FAIS 2010 Training Presentation
INDEX
THE AIM AND PURPOSE OF FAIS
FINANCIAL ADVISORY AND INTERMEDIARY SERVICES
1. Describing words
1.1 Advisory 1.2 Intermediary
2. Definitions 2.1 Advice
2.2 Client
3. Financial Service Provider
3.1 Intermediary Services
Fais Fit & Proper Requirements
4. Key Individual 5. Representative and Representatives under supervision
6. Supervision
7. Who are the different role-players in the legislation
7.1 Financial Services Board 8. What are the Functions of the role-players?
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
9. Protection That the FAIS Legislation Gives Clients 10. The role of the Ombud in terms of the role in supporting Fais
10.1 Definitions
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:
• Keeping records
• Complaint practices
• Keeping within the law as to who can advise
• Licensed advisors against bad advice
• Have access to the ombud for complaints
• Freedom of choice
• Unscrupulous advisors
• Unregulated industry to a large extent which let do abuse by various parties
• Illiterate and gullible clients
• Industry which is production 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 advisors
• Representatives
• Employees of financial service providers
• Compliance officers
• Auditors of financial services providers
Advisors representatives will have to be licensed and comply with the Act in as much as they
• Are fully competent
according to the “FIT AND PROPER” and have the right knowledge and skills
• They are registered as a representative
• Fully trained
• Honesty
• Integrity
• Access to legal redress in the case of a complaint
FINACIAL ADVISORY AND INTERMEDIARY SERVICES ACT
1. DESCRIBING WORDS
1.1 ADVISORY
• Empowered to make recommendations
• An advisory body
• Consultative
• Counseling
• Helping
• Recommending
1.2 INTERMEDIARY
• A person who acts as an agent between parties
• Agent
• Broker
• Entrepreneur
• Go-between
• Mediator
• Middleman
FAIS ACT 5 2010
2. DEFINITIONS
2.1 ADVICE
Recommendation, guidance or proposal of a financial nature -
furnished by any means or medium, to any clients or groups of
clients
• buying the financial product
• or investing in a financial product
• on the conclusion of any other transaction including a
loan or cession aimed at incurring any liability
• on replacement
• is given in the course of or incidental to financial
planning in connection with the affairs of the client
• Results in any such purchase, investment, transaction,
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.
3. FINANCIAL SERVICES PROVIDER
Means any person other than a representative who as a regular
feature of the business of such person
FAIS ACT 6 2010
• FURNISHES ADVICE OR
• FURNISHES ADVICE AND RENDERS ANY
INTERMEDIARY SERVICE OR
• JUST RENDERS AND INTERMEDIARY SERVICE
3.1 INTERMEDIARY SERVICES
• Any act other than the furnishing of advice performed by a
person for or on behalf of a client of product supplier
• The result of which the client may enter into or OFFERS to
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
FAIS ACT 7 2010
4. KEY INDIVIDUAL
An authorized financial services provider or a representative carrying on business as
• A corporate or unincorporated body
• Trust
• Partnership (any natural person responsible for managing or overseeing, either alone or together with other responsible persons)
5. REPRESENTATIVE and REPRESENTATIVES UNDER 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:
• advice on the procedure for entering into a transaction
• in relation to the description
• in answer to routine admin queries
• in the form of objective information about a particular product
• the display or distribution of promotional material
• an analysis or report on a financial product without any
• express or implied recommendation, guidance or proposal
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
FAIS ACT 8 2010
individuals or suitably qualified representatives until such time as the
incoming representative has;
• Completed the minimum experience requirements as per the
attached Table A,
AND
• Completed the required qualification (OR credit levels for
representatives appointed for the 1st time during 2008 or 2009)
AND
• Completed ALL the required Regulatory exams – levels 1 and 2
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 others this detail could be provided verbally or by the presentation of 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.
FAIS ACT 9 2010
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:
• indicate on the representative register whether the
representative is acting under supervision, and
• differentiate on the representative register between
representatives that are acting under supervision and those that
meet all the requirements and are not acting under supervision.
• Issue a representative mandate letter that signifies their
supervision status.
Objective of the supervision period At the end of the supervision period the supervisee will have 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 of financial products detailed above.
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
FAIS ACT 10 2010
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 or subcategories 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:
• ensure that supervisees are supervised at all times when
executing their duties in terms of the supervisory arrangement;
• ensure that the supervisee has a good understanding of and
exposure to the Categories and/or subcategories in which he or
she is providing financial services;
• observe selected meetings between the supervisee and
customers, the frequency of which may vary according to the
complexity of the service that is provided; and/or the complexity
of the products offered; and/or the experience of the supervisee;
and/or the qualifications of the supervisee;
• ensure that the supervisor is able to provide properly
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);
• assess the advice given by the supervisee for appropriateness
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
• Supervisees are expected to obtain experience across the
FAIS ACT 11 2010
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
-place the supervisee in a position where he or she can
gain experience in the specific subcategory; or
- extend the period under supervision to ensure that the
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:
1. The supervision period is linked to the Category or subcategory
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
2. The maximum period any representative can act under
supervision in any Category or subcategory, is six (6) years from
date of first appointment as a representative;
3. Representatives who give advice and/or render intermediary
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
onerous Category or subcategory is met;
4. Any significant interruption during six (6) consecutive weeks (or
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.
FAIS ACT 12 2010
5. The supervisee must have properly documented evidence of the
supervision, the method followed and frequency thereof that
took place during the period under supervision.
In addition the Supervisees must:
• adhere to the requirements of this supervision contract;
• provide the supervisor upon request, where applicable, with any
records and or documents regarding the advice given and/or
intermediary services rendered;
• disclose to clients that he or she is acting under supervision;
• actively pursue the completion of the required qualifying criteria
within the prescribed time limits;
• undertake the relevant product training;
• request guidance from the supervisor if in doubt when
performing any duties in relation to the supervision contract;
• perform the tasks and adhere to the mandates detailed in
Annexure B: Formalised Procedures and Mandates; and
• follow the procedures for providing advise and intermediary
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;
1. Direct Supervision – this is the MINIMUM supervision standards
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
2. Ongoing supervision – after the initial Direct supervision period
FAIS ACT 13 2010
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:
• Sign-off by a supervisor on the advice given to a client;
• Pre-transaction sign-off by a supervisor where intermediary
services are rendered;
• Attending meetings with supervisee and clients where the
purpose of the meeting is the rendering of financial services;
• Appropriate post transaction sampling;
• Follow-up calls to clients after the rendering of financial services
by the supervisee to confirm certain aspects of the interaction
with the client;
• any other activity that enables the supervisor to scrutinise the
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
o on completion of the experience period required in terms
of the category of license and completion of the
qualification requirements determined in the Fit and
Proper requirements in the FAIS Act 2002 whichever
occurs last; or
o on an earlier date if:
‐ the supervisee fails to achieve the requirements in 5.1
FAIS ACT 14 2010
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.
FAIS ACT 15 2010
16
7. WHO ARE THE DIFFERENT ROLE PLAYERS IN THE LEGISLATION
FINANCIAL SERVICES BOARD
RECOGNISED
BODY
KEY
INDIVIDUALS
FINANCIAL
SERVICES
PROVIDER
EXTERNAL
AUDITOR
COMPLIANCE
OFFICER
REPRESENTATIVES
(advice givers)
Support staff
(non Advice-giving staff) FAIS ACT 2010
8. WHAT ARE THE FUNCTIONS OF THE ROLE-PLAYERS?
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
FAIS ACT 17 2010
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
secretary. These are not advice staff giving.
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
1. GENERAL CODE OF CONDUCT for authorized FSP’S
and representatives
2. Determination of Procedure for APPROVAL OF KEY
INDIVIDUALS
3. Financial advisory and intermediary services
REGULATIONS
FAIS ACT 18 2010
4. Determination of FEES PAYABLE to the Registrar of
FSP’S
5. Determination of FUNCTIONS TO BE PERFORMED BY
RECOGNISED REPRESENTATIVE BODIES
6. Rules on proceedings of the OFFICE OF THE OMBUD for
FSP’S
7. Determination of COMPLIANCE REPORTS BY
COMPLIANCE OFFICERS AND AUTHORISED FSP’S
8. Determination of FIT AND PROPER REQUIREMENTS for
FSP’S
9. QUALIFICATIONS AND EXPERIENCE OF COMPLIANCE
OFFICERS in respect of Financial Services Business
10. Determination of form and manner of REPORT OF
EXTERNAL AUDITOR of authorized FSP’S on money and
assets held on behalf of clients
9. PROTECTION THAT THE FAIS LEGISLATION GIVES 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
of industry to display professionalism and put client’s
needs before their own.
The Code of Conduct combined with the Consumer
Education drive should result in consumers becoming
FAIS ACT 19 2010
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
6. A provider must-
(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:
1. The Ombud’s office, and 2. The authority given to the Registrar to apply for
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.
10. THE ROLE OF THE OMBUD IN TERMS OF THE ROLE IN SUPPORTING FAIS
FAIS ACT 20 2010
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
Section 20 of FAIS Act introduces the Ombud’s office and its
functions and objectives:
Ombud for Financial Services Providers
Office of Ombud for Financial Services Providers
20. (1) There is an office to be known as the Office of the
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
FAIS ACT 21 2010
(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
FAIS ACT 22 2010
Category 2 – Short term insurance
Key Individuals
2004 - 2007
2008
Approved in 2009 First Time Approvals in
2010 First Time Approvals in
2011
1.Entry Level Requirements
Will have already
qualified
Will have already
qualified
Matric or Equivalent
Matric or Equivalent
Matric or Equivalent
2.Entry Level Experience
Requirements
Will have already
qualified
Will have already
qualified
As per supervisory
requirements.
Generally 12
As per supervisory
requirements.
As per supervisory
requirements.
3.Recognised Qualification
Not required only
minimum credits
(30/60) @ NQF level
by 31.12.2009
Not required only
minimum credits
(30/60) @ NQF
level by 31.12.2009
Completed by
31.12.2013
Approved qualification
prior to approval as KI
Approved qualification
prior to approval as KI
4.Regulatoty Examination
level 1 (RE 1)
By 31.12.2011
By 31.12.2011
By 31.12.2011
By 31.12.2012
Prior to approval as KI
5.Regulatoty Examination
level 2 (RE 2)
Not required UNLESS
you are a sole
proprietor
Not required
UNLESS you are a
sole proprietor
Not required unless you
are a sole proprietor, in
which case, to be
completed 31.12.2013
Not required unless you
are a sole proprietor, in
which case, to be
completed 31.12.2014
Not required unless you
are a sole proprietor, in
which case, needed within
6 years of authorisation
6.Continuous Professional
Development (CPD)
Specified number of
hours - as per table D -
over a 3 year period
once RE1 completed
and every 3 years
thereafter
Specified number of hours - as per table
D - over a 3 year
period once RE1
completed and
every 3 years
thereafter
Specified number of
hours - as per table D -
over a 3 year period
once RE1 completed
and every 3 years
thereafter
Specified number of hours
- as per table D - over a 3
year period once RE1
completed and every 3
years thereafter
Specified number of hours
- as per table D - over a 3
year period once RE1
completed and every 3
years thereafter
FAIS ACT 23 2010
Representatives
2004 - 2007
2008
2009
Appointed in & after 2010
1.Entry Level Requirements
Will have already qualified
Will have already qualified
Matric or Equivalent
Matric or Equivalent
2.Experience Requirements
Will have already qualified
Will have already qualified
subject to the balance of any
supervision rules
Generally 12 months
Generally 12 months
3.Recognised Qualification
Not required subject to
achieving 30/60 credits by
31.12.2009
Must complete qualification by
31.12.2013 OR obtain credits 30/60 @ NQF level by
31.12.2011
Must complete qualification by
31.12.2013
Full qualification within 6 years
of appointment although time
should be allowed to complete
RE2 after completion
4.Regulatoty Examination level
1 (RE 1)
By 31.12.2011
By 31.12.2011
By 31.12.2011
Within 2 years of appointment
5.Regulatoty Examination level
2 (RE 2)
By 31.12.2013
By 31.12.2013
By 31.12.2013
Within 6 years of appointment -
generally expected to be
completed after qualification
6.Continuous Professional
Development (CPD)
Specified number of hours - as
per table D - over a 3 year
period once RE2 completed and
every 3 years thereafter
Specified number of hours - as
per table D - over a 3 year
period once RE2 completed and
every 3 years thereafter
Specified number of hours - as
per table D - over a 3 year
period once RE2 completed and
every 3 years thereafter
Specified number of hours - as
per table D - over a 3 year
period once RE2 completed and
every 3 years thereafter
FAIS ACT 24 2010
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