[PDF] - FAIS 2010 Training Presentation INDEX THE AIM AND PURPOSE OF FAIS PDF Document

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FAIS 2010 Training Presentation

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INDEX THE AIM AND PURPOSE OF FAIS FINANCIAL ADVISORY AND INTERMEDIARY SERVICES

1.1 Advisory 1.2 Intermediary

2.1 Advice 2.2 Client

3.1 Intermediary Services Fais Fit & Proper Requirements

7.1 Financial Services Board

8.1 Financial Services Board 8.2 Financial Services Provider 8.3 Key Individuals 8.4 Representatives 8.5 Compliance Officer 8.6 Auditor 8.7 Support Staff

10.1 Definitions

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THE AIM AND PURPOSE OF FAIS WHO IS PROTECTED BY FAIS WHY DID THEY NEED PROTECTION Consumers By financial advisors who will indirectly protect consumers by:

to who can advise

advisors against bad advice

access to the

large extent which let do abuse by various parties

driven- with little or no focus on ethics, and value to the client WHO HAS TO ABIDE BY THE RULES OF FAIS HOW WILL CONSUMERS BE PROTECTED

financial service providers

financial services providers Advisors representatives will have to be licensed and comply with the Act in as much as they

fully competent according to the “FIT AND PROPER” and have the right knowledge and skills

representative

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the case of a complaint

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FINACIAL ADVISORY AND INTERMEDIARY SERVICES ACT

1.1 ADVISORY

1.2 INTERMEDIARY

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2.1 ADVICE Recommendation, guidance or proposal of a financial nature - furnished by any means or medium, to any clients or groups of clients

loan or cession aimed at incurring any liability

planning in connection with the affairs of the client

variation, replacement or termination, as the case may be 2.2 CLIENT Means a specific person or group of persons, excluding the general public, who is or may become the subject, to whom a financial service is rendered intentionally, or is the successor in title of such person or the beneficiary of such service.

Means any person other than a representative who as a regular feature of the business of such person

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ADVICE AND RENDERS ANY INTERMEDIARY SERVICE OR

3.1 INTERMEDIARY SERVICES

person for or on behalf of a client of product supplier

enter into with a view to a) Buying b) Selling c) Otherwise dealing in a financial product d) Managing e) Administering f) Keeping in safe custody g) Maintaining or servicing h) Collecting or accounting for premiums or other i) Moneys j) Receiving submitting or submitting or processing the k) Claims of a client against a product supplier FAIS FIT AND PROPER REQUIREMENTS See table at end of manual

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An authorized financial services provider or a representative carrying on business as

persons)

SUPERVISION Any person who renders a financial service to a client for or on behalf of a financial services provider, in terms of conditions of employment or any other mandatory agreement Advices do not include:

Representatives under supervision The Act demands that an FSP only appoint representatives that are fully compliant from an experience and qualification perspective. This is clearly not practical and an exemption exists that allows representatives to work under supervision of one or more key

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individuals or suitably qualified representatives until such time as the incoming representative has;

attached Table A, AND

representatives appointed for the 1st time during 2008 or 2009) AND

This supervision process cannot exceed a period of 6 years from the date first appointed as a representative. What must the supervised representative do? i) Before any financial service is rendered a client must be informed that the representative is working under supervision In a direct marketing situation this would be at the start of a call and in

the issued mandate letter. (A degree of practicality is required here and not all interactions need be preceded with a statement to this effect. Generally those likely to result in a sale, cancellation or amendment to a financial product should have the required information supplied) Supervision agreement A supervision agreement will form part of the employer's performance management processes and/or employment contract, and details the procedures regarding the rendering of services under supervision. NB 1: Supervision can apply to key individuals who are also acting as representatives.

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NB 2: Qualifications and Regulatory exams need not be done under supervision for any representative appointed during 2008 or 2009 that have completed their minimum experience requirement by 31/12/2009 It must be noted that, we are obliged to:

the representative register whether the representative is acting under supervision, and

the representative register between representatives that are acting under supervision and those that meet all the requirements and are not acting under supervision.

supervision status. Objective of the supervision period At the end

completed his/her minimum experience requirements and their appropriate qualification (where applicable) and should be thoroughly versed in the manner and form by which financial services, as envisaged in terms of the Financial and Advisory & Intermediary Services Act “FAIS”, are rendered in respect of the product categories

Supervisor rules Selection of the supervisor: The financial services provider must ensure that the normal working relationship between the supervisee and supervisor allows the supervisor oversight of the activities performed by the supervisee as per agreement, and that there is regular contact that enables the transfer of skills, which may include face-to-face and/or contact via electronic means, between the supervisee and supervisor in the

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execution of their duties. Ideally a supervisor must have completed and meet the relevant requirements regarding experience and qualification and at least the first level regulatory examination in relation to the specific Categories

before the supervisor is allowed to act as a supervisor for a specific Category or subcategory however Supervisors that were acting as supervisors prior to 31 December 2010 can continue acting as supervisors in terms of the transitional arrangements in the relevant Board Notice 104. Duties of the Supervisors:

executing their duties in terms of the supervisory arrangement;

exposure to the Categories and/or subcategories in which he or she is providing financial services;

customers, the frequency of which may vary according to the complexity of the service that is provided; and/or the complexity

and/or the qualifications of the supervisee;

documented evidence of the supervision actions undertaken, including methodology and frequency, and such evidence must be available for scrutiny by the Registrar (see Checklist of Supervisor annexure as a guide);

based on a review of the analysis conducted and the record of the advice as provided for in terms of the General Code of Conduct, and ensure that the FSP takes the necessary action to protect the client where it is found that the supervisee's actions may not have been in the interest of the client; and

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subcategories in respect of which they are appointed as a representative. Should this prove to be problematic during the minimum period under supervision due to business reasons, the financial services provider/supervisor should make arrangements to either

gain experience in the specific subcategory; or

supervisee receives sufficient exposure to the specific subcategory, provided that the maximum period under supervision of six (6) years is not exceeded. Supervisee rules The following rules apply to the period a representative acts under supervision:

i.e.the relevant minimum and maximum periods commence on the date the representative is appointed to render services in relation to the specific Category or subcategory

supervision in any Category or subcategory, is six (6) years from date of first appointment as a representative;

services in respect of multiple Categories or subcategories can gain the experience at the same time, and will remain under supervision until the experience requirements for the most

longer) e.g. maternity leave, prolonged illness, while gaining experience must be compensated for by arranging for an additional period under supervision, equal to the period interrupted.

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supervision, the method followed and frequency thereof that took place during the period under supervision. In addition the Supervisees must:

records and or documents regarding the advice given and/or intermediary services rendered;

within the prescribed time limits;

performing any duties in relation to the supervision contract;

Annexure B: Formalised Procedures and Mandates; and

services as supplied by the employer and/or supervisor on which the performance reviews will be based. How is supervision to be carried out? There are two specific types of supervision;

that are applied during the first months of supervision. This supervision must take place at least weekly but could as much as daily – it is for the supervisor to set the required standards, As can be expected this level of supervision is far more intense given that the representative will be new to the job. The time periods during which direct supervision must take place differ from one licence category to another. See Table B

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the balance of the overall supervision period must be conducted under a supervision program that has actual supervision taking place at least on a bi monthly – monthly basis. It should be remembered that these are minimum standards and each representative and/or task may demand higher standards or time frames being applied. Supervision may include one or more of the following activities:

services are rendered;

purpose of the meeting is the rendering of financial services;

by the supervisee to confirm certain aspects of the interaction with the client;

activities of the supervisee in respect of rendering of financial services. As previously stated both the supervisor and supervisee must have properly documented evidence of the supervision, the method followed and frequency thereof that took place during the period under supervision. Period of supervision Minimum period is 12 months

qualification requirements determined in the Fit and Proper requirements in the FAIS Act 2002 whichever

‐ the supervisee fails to achieve the requirements in 5.1

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within a period of 6 years; ‐ the supervisee is fairly dismissed by the employer for a reason related to the supervisee’s conduct or capacity as an employee. ‐ the employer and supervisee agree to terminate the agreement. See attached agreement and formal documentation.

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LEGISLATION FINANCIAL SERVICES BOARD

KEY INDIVIDUALS

FINANCIAL SERVICES PROVIDER EXTERNAL AUDITOR COMPLIANCE OFFICER REPRESENTATIVES (advice givers) Support staff (non Advice-giving staff)

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8.1 FINANCIAL SERVICES BOARD This is the regulatory body for the financial services industry and is the body, which will be issuing licenses to authorised FSP's. 8.2 FINANCIAL SERVICES PROVIDER This is an entity/person which is involved either in: The rendering of advice; or the rendering of an intermediary service; or both. This could be an entity such as a large corporate that is also a product supplier or even an independent brokerage that operates as an SMME (Small, medium, micro enterprise.) 8.3 KEY INDIVIDUALS These are natural persons within the FSP who are either managing or overseeing the activities of the FSP relating to financial services (for example a manager of a distribution unit in an FSP) 8.4 REPRESENTATIVES These are the persons who give financial advice to clients e.g. Finance and Insurance Provider

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8.5 COMPLIANCE OFFICER This is the person who embeds compliance within the FSP and reports to the FSB on compliance issues within the FSP. Can be an internal person or outsourced. 8.6 AUDITOR This is the person responsible for the financial statements of the FSP and who submits reports to the FSB on the financial state of the FSP. 8.7 SUPPORT STAFF These are the staffs that support the function of the sales staff such as the administrative functions of a FSP, for example a

In addition to the Act are the pieces of SUBORDINATE LEGISLATION which support the requirements of the Act. Here is a depiction of the Act with some of the pieces of subordinate legislation: FAIS

and representatives

INDIVIDUALS

advisory and intermediary services REGULATIONS

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FSP’S

RECOGNISED REPRESENTATIVE BODIES

FSP’S

COMPLIANCE REPORTS BY COMPLIANCE OFFICERS AND AUTHORISED FSP’S

FSP’S

OFFICERS in respect of Financial Services Business

EXTERNAL AUDITOR of authorized FSP’S on money and assets held on behalf of clients

CLIENTS The Act lays down standards for market conduct of both Providers and representatives – the full focus is on the client – from the right of the consumer to be treated fairly, full disclosure of relevant information and the responsibility

needs before their own. The Code of Conduct combined with the Consumer Education drive should result in consumers becoming

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better advised and equipped to make intelligent, informed financial decisions. The following extract for the General Code of Conduct is an example which illustrates the care and protection afforded to clients by the FAIS legislation. PART V - CONTACTING OF CLIENT

(a) in making contact arrangements, and in all communications and dealings with a client, act honourably, professionally and with due regard to the convenience of the client; and (b) at the commencement of any contact, visit or call initiated by the provider, explain the purpose thereof and at the earliest opportunity, provide the information referred to in section 5 There are two main pieces of protection afforded to clients:

interdicts and institute class actions* against offenders *This refers to actions which are instituted by groups of people against a perpetrator. For example, a class action in this context could be a group of individuals suing a representative for misrepresenting the features of a product.

IN SUPPORTING FAIS

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10.1 DEFINITION In terms of the Act: “Ombud” means- (a) the Ombud for Financial Services Providers appointed in terms of section 21(1); and 20 (b) for the purposes of sections 27, 28, 31, and 39, includes a deputy Ombud

functions and objectives: Ombud for Financial Services Providers Office of Ombud for Financial Services Providers

Ombud for Financial Services Providers (2) The functions of the Office are performed by the Ombud for Financial Services Providers (3) The objective of the Ombud is to consider and dispose of complaints in a procedurally fair, informal, economical and expeditious manner and by reference to what is equitable in all the circumstances

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(a) the contractual arrangement or other legal relationship between the complainant and any other party to the complaint; and (b) the provisions of this Act (4) When dealing with complaints in terms of sections 27 and 28 the Ombud is independent and must be impartial

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