The Financial Services Board, now called the Financial Sector Conduct Authority (FSCA), published Board Notice 194 of 2017 in December 2017, introducing several amended Fit and Proper requirements that Financial Services Providers (FSPs), Key Individuals and Representatives must meet. These requirements came into effect on 1 April 2018, with certain provisions being delayed until later dates.
Along with the FAIS Act, which aims to protect the consumer and professionalise the financial services industry, the new Fit and Proper requirements establish a higher level of professionalism and compliance in the industry. This new legislation has far-reaching effects for the entire industry, but it must be welcomed as it is aimed at bringing about professionalism.
The Fit and Proper requirements also aim to establish increased competence within the industry. Most elements of Fit and Proper hinges on the fact that competence will take centre stage. If there is an increased focus on competence and compliance, elements such as honesty and integrity, good standing, operational ability and financial soundness will all fall into place.
For a schedule of the Fit and Proper deadline dates, click here.
What are the new Fit and Proper Requirements?
The following is a high-level summary of the Fit and Proper requirements which need to be implemented and complied with before each deadline date:
Honesty, Integrity and Good Standing
FSPs need to set out adequate policies and internal processes to ensure that the Key Individuals and Representatives fulfil their duties in an honest manner and comply with the requirements. In addition, FSPs must be able to meet standards or principles of good standing like keeping up-to-date with regulatory obligations, having a valid licence, having no outstanding reports, not owing any fees and ensuring that all requirements are met.
Competence Policy and Processes
Competence is defined in Board Notice 194 as, “Having the skills, knowledge and expertise needed for the proper discharge of a person’s responsibilities in the performance of his or her functions.” The FSP and Key Individual must therefore make sure that Representatives receive adequate training in order to maintain compliance and be competent enough to offer clients the particular financial services or products for which they are authorised.
The Competence requirements include Regulatory Exams, Class of Business training, Qualifications, Product Specific Training and Experience. Continuous Professional Development (CPD) must be undertaken to ensure that the level of competence is maintained, updated and, where necessary, new knowledge and skills are developed. FSPs must also establish, maintain, update and submit a competence register to the FSCA if requested to do so.
Did you know? Masthead can help you achieve your competence requirements
Record and keep track of all your training activities.
Keep all records relating to COB, PST, CPD, RE and Qualifications in this register.
Easily keep record of all training done through the Masthead Learning Centre as these are pulled through automatically.
Add external training quickly and easily.
Add supporting documents such as certificates and degrees.
Export all records for reporting purposes in seconds.
Manage your CPD hours easily – just export and filter on the dates.
Note: All information and documents relating to training will be retained in accordance with Board Notice 194 requirements.
Operational Ability (for Financial Services Providers, Representatives and Key Individuals)
Operational ability refers to the functional skill, capability and capacity of a person or organisation to perform certain duties, tasks and obligations.
Key Individuals and Representatives have certain operational ability requirements that they need to comply with so that they efficiently carry out their duties relevant to their role in the FSP. In addition, FSPs have a set of requirements that help them monitor their compliance and ensure that they deliver continuous and satisfactory service to clients. This includes adequate communication facilities, storage and filing systems for safekeeping of records and more.
Attend this webinar or face-to-face seminar
How to create an effective Operations Manual for your FSP – Get a thorough understanding of the policies and processes that must be included in your FSP’s Operations Manual. By attending, you will have a good grasp of the regulatory requirements applicable to the Operations Manual.
Governance Framework
FSPs are required to implement an effective Governance Framework which must include the following: Conduct Risk Management; Business Plan; Risk Management Policies, Processes and Systems; Accounting Policies and Processes; Remuneration Policy for all staff; Business Continuity Policy; Financial Recovery Plan; Regular monitoring of systems, processes and internal controls. This Governance Framework must support practical management and oversight of the financial services that the FSP provides and must ensure the fair treatment of clients by integrating the TCF principles into the policies.
Automated Advice is a new requirement under Operational Ability. FSPs that provide automated advice (e.g. robo-advice that uses algorithms and technology, without the direct involvement of a natural person) must monitor and review the automated advice generated by algorithms and ensure the quality and suitability of the automated advice for their clients.
Outsourcing Policy and Processes
This is a new requirement introduced for FSPs that outsource some of their functions to other parties. Where an FSP outsources certain functions (e.g. functions that the law requires it to perform or important operational functions) the FSP must ensure that the person to whom the function is being outsourced is capable and authorised (if needed) and the FSP must have measures to assess the standard of performance of the outsourced delivery.
They should have a written agreement in place which governs the outsource arrangement and addresses the rights, responsibilities, service-level requirements and access by the FSP and Conduct Authority to the business and the information.
Appointment of Representatives
Another requirement under Operational Ability is the Appointment of Representatives. An FSP must ensure that when appointing a Representative, that person must possess the operational ability to effectively function as a Representative of the FSP or perform the activities for which that person was appointed. The FSP must therefore develop and implement a process that includes the necessary Human Resources policies and processes which should include a Recruitment and Selection policy.
Financial Soundness
FSPs must maintain financial resources that are adequate to carry out their activities and ensure that they can meet their liabilities as these fall due. FSPs must therefore set out how it will ensure it has adequate financial resources and how it will manage and monitor compliance with the Financial Soundness requirements applicable to their type of FSP.
For full details on each of the amended Fit and Proper requirements, read Board Notice 194 of 2017
Masthead can help assess your FSP’s Fit and Proper status
To support you in staying on track with amended Fit and Proper requirements, Masthead has developed a Gap Analysis document designed to help you recognise which changes apply to your business and how to implement these changes. This document has easy to follow instructions on how to complete the assessment and covers each of the new requirements.
In the Gap Analysis you will find:
A Fit and Proper Roadmap which shows the key dates that the requirements become or became effective.
All the requirements along with a brief description and recommendation of what is required.
The documented evidence that should be in place in your FSP.
Questions to help you objectively assess your documented evidence for each requirement.
Space to draft your action plans, together with the name of the person responsible for the work and the date by when this should be done.
Need help working through the Gap Analysis or assessing your FSP’s Fit and Proper status?
The impact of the Fit and Proper requirements on FSPs, Key Individuals and Representatives
It is important that FSPs have a thorough understanding of the definitions and requirements applicable to them, and the impact these have on their business, processes, training plans and reporting requirements contained in Board Notice 194 of 2017.
Legislation stipulates that FSPs align their business processes to the Fit and Proper Requirements. Failure to do so means that an FSP is not compliant and would not be allowed to practice or might face penalties for non-compliance.
FSPs therefore need to continuously review their business processes and plan accordingly to ensure that they are managing their compliance and meet all Fit and Proper requirements.
MASTHEAD IS
A national supplier of risk management services to independent financial advisors and other licensed financial service providers (FSPs). Established in 2004, we help our clients overcome their risk management challenges so they can grow and thrive in an increasingly regulated industry. Providing professional guidance and practical support, our team of specialists is passionately committed to delivering tangible solutions.
Joleen is a seasoned professional with over 22 years of working experience across a range of industries. She started her career in Corporate Finance within the IT and engineering sector and moved into the financial services sector in 2005. As the Head of Marketing Finance at Discovery Holdings she was responsible for the finance function of the distribution channels and marketing.
Joleen’s move to Old Mutual in 2011 gained her experience in strategy as part of the Personal Finance: Broker Distribution and Franchise executives. This included the management of the Old Mutual Black Distributors Fund. Key to managing this function was a comprehensive understanding of the regulatory impacts on financial advisors and the operational aspects that affect FSPs and tied advisors.
Beyond general management, Joleen specialises in strategy development, business advisory, distribution management and economics and is well-versed in organisational development areas like diversity, team formation and performance management. Joleen has a BCom Accounting undergraduate degree from Witwatersrand University and an MBA from the UCT Graduate School of Business.
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LAURENCE MULLER
Finance Director & Chief Operating Officer
Laurence joined Masthead as Head of Finance in 2007. Two years later he was appointed to his current position as Financial Director and has since served as a director on the Masthead board. During 2021 he was also appointed as COO.
Laurence has a BAcc and BCompt Honours degree and is a Chartered Accountant (CA(SA)). He holds a Post Graduate Diploma in Financial Planning through the University of Stellenbosch Business School and is a Certified Financial Planner (CFP) and member of the Financial Planning Institute (FPI). He has also successfully completed the FSCA’s RE 1 and 5 Examinations.
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ANRI DIPPENAAR
Head of Compliance
Anri has a wealth of experience having been involved in the financial services industry since 2012. From 2014 to 2017, she worked at Masthead as a Compliance Officer.
Anri then moved into the corporate space where she held various compliance roles such as Group Compliance Monitoring Manager, Group Compliance Specialist and most recently as a Senior Group Compliance Manager before returning to Masthead as the Head of Compliance.
Anri has an LLB degree and completed her Master’s degree in Insurance Law. She also completed the Senior Management Development (Advanced Peak Performance Programme (APPP) through GIBS.
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SHERLENE NEETHLING
Head of Operations
Sherlene has more than 25 years’ experience in Financial Services having worked in the Employee Benefits, Linked Product and Life Assurance environments prior to joining Masthead in 2006.
Sherlene has a wealth of experience having worked in many areas including, product marketing, traditional marketing, and operations. As Head of Operations at Masthead, she leads the IT, marketing, operations and learning centre teams.
Sherlene has a marketing qualification and a Certificate in Journalism.
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ANDRIA HIBBERT
Head of Corporate Accounts and Regional Manager
Andria has been in the financial industry for more than 33 years having worked in banks and insurance companies. She joined Old Mutual Broker Distribution in 1995 as an Admin Manager in Durban and later joined Masthead when they opened their doors in October 2004 as the Regional Services Manager for KwaZulu-Natal. Five years later she was appointed as the Regional Manager in KwaZulu-Natal and in 2014 she was transferred to Johannesburg as the Regional Manager.
In 2020, she took on the additional role of National Key Account Manager and was responsible for managing all Corporate Accounts. In 2022, Andria was promoted to Head of Corporate Accounts and transferred to the Western Cape as Regional Manager.
Andria has a BCom in Industrial Psychology degree. She is also a registered Compliance Officer with the FSCA for CAT I, II, IIA, and IV and has successfully completed the FSCA’s RE 1 and RE 3 Examinations.
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MAQBOOL SONDAY
Head of Finance
Maqbool joined Masthead as a Financial Accountant in 2008. Seven years later he was appointed as Finance Manager and then appointed to his current position as Head of Finance in 2022.
Maqbool has a BCom Accounting degree from the University of the Western Cape. From 2003 and 2005, he completed his articles at SizweNtsalubaVSP and in 2006 he went on to complete his BCom Honours degree from the University of KwaZulu-Natal.
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HEIDI DE LANGE
Regional Manager and Compliance Officer
Heidi has more than 33 years’ experience in the financial services industry. In 2004, she moved from Old Mutual to Masthead as a Regional Service Manager. Nine years later she was appointed as Regional Manager of the Gauteng North, Limpopo and Mpumalanga region and went on to become a Compliance Officer to complement the management offering.
Heidi has a BCom Entrepreneurs degree from Unisa and she is approved as a CAT I and CAT II Compliance Officer. She has also successfully passed all the FSCA’s Regulatory Examinations.
