“A person may not render financial services or contract in respect of financial services other than in the name of the financial services provider of which such person is a representative.”
The reasons for the insertion of the requirement in section 13(1)(c) are:
- To ensure that consumers of financial services know with whom they are contracting and who is ultimately responsible to perform in terms of its contract.
- To remove uncertainty of whether the representative is acting on its own behalf or on behalf of a principal.
- To prevent the undesirable business practice of “renting a licence”. This practice is when a representative contracts with clients who are not aware that the representative actually acts on behalf of the FSP. This also creates an undesirable risk for FSPs.
- To ensure that all monies received by an FSP and its representatives are reported on by the auditor of the FSP as per section 19(3) of the FAIS Act.
A Representative will not be allowed to market or advertise any services relating to financial services in its own name. All marketing material must clearly stipulate that such advertising is on behalf of the FSP for which it is a representative.
All business documentation of a representative must clearly reflect that it is not acting as a principal but as a representative. The documentation must further indicate the name of the FSP on whose behalf the representative acts.
One of the principles of TCF is that clients are provided with clear information both before, during and after conclusion of a transaction. Ensuring that customers understand who they are doing business with and who takes responsibility for the advice given, helps them to make informed choices and reduces the likelihood of disputes in the future.
In particular, those FSPs who have appointed juristic representatives, should take careful note of the implications of this Guidance Note.
Click here to read the full Guidance Note.