The Registrar of the FSB referred a case against Discovery Life Limited (Discovery) and Regal Financial Services (Pty) Ltd (Regal) to the Enforcement Committee owing to contraventions of Section 3A of the FAIS General Code of Conduct (the Code).
Discovery was involved in employment negotiations with four financial advisors prior to the prohibition of sign-on bonuses but provided the finalised offers, which included sign-on bonuses, to the advisors after the prohibition date of 4 December 2014. It was also found that Regal provided a sign-on bonus to an advisor after this date.
Section 3A of the Code deals with financial interest and conflict of interest management policy and makes it clear that ”no person may offer or provide a sign-on bonus to any person, other than a new entrant, as an incentive to become a Category I provider that is authorised or appointed to give advice.”
Discovery agreed to reverse and recover the sign-on bonuses from the advisors and to pay this over to the FSB as part of the administrative penalty of R2,5 million. An administrative penalty of R200,000 was imposed on Regal.
This signals a warning by the FSB to both financial institutions and advisors who have, after 4 December 2014, engaged in any form of arrangement which would constitute a sign-on bonus.