Events

Representatives who have a date of first appointment on or after 1 August 2018 and Representatives of a CAT I FSP appointed for the first time as a Representative in respect of a Tier 1 product for advice on or after 1 August 2018 are reminded that they have until 31 January 2019 to comply with the Class of Business training requirements.

To read FAIS Notice 52 of 2018, click here.

Class of Business training requirements

Posted on 6 November 2018

Representatives who have a date of first appointment on or after 1 August 2018 and Representatives of a CAT I FSP appointed for the first time as a Representative in respect of a Tier 1 product for advice on or after 1 August 2018 are reminded that they have until 31 January 2019 to comply … Continued

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Short-term advisors who charge clients a fee over and above that earned for “rendering services as intermediary” are reminded to implement an explicit, written fee agreement before Rule 12.4.1 of the Short-term Insurance Policy Holder Protection Rules takes effect on 1 January 2019.

To read more on Rule 12.4.1, click here

Class of Business training requirements

Posted on 6 November 2018

Representatives who have a date of first appointment on or after 1 August 2018 and Representatives of a CAT I FSP appointed for the first time as a Representative in respect of a Tier 1 product for advice on or after 1 August 2018 are reminded that they have until 31 January 2019 to comply … Continued

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The Council for Medical Schemes recently published the Demarcation Exemption Appeal Outcome. In March 2017 the Council in consultation with other stakeholders approved the Exemption Framework, which permits the exemption of Providers of indemnity products that are conducting the business of a medical scheme from certain provisions of the Medical Schemes Act for a period of two years (1 April 2017 to 3 March 2019). Two entities that applied to the Council for an exemption were declined and their appeals later dismissed. The affected entities have a right to take the decision on review if they are advised to do so.

Following from this decision, the Council cautions members of the public and contractors of health products from the affected entities, Discovery Health (Pty) Ltd and Agility Insurance Administrators (Pty) Ltd that these products are unregulated and are prohibited. Discovery Health has been directed to move affected members to a regulated product by 28 February 2019.

The Council for Medical Schemes has urged clients who have purchased Discovery Comprehensive Primary Care or Discovery Essential Primary Care products from Discovery Health to contact Discovery Health to make alternative arrangements.  We recommend that FSPs that have clients who are affected by this ruling, make contact with their clients to ensure that they are not left without cover.

Click here to read the full Notice published by the Council for Medical Schemes – Circular 50 of 2018: Demarcation Exemption Appeal Outcome

Class of Business training requirements

Posted on 6 November 2018

Representatives who have a date of first appointment on or after 1 August 2018 and Representatives of a CAT I FSP appointed for the first time as a Representative in respect of a Tier 1 product for advice on or after 1 August 2018 are reminded that they have until 31 January 2019 to comply … Continued

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The National Treasury recently published amendments to the Regulations made under section 72 of the Long-Term Insurance Act and section 70 of the Short-Term Insurance Act. On 26 October 2018 they further published a notice to clarify the commencement date of some of these amendments. The Amendments to the Regulations must now be interpreted to have taken effect on 28 September 2018.

To read the documents relating to these amendments, including Masthead’s submissions to the Regulator regarding the amendments, click here.

Class of Business training requirements

Posted on 6 November 2018

Representatives who have a date of first appointment on or after 1 August 2018 and Representatives of a CAT I FSP appointed for the first time as a Representative in respect of a Tier 1 product for advice on or after 1 August 2018 are reminded that they have until 31 January 2019 to comply … Continued

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An Ombud determination highlights the importance of adhering to the General Code of Conduct when rendering financial services and making adequate product disclosures when advising the client.

In the case of Dr R.A.Georges De Meulenaere v S. E Coetzer t/a Downstream Trading, the financial service provider (FSP) advised his client in 2011 to invest in Unimin African Resources (Pty) Ltd, as Unimin would yield greater returns than the client’s existing investment in Netcare. The client then sold his shares in Netcare and used the proceeds to purchase listed preference shares in Unimin. The FSP informed the client that the shares could be exchanged for shares in Global Precious Commodities (GPC) after 12 months.

When the client requested the return of his funds in 2014, he discovered irregularities had been detected with Unimin’s capital structure. Certain preference shares issued, including the client’s shares, had been declared invalid, and the client incurred losses due to the FSP’s recommendation. The FSP claimed it played no material role in the client’s decision to purchase Unimin shares, however, the ‘Information Page and Offer to Purchase’, which included the FSP’s licence number, was signed by both the client and FSP.

The FSP’s mistakes

  • The FSP did not understand the client’s risk appetite or risk tolerance. The FSP recommended that the client invest in a high-risk product without having conducted a risk analysis. Had it done an analysis, it would have realised the client was a moderate risk investor who required a guarantee on his capital.
  • The FSP did not provide the client with adequate information about the investment. The FSP failed to disclose the true nature of the investment, so the client was unaware of the associated risks. There was no evidence that indicated the client was informed of the consequences of replacing the Netcare shares with the shares in Unimin.
  • The FSP did not conduct any due diligence. The FSP’s lack of understanding of Unimin and the fact that no due diligence was conducted on the product resulted in the replacement of the client’s Netcare shares with the purchase of the Unimin shares.

How to avoid the same pitfalls

In light of this determination, it is imperative to follow the requirements set out in the General Code of Conduct to render suitable advice. Understand the product and your client, and adequately disclose to the client all information and risks associated with the product. Also, be fair to clients by providing information in a format they can easily understand.

In the event of a dispute, the Ombud will look for evidence to back up any statements in defence of a complaint. For this reason, gather information about clients’ personal circumstances, needs, concerns and objectives and set out the rationale/reasons why a particular investment is suitable for the client. Keep proper records of the information/discussion and be able to show that you gave it to the client. Be cautious about using standardised templates without first considering if they are appropriate for the circumstances. Where a product is being replaced, ensure the client fully understands the associated consequences and risks.

By following the requirements set out in the General Code of Conduct and keeping a record of your advice, you are not only being fair to clients, but covering yourself in the event of a client dispute.

To read the full Ombud Determination, click here.

Class of Business training requirements

Posted on 6 November 2018

Representatives who have a date of first appointment on or after 1 August 2018 and Representatives of a CAT I FSP appointed for the first time as a Representative in respect of a Tier 1 product for advice on or after 1 August 2018 are reminded that they have until 31 January 2019 to comply … Continued

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Somebody broke into my son’s luggage when he flew home for the recent holidays, so I went to our local luggage shop to replace it. The perfect shell suitcase was there, branded with characters from the Star Wars franchise.

Pleased with the new suitcase, I went home and showed my son, who is a Star Wars fan. Greeted with silence, I thought he must be thrilled. Then the following conversation ensued:

Son:   Mum, this suitcase is wrong!

Me:    How can it be wrong? It has Star Wars characters and is a shell suitcase. It’s perfect!

Son:   It’s too small compared to my other suitcase, and it has zips.

Who knew large luggage came in different sizes and that zips are apparently easier to break into compared to clasps? The above got me thinking about items being the correct fit for the owner. This led to thoughts about Financial Services Providers’ (FSPs) succession plans.

Succession failures can have dire consequences for an FSP and succession plans are becoming increasingly important when applying for a new licence. The new FSCA licence application form (FSP 7 in particular) requires one of the supporting documents to be a business continuity policy:

[The plan, inter alia, must demonstrate processes that are devised to cater for exceptional risks that, though unlikely, would have catastrophic consequences for the business of the applicant. It can cover a range of situations including, succession planning, the death of a key person, crisis events that threaten to shut down business operations or any other financial situation or unexpected event that threatens to destroy the business of the applicant.]

Many business owners only think about succession planning when they want to realise value and exit their businesses. Often, they leave it too late and it becomes a fire sale.

Good succession planning can enhance organisational efficiency and create workplace harmony by ensuring that staff and clients know their needs are being addressed. It can also dictate the direction the company will take, which is important to maintain a competitive edge.

Giving effect to succession plans are complex undertakings and they can be exceedingly uncomfortable. But nobody can run their business forever, and one needs to plan for that inevitability.

What can go wrong with succession?

Common mistakes include appointing the wrong person or not having successors in place. By not having a proper succession plan you are doing a disservice to yourself, your clients and employees.

A failed succession process can affect the financial wellbeing of a business, damage client confidence or create a power struggle that can impact on the business culture.

Successful succession planning

Successful succession planning should start early and you should approach it with an open mind. It also requires an effective way for information to be passed to the identified successor. In addition, a good succession plan will identify the critical roles within the FSP, whether the potential successor is ready to take over and, if not, what training or experience they need.

Don’t make the mistake of waiting until it is too late, or assume the loose or verbal arrangement you have made will come to fruition. Take a cold, hard look, and assess your plan honestly.

Masthead can assist you with succession planning through practical guidance, seminars, business assessments and business valuationsGet in touch with us if you would like to know more.

As for my ‘succession plan’ with my son’s luggage, the successor was my brother’s spare luggage set. My son is now back in Cape Town with an 84cm shell, boring black luggage.

Class of Business training requirements

Posted on 6 November 2018

Representatives who have a date of first appointment on or after 1 August 2018 and Representatives of a CAT I FSP appointed for the first time as a Representative in respect of a Tier 1 product for advice on or after 1 August 2018 are reminded that they have until 31 January 2019 to comply … 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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+27 21 686 3588

E-mail:

 info@masthead.co.za

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