Unit 1

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Unit 1

Demonstrate understanding of the FAIS Act as a regulatory framework

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Role players (FAIS)

FSPs (Financial Service Providers): Can be BIG Companies like Old Mutual, Liberty Life, ABSA, FNB, Discovery Life & Health, OUTsurance , Wesbank , Toyota, BMW, etc. Can also be FSP / Sole Proprietor like ABC Brokers, Steven Smith Brokers. Representative like ABC Brokers (Sole Prop / FSP), Steven Smith (Employee of an FSP)

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FAIS Act as Regulatory Framework

Knowledge Criteria Describe the FAIS Act and subordinate legislation. Explain how the FAIS Act is integrated with other Financial Sector Conduct Authority legislation. Describe the requirements when interaction between FSPs takes place. Explain in general which departments of the Commissioner’s office deal with which FSP matters Explain what the correct format of communication with the Commissioner is. Explain what processes are required to remain updated with regards to published changes to legislation that will affect the FSP. Skills Criteria Interact with the Commissioner when and where required.

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Describe the FAIS Act and subordinate legislation

Before the introduction of the Financial Advisory and Intermediary Services Act (FAIS Act), clients who felt that they received inappropriate/poor advice from insurance agents/advisors/brokers had to seek recourse through the formal court system. The basis of a claim of this nature was the concept of delictual liability. The client had to prove on a balance of probabilities that the wrongful intentional/negligent act or omission of the advisor caused damage to the client. Very few clients had the financial means, the time and/or the knowledge to effectively access the court system. A gap existed for a more expeditious and cost-effective way of resolving consumer complaints.

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Regulatory environment in South Africa

Legislation administered by the FSCA includes: Long-term Insurance Act; Financial Advisory and Intermediary Services Act (FAIS); Financial Markets Act; Pension Funds Act; Financial Intelligence Centre Act; and Consumer Protection via the Treating Customers Fairly (TCF) framework.

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Requirements when interaction between FSPs takes place

Given the complexity of the different aspects of financial services, a financial planner cannot always be all things to all clients. Situations may arise where you are unable to offer the advice or products required by the client. To overcome this problem, establish relationships with professionals who have competencies and skills in complementary areas. When looking for complementary professionals to partner with, it is important to identify businesses and individuals who have the same ethical and service standards as yourself. If the same, or a similar, level of service or ethical standards are not offered to your clients and their expectations are not met, you could lose your client.

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Which departments of the Commissioner’s office deal with which FSP matters

Registration Department: Responsible for new licence applications, profile changes (change to any of the application detail that must be submitted in terms of licensing conditions of FSPs), updating the central representative register, approval of mandates and application forms for discretionary FSPs and Administrative FSPs, lapsing of licences, any queries relating to the status of an FSPs licence and liaison with the FSCA's Finance Department relating to collection of levies.

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Correct format of communication with the Commissioner

The format of communication with the Commissioner that is required electronic communication is the preferred medium, but hard copy applications, reports and profile changes will be accepted if delivered by hand. Faxes should be avoided.

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The changes that must be reported

The following profile changes must be reported: change of contact details; name changes; change of ownership or directorship; change of key individuals and their information; change of representatives and their information; change of compliance officers; change of auditor; change to the categories/sub categories of a license; change of financial services offered (advice/intermediary services)

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The reporting obligations imposed by the Act

the auditor of a FSP must report to and inform the commissioner in writing of any irregularity or suspected irregularity in the conduct or the affairs of the FSP of which the auditor became aware in performing functions as auditor and which, in the opinion of the auditor, is material; the compliance officer of a FSP must report to and inform the commissioner in writing of any irregularity or suspected irregularity in the conduct or the affairs of the FSP of which the compliance officer became aware in performing functions as compliance officer and which, in the opinion of the compliance officer is material;

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Processes required to remain updated with published changes to legislation

It is crucial for an FSP to be aware of changes in legislation, as well as new legislation introduced, and to ensure that all staff members, such as representatives, are informed of the changes and requirements. Financial services are impacted by many laws relating to financial products, security related legislation, insurance, specific legislation, as well as consumer protection legislation. It is important that the business constantly align its practices and compliance with applicable legislation.

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Legislation that will affect the FSP during 2021

Financial Sector Conduct Authority: The move from FSB to the new FSCA is envisaged to be effective from April 2018. On 21 June 2018 Kuben Naidoo, the Chief Executive Officer of the Prudential Authority, published a communication which confirms that the Insurance Act, 2017 will take effect on 1 July 2018, as anticipated ("Communication"). The Conduct of Financial Institutions Bill (“COFI“) was published by the Minister of Finance in December 2018 for public comment until 1 April 2019. Since then, there has been no further communication from National Treasury on the bill. Tranche 1 PPR amendments and Tranche 1 Insurance Regulations amendments were published on 15 December 2017 and became effective on 1 January 2018. The Equivalence of Reward POSITION PAPER, 13 December 2019.

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Interact with the Commissioner when and where required

All authorised FSPs have an obligation to ensure compliance with the FAIS Act and its subordinate legislation which amongst other requirements includes:  1. Submission of compliance report;  2. Submission financial statements;  3. Payment of annual levies.