Chapter 9: Regulation of financial services in South Africa Flashcards
Financial Services Board Act, the functions of the Board are
- To supervise and enforce compliance with laws regulating financial institutions and the provision of financial services
- To advise the Minister on matters concerning financial institutions and financial services, either of its own accord or at the request of the Minister
- To provide, promote or otherwise support financial education, awareness and confidence regarding financial products, institutions and services.
The FSB receives its regulatory powers from the specific Acts that relate to different types of business. These powers include:
- The power to grant, refuse or withdraw the authorisation, or restrict the business, of firms
- The power to impose penalties
- The ability to approve individuals carrying on specific roles in each area of regulated activity
- Powers in the area of market abuse and financial crime
- Powers to prosecute money laundering or insider dealing offences.
The Financial Services Authority (FSA) in the UK publishes a list of eleven principles for the conduct of investment business (i.e. principles that apply to firms outside the FSA).
- Integrity: A firm must conduct its business with integrity.
- Skill, care and diligence: A firm must conduct its business with due skill, care and diligence.
- Management and control: A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
- Financial prudence: A firm must maintain adequate financial resources.
- Market conduct: A firm must observe proper standards of market conduct.
- Customers’ interests: A firm must pay due regard to the interests of its customers and treat them fairly.
- Communication with customers: A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.
- Conflicts of interest: A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.
- Customers: Relationships of trust: A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement.
- Clients’ assets: A firm must arrange adequate protection for clients’ assets when it is responsible for them.
- Relations with regulators: A firm must deal with its regulators in an open and co-operative way, and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice.
There are two bodies with statutory powers:
- The FSB appoints the Financial Services Ombud and works with the Minister of Finance in appointing the members of the Financial Services Ombud Scheme Council. The Financial Services Ombud has greater powers of enforcement, although she/he would defer to the industry appointed Ombud in the first instance.
- The Pension Fund Adjudicator is appointed by the Minister of Finance to deal with complaints arising from members of funds governed by the Pension Funds Act. The decisions of the Adjudicator carry the weight of a court of law. Appeals against decisions of the Adjudicator have to be lodged with the Supreme Court.
Standards of Actuarial Practice (SAPs) and Advisory Practice Notes (APNs) are practice area specific standards and advisory notes.
SAPs are standards to which all members must adhere. A material breach of the SAP will in itself be ground for a complaint under the disciplinary procedures and will amount to strong prima facie evidence of unprofessional conduct. A member choosing to depart from a strict interpretation of a SAP is strongly advised to disclose and justify any such departure in his/her report.
APNs provide advice to members to guide them in their relevant area of practice. Failure to comply with an APN will not in itself constitute grounds for complaint under the disciplinary procedures.
