertising
- Safe- keeping, separation, protection of funds
- Guarantees, professional indemnity, fidelity insurance
- Controlling and prohibiting incentives
What are the duties of FSPs under the General code of conduct?
- Conveying clear and non-misleading information
- Disclosing conflicts of interest
- Client’s best interest
- recording accurate transactions
- safe record keeping and retrieval of documents
- confidentiality of client information