Chapter 5: Financial advisors and other intermediaries Flashcards
A financial services provider (FSP) wishes to advise clients on investing in pension funds. Is he obliged to register in terms of the FAIS Act?
Yes, because a pension fund is a financial product in terms of the Act.
An FSP wishes to advise clients on investing in securitised debt. Is he obliged to register in terms of the FAIS Act?
Yes, because securitised debt is a financial product in terms of the Act.
An FSP wishes to advise clients on health service benefits. Is he obliged to register in terms of the FAIS Act?
Yes, because health service benefits is a financial product in terms of the Act.
Doreen provides advice to clients in respect of the procedure for entering into a life insurance policy. Is she providing a financial service (i.e. a regulated activity) in terms of the FAIS Act?
No, the provision of factual advice on a procedure for entering into a transaction is excluded.
Susan is an insurance broker and he replaces a client’s life insurance policy with another one, because according to him the first policy does not cater for the needs of the client anymore. Is he providing a financial service (i.e. a regulated activity) in terms of the FAIS Act?
Yes, replacement of a financial product is a regulated activity.
Give two examples of product suppliers.
Insurance company and a company issuing shares
Name four characteristics that an applicant for a financial services provider must possess?
The characteristics are as follows:
good character and integrity
competency (qualifications and experience)
operational ability
solvency
Through which organisation can an application for approval as an FSP take place?
The Financial Services Board
What is a key individual?
A person managing or overseeing the activities of the financial services provider
What are the purposes of the codes of conduct that exist for various kinds of FSPs?
The protection of clients. Particularly, clients’ needs must be met and they must be enabled to take informed decisions.
Describe the requirements in respect to conflicts of interest in the General Code of Conduct.
The FSP or its representative must disclose the existence of any personal interest in the financial service or any circumstance which gives rise to an actual or potential conflict of interest, like non-cash incentives or other indirect consideration payable by another provider. The FSP or its representative must take all reasonable steps to ensure fair treatment of the client.
What are the duties of an FSP when contacting clients?
An FSP must act honourably, professionally and with due regard to the convenience of the client in all communications and dealings with a client. At the commencement of any contact, visit or call initiated by the FSP, he must explain the purpose thereof and at the earliest opportunity, comply with the disclosure requirements
What should an FSP do prior to recommending a financial product to a client?
A needs analysis.
Describe what the objectives of an internal complaints resolution system of an FSP in terms of the General Code of Conduct should be.
The internal complaints resolution system must be designed to ensure
availability of adequate manpower, other resources and adequate training of staff;
that responsibilities and mandates are delegated to facilitate complaints resolution of a routine nature;
escalation of non-routine serious complaints;
internal follow-ups to avoid occurrences giving rise to complaints or improve services.
What should a Discretionary FSP (DFSP) obtain from his/her client before rendering intermediary services but after obtaining the necessary information?
A mandate.
