Events

Deadline for payment of Levies

FSPs are reminded that the FAIS Levy Invoices should have been received with payment due by 31 October 2019.  If an FSP has not received their invoice, we suggest that they contact the FSCA to request that this be re-sent to them. Failure to pay levies timeously can result in licence suspension.

 

Update your Competence Register

FSPs are reminded that they must be able to provide their Competence Registers to the FSCA if asked to do so. The Competence Register must keep a record of all qualifications, regulatory exams, class of business training, product specific training and CPD.

The Competence Register must be updated with all class of business and product specific training completed by the FSP, its Key Individuals and Representatives within 15 days after the training occurred and all information and documentation relating to the training must be retained for at least 5 years.

Reminders – 15 October 2019

Posted on 15 October 2019

Deadline for payment of Levies FSPs are reminded that the FAIS Levy Invoices should have been received with payment due by 31 October 2019.  If an FSP has not received their invoice, we suggest that they contact the FSCA to request that this be re-sent to them. Failure to pay levies timeously can result in licence suspension. … Continued

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The FSCA recently published a draft exemption in terms of the Collective Investment Schemes Control Act (CISCA). The draft exemption proposes to exempt managers and auditors of collective investment schemes (CIS) from the application of section 74(1)(a) and 2(c) of the CISCA, which determines the accounting standard to be applied by managers and auditors of CIS portfolios.

Currently CISCA requires the manager and auditor of a CIS to ensure that accounting records are maintained, and annual financial statements are prepared in conformity with ‘generally accepted accounting practice’ (GAAP). However, since 1 December 2012, GAAP no longer applies as a standard in South Africa. No further regulated requirement exists with regards to an accounting and auditing standard for a collective investment scheme and its portfolios.

The exemption is aimed at facilitating the implementation of alternative accounting standards for managers and collective investment schemes in South Africa in order to ensure alignment with South African accounting practices international standards for accounting.

The draft exemption was published together with FSCA Communication 1 of 2019 (CISCA) which sets out the background and content of the exemption together with an invitation to comment on the draft.

Interested parties are invited to submit comments on the draft Exemption Notice to Marius.DeJongh@fsca.co.za by 29 November 2019.

Reminders – 15 October 2019

Posted on 15 October 2019

Deadline for payment of Levies FSPs are reminded that the FAIS Levy Invoices should have been received with payment due by 31 October 2019.  If an FSP has not received their invoice, we suggest that they contact the FSCA to request that this be re-sent to them. Failure to pay levies timeously can result in licence suspension. … Continued

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The Financial Sector Conduct Authority (FSCA) recently published FSRA Compliance Extension Notices namely 1 and 2 of 2019 for Short-term and Long-term Insurance respectively (Notices). In terms of these Notices, the FSCA granted an extension for the period of compliance with Regulation 4.2(3) of the Regulations made under section 70 of the Short-term Insurance Act (STIA) and Regulation 8.2(2) of the Regulations made under section 72 of the Long-term Insurance Act (LTIA) to 1 February 2020.

What do these Regulations deal with?

These Regulations, in both the STIA and LTIA, deal with the requirements relating to receiving premiums. An independent intermediary who receives premiums is required to account for such premiums and must promptly open and maintain one or more separate bank accounts into which premiums will be received. In terms of these Regulations such an account may only contain monies collected from policyholders and may not contain any monies or funds of the independent intermediary.

Reason for extending the period for compliance

In the accompanying FSCA Communication 7 of 2019 (Insurance) the FSCA states that it has received several applications for exemptions from independent intermediaries more particularly in the retail market, where rendering services as intermediary is not the primary focus in the entity and the insurance product is subsidiary to a commercial contract. In these instances, the premium for the insurance product is collected together with payment for a non-insurance service or product. Some of the reasons given for the exemption applications include practical challenges, customer convenience and suitable service to policyholders.

As these applications require the FSCA to consider, amongst other things, various complexities in the business models of these applicants, the FSCA requires additional time to consider these applications and make an informed decision on how to approach the variety of issues.

Extension Period

The initial date for ensuring compliance with these Regulations was 28 September 2019 however the Notices have extended the deadline for complying with these Regulations to 1 February 2020.

What is the impact on FSPs?

It is important to note that these Extension Notices only relate to an extension of the deadline for compliance with the relevant Long-term and Short-term Insurance Regulations set out above. These Notices have no relevance to the FAIS framework. This means that if an FSP collects long-term or short-term insurance premiums, they are required to comply with the existing requirements relating to premium collection set out in the FAIS General Code of Conduct. Should an FSP experience similar challenges in collecting premiums to those mentioned above, then they would have to seek exemption from that requirement under FAIS. If an exemption from the abovementioned Long-term or Short-term Regulations is required, the application in terms of these Regulations must be brought by the insurer not the FSP.  This does create some complexity as there are dual regulatory frameworks regulating the same activity. In time, amendments will be made to the General Code of Conduct to ensure harmonisation of the requirements for the collection of long-term and short-term insurance premiums.

To read the notices and communication from FSCA, click on the links below:

 

Reminders – 15 October 2019

Posted on 15 October 2019

Deadline for payment of Levies FSPs are reminded that the FAIS Levy Invoices should have been received with payment due by 31 October 2019.  If an FSP has not received their invoice, we suggest that they contact the FSCA to request that this be re-sent to them. Failure to pay levies timeously can result in licence suspension. … Continued

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The FSCA recently published a Press Release regarding the fine that it imposed on MET Collective Investments (Pty) Ltd (METCI). The administrative penalty of R100 million was a result of METCI contravening various sections of financial sector laws including section 4 of the Collective Investments Schemes Control Act (CISCA) and Board Notice 90 and 92.

METCI was under investigation, by the FSCA, after one of its unit trust funds lost approximately 66% of its value during 8 to 11 December 2015. As a result of the investigation the FSCA found that METCI did not have proper risk management processes in place to manage and exercise proper control, oversight and governance over the fund. It was also found that METCI breached exposure limits as well as published misleading statements in certain minimum disclosure documents.

In the Order the Commissioner emphasises the statutory objective that CIS managers need to exercise proper oversight and that they must take responsibility for regulatory compliance. While CISCA permits a CIS manager to delegate the investment management of a CIS portfolio to a third party such as a Category II Financial Services Provider, the legislation is unambiguously clear that anything that is done or not done by that delegated person, must be regarded as having been done by the CIS manager. Therefore, ultimately the CIS manager will be held accountable for the actions taken by an investment manager, or any other person, to whom it has delegated certain functions, highlighting the importance of a robust risk management system.

To read the full Order, click here.

Reminders – 15 October 2019

Posted on 15 October 2019

Deadline for payment of Levies FSPs are reminded that the FAIS Levy Invoices should have been received with payment due by 31 October 2019.  If an FSP has not received their invoice, we suggest that they contact the FSCA to request that this be re-sent to them. Failure to pay levies timeously can result in licence suspension. … Continued

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FSPs must strive to maintain and adopt the highest ethical standards and values in their business activities and practices. This includes avoiding, eliminating or mitigating conflict of interest.

A recent FAIS Ombud determination in the case of K.R. Morulane v Silver Seed Capital (Pty) Ltd and 2 others reveals why it is crucial to declare to clients any conflict or potential conflict of interest that exists or could exist with a product provider. The case highlights the importance of making such disclosures to clients before they purchase a product so they can make an informed decision.

 The facts of the matter

In the abovementioned case, the client invested in UG2 Platinum Ltd shares, based on the representative’s recommendation. The representative assured the client the investment was for a 12-month period with a tax-free return of 12% on maturity.

The client requested a withdrawal of her capital on maturity, but the FSP failed to respond to her request. After several unsuccessful attempts to contact the FSP, the client laid a formal complaint with the FAIS Ombud. The FSP did not respond to the complaint despite being given several opportunities to do so. The FSP’s failure to respond to the complaint resulted in the matter being determined without the FSP’s response.

After other investigations into the FSP following complaints by different complainants, the Ombud’s office found the FSP was conflicted in the matter and had concealed such information from the client. Failure to disclose this material conflict resulted in the FSP breaching section 3(1)(b) of the Code of Conduct and prejudicing the client from making an informed decision about the product.

In investigating the FSP, it appeared the director of the FSP was also the company secretary of the product supplier, UG2 Platinum Ltd. It is evident from the FSP’s involvement with UG2 Platinum Ltd that the purpose was to entice selected investors with extravagant returns. It seems the FSP persuaded the client to purchase this specific product for the FSP’s gain instead of in the client’s interest.

The FSP’s mistakes

The FSP made several mistakes. The representative failed to fulfil his duties as a provider and his actions may be imputed to the FSP. The FSP failed to provide the client with adequate and appropriate information in recommending the product to the client.

The representative did not disclose to the client that a conflict of interest existed between the FSP and the product supplier. Failure by the representative to disclose this relevant information resulted in the client being unfairly prejudiced from making an informed decision.

There was no evidence that the FSP did a needs analysis and the FSP did not consider the client’s financial position and why the investment suited the client risk profile.

The FSP failed to render advice honestly, fairly, with due skill, care and diligence and in the interests of the client. A conclusion can be drawn from the complainant’s version that the FSP acted dishonestly in recommending the investment to the client and fraudulently concealed its involvement with the product supplier.

How to avoid such complaints

Conflict of interest is a significant issue and should not be taken lightly by FSPs, as first and foremost it forms part of the ethical standards of any business. It is also embedded in the FAIS General Code of Conduct to ensure fair treatment to the client.

An FSP and representative must avoid conflict of interest. Where this is not possible, the FSP must at least try to mitigate such conflict. FSPs must declare and disclose in writing at the earliest opportunity to the client any conflict of interest which exists or may exist.

The client should also be made aware of the FSP’s conflict of interest management policy and procedures maintained to mitigate the identified conflict. An FSP must act with honesty, integrity and in the best interests of the client.

FSPs must provide clients with reasons why the recommended products suit the clients’ financial need. Record such discussions in writing, so you have evidence of having done so if a complaint arises.

In a situation like this case, an FSP should consider and recommend a variety of products and allow clients to make an informed and impartial decision, taking into consideration all the relevant disclosures.

FSPs that fail to declare and disclose conflict of interest could subject the business to administrative penalties and legal action if it is found the FSP acted fraudulently.

By abiding by high ethical standards, you can protect yourself and your business from potential complaints and you will be treating your clients fairly.

Reminders – 15 October 2019

Posted on 15 October 2019

Deadline for payment of Levies FSPs are reminded that the FAIS Levy Invoices should have been received with payment due by 31 October 2019.  If an FSP has not received their invoice, we suggest that they contact the FSCA to request that this be re-sent to them. Failure to pay levies timeously can result in licence suspension. … Continued

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Levies due and payable

FSPs are reminded that the FAIS Levy Invoices should have been received with payment due by 31 October 2019.  If an FSP has not received their invoice, we suggest that they contact the FSCA to request that this be re-sent to them. Failure to pay levies timeously can result in licence suspension.

 

Liquidity Calculation Declaration

FSPs that are required to maintain liquid assets and whose financial year end was 28 February 2019, are required to submit a Liquidity Calculation Declaration to the FSCA by 15 October 2019.

Reminders – 15 October 2019

Posted on 15 October 2019

Deadline for payment of Levies FSPs are reminded that the FAIS Levy Invoices should have been received with payment due by 31 October 2019.  If an FSP has not received their invoice, we suggest that they contact the FSCA to request that this be re-sent to them. Failure to pay levies timeously can result in licence suspension. … Continued

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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.

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