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Section 1A – Fundamentals of the financial planning profession
 The financial advisor (1.1)
- “a person who provides a variety of services, principally advisory in nature, to consumers with
respect to management of financial resources based upon an analysis of individual consumer needs
and goals”
- A financial advisor is an individual who guides to meet your current financial needs and long-term
goals. They access your financial situation, understanding what you want your money to do for you
now and in the future. They help you create a plan to achieve those goals.
- Financial advisors can assist individuals reduce their spending, paying of debit, saving and investing
for the future.
- Specialised in Tax, Managing investments or Retirements.
- Certified financial planners- general partitions that offer advise on everything, budgeting, investing,
insurance and retirement plan.
Definition by Supreme Court of Appeals: Any person (whatever his designation) who offers
information and advice on financial planning or investments or procures investments, for
reward by way of commission or otherwise.
 FPI Financial Planning Institute: Is the financial planning institute, it is regarded as the leading
independent professional body for financial planners in South Africa, it ensures that south
Africans have access to and value competent financial planning.
- Professionalism in financial planning rests on competence and ethics.
- As the caste don of the profession the FPI is uncompromising, establishing and maintaining world
class professional financial planning standards.
- Members of the FPI include both general practitioners and specialists in particular sectors of
financial plan.
Financial advisor: “means fit and proper financial institutions or representatives of financial
institutions that render financial advice to financial customers.”
Financial Planner: “a person who is authorised by a Professional Body to use a professional
designation afforded a person in the practice of Financial Planning, having met that body’s
competency and minimum experience standards, who is in good standing and who is subject
to that body’s code of ethics and conduct rules.”
- When the financial planning institute is referring to financial planners the normally refer to a
Certified Financial Planner which is a CFP.
- The CFP designation is internationally recognized as the standard for financial planning
professionals. This status gives consumers confidence that the financial planner they are dealing
with is suitably qualified to provide advise and information while giving assurance they remain up to
date with the developments in the industry.
- In order to receive the respected CFP designation an applicant must meet the four E’s these are
Education, Examination, Experience and Ethics.
 What characteristics and skills are required to be a financial advisor? (1.2)
 The financial planning profession is a people-intensive industry - interpersonal skills is
- Many people within the financial services would say focus on portfolio management skills,
accounting skills, income task calculations, retirement plan but the most important is the
Interpersonal skills.
- The financial planner’s business is services orientation, you have to deal with human beings, hence
building and maintaining relationships is extremely important.
 Most important – to be a persona of honesty and integrity.
 Essential to build sustainable and strong relationships of trust.
 Four important Interpersonal skills that a financial planner should focus on
1. Patience- You have to be patient and listen to what the client is saying, Vital information
can be found in there
2. Communication- The effectiveness of your advice will depend on how well you
communicate with your client; your speech must be certain so that your client takes you
seriously but at the same time is not intimidated. Must be simple and easy to understand.
3. Personal Touch- Refer to them by their first name or if they are elderly by their last name
will have an effective result.
4. Etiquette- People assume that someone becomes low on manners is equally low on
knowledge. Manners is very important in financial planners.
Other important characteristics and skills:
 Strength of character
 The ability to communicate well and positively influence people
 Credibility and trust – honest and ethical in nature
 The ability to offer a vision and direction
 Ability to work through and overcome difficulties
 Excellent listening skills
 Ability to solve problems creatively
 Organisational skills
 What is financial planning? (1.3)
“Financial planning” refers to: the organization of an individual’s financial and personal data for the
purpose of developing a strategic plan to constructively manage income, assets and liabilities to meet
near and long-term lifestyle goals and objectives.
 Financial products and services are referred to as ‘intangible’ products and services – cannot,
touch, hold or look at.
 Benefits of financial products and services only arise in the future.
 It is therefore important to build a relationship of trust with the client.
 Why is financial planning important? (1.4)
Effective financial planning gives individuals the opportunity to gain control over their own
financial affairs, maximise the use of available income/capital.
Financial planning is important because it can help you reach all your goals throughout each stage of
your life. It can help when you just getting started in your career, trying to pay debt and save for the
Planning can help protect your family from unexpected events.
Help worry less about market down turns
Through the process of financial planning, you can have less stress, more confidence, and more time
to focus on other things that make you happy.
The main benefit why is for a peace of mind and freedom to pursue other dreams and hobbies that
they might have and provide security for their families.
 Benefits of financial planning include
• Maximising wealth over the long term
• Ensuring financial independence after retirement
• Reducing debt
• Enabling clients to meet short term goals
• Assisting clients to be prepared for emergencies
• Meeting lifestyle goals at each stage of life
 Ensuring that affairs are in order at the time of death
 What a client looks for in a financial advisor? (1.5)
1. Integrity- Should never lie or stretch the truth for any reason, always put the client’s needs
before their wants
2. Accessibility and Punctuality- Are you reliable and available to your clients
3. Sympathy- How much do you care about your client’s pain, understand their struggles and
where they are coming from.
4. Clarity- clear out confusion,
 Behaving in an ethical, trustworthy, and honest way.
 Always putting the interests of the client before your own interests, the interests of the
financial services business and product suppliers.
 Offering products and services that fall within the range of your experience, knowledge, and
 What requirements must be met to practice as a financial advisor? (1.2.6)
Historically there was no form or system of regulating financial advisers and intermediaries,
clients had very little reports against dishonesty advisers, furthermore, to protect clients such as
complaints procedure and record keeping systems where not formally regulated.
-The FAIS act was introduced to regulate the business of all financial service providers who give
advice and provide intermediary services to clients, regarding a wide range of financial
- In terms of the act, such financial service providers need to be licensed and professional
conduct is controlled through the of conduct and enforcement measures.
 The FAIS act aims to achieve the following
1. Professional conduct
2. Protect Informed clients
3. Professional and acceptable sector
Prior to the FAIS (Financial Advisory and Intermediary Services) Act it was simple to work
as a financial advisor – few barriers to entry.
 Fit and proper requirements (chapter 2) introduced and the licensing of financial
services providers.
 Two options available:
1. Apply for license from FSCA (Financial Sector Conduct Authority) to operate as a FSP (Financial
Service Provider).
The FSCA’s (Financial Sector Conduct Authority) mandate is to enhance the efficiency and integrity
of financial markets. Promote fair customer by financial institution, provide financial education and
provide and promote financial illiteracy.
The FSP (Financial Service Provider) is a business that office financial advice or intermediary service
or both. Intermediary services can include Insurance companies, Brokerages,
An FSP is made up of key individuals who are responsible for the financial service provided and all its
representatives. The representatives are those who give advice on behalf of the office.
If a FSCA and FAIS requires that every FSP to be registered with the FSCA before they may legally
conduct business
2. Work as a representative of a licensed FSP.
 Ethics and the financial advisor (1.6.4)
FAIS Act and the General Code of Conduct
 The law prescribes a standard of ethical behavior (SA Constitution and Bill of Rights)
 Prescribes minimum standards of ethical behavior
Internal business policies and procedures- Policies
The policies and procedures of the business the financial advisor works for or has within his
own business.
These policies reflect the value the business places on ethics and integrity.
Professional bodies
All professional bodies (FPI) have ethical codes of conduct that must be adhered to by all
These codes also offer some protection to a client dealing with a member of a professional
Personal standards of ethics
Ethical challenges arise that fall beyond the prescribed standards.
It is easy to make the wrong ethical choice when there are no ethical structures in place.
Often need to make decisions based on knowledge and own personal standards of ethics.
Consider the possible consequences of making an unethical decision.
A code of conduct provides the minimum standard of ethical behavior required in a particular work
environment or situation.
The following codes apply to a financial advisor:
FAIS General code of conduct – Chapter 2
Provides for a general code of conduct for various categories of FSPs.
Business code of conduct
As an FSP, employees must abide by any codes of conduct as required by the business.
FPl – Code of Ethics and Professional Responsibility.
Provides a framework and a guideline for ethical and honest behavior that must be followed by
members of the FPI.
The code demonstrates a commitment to both professionalism and integrity.
 The Principles of the Code of Ethics and Professional Responsibility:
1. Clients first- Placing the client’s interest first is the whole mark of professionalism and is a core
value of unprofessional it requires financial planner to act honestly at all times and not place any
personal interest before the client’s interest.
2. Integrity- Adheres honesty, fairness, and consistency in all professional matters. Financial
planners are placed in a position of trust by their clients and the Ultimate source of that trust is
the financial planner’s personal integrity.
3. Objectivity- Requires intellectual honesty and impartiality regardless of the services delivered or
the capacity the financial planner functions, it required them to identify and to manage conflicts
of interest and exercise some professional judgement at all times.
4. Fairness- Requires providing clients with what they are due, owed or could legitimately expect
from the professional relationship. They must be fair and consider the need and expectations of
all stakeholders in a balanced and unbiased manner. Information must be provided in a way in
which it is easy to understand. treating others in the same manner that you would like to be
5. Competence- Requires obtaining and maintaining a high level of knowledge, skills, and abilities
in the provision of professional services. It also includes the wisdom to recognise one’s own
limitations, consulting with other professionals when in doubt and referring clients to others
should one not have the time, ability or inclination ultimately respond to a client’s needs.
6. Confidentiality-requires client information to people protected and maintained in such a
manner that allows access only to those who are authorized. A relationship of trust and
confidence with the client can only be brought on the understanding that the client's
information will not be disclosed inappropriate.
7. Diligence- requires fulfilling agreed upon professional commitment in a timely and fair manner
and taking due care planning supervising and delivering professional services at all times.
8. Professionalism- requires behaving with dignity and showing respect and good cutesy to client’s
fellow professionals and others in business related activities and complying with appropriate
legislation, regulations, rules, and professional requirements at all times.
 Section 1.8 – The financial planning environment
 The financial planning environment consists of the external environment as well as the internal
environment specific to each financial advisor of the financial planning business.
 Financial planning environment consists of external and internal
 Internal environments include factors that have a direct influence on the client’s financial
adviser of the organization
 External environment factors do not affect the organization, the client or the financial advisor
 Certain trends can be identified within the internal and external environments which may have
an impact on the financial advisor and the finances of the clients.
 It is therefore necessary to implement a system which enables you to keep up with the changes
taking place.
The external environment (1.8.1)
These include Global, Political, Demographic, Legal and Economic environment
Different factors outside of the financial services industry
Cannot be controlled
Global environment (
 Refers to the international environment in which countries and businesses operate.
 Globalisation means the breaking down of barriers between countries that would
previously have limited trade between them
thereby making use of differences in skills, resources, costs, tax rates etc.
 All economies becoming more and more connected through the process of international
 What occurs in other economies will have an impact on local economy and therefore on
performance of investments
 Global business or international business increases competition in domestic markets and
helps grow the South African economy and South African markets and introduces new
opportunities for foreign markets.
 Global competition encourages companies become more innovative and efficient in
their use of resources.
 For consumers global business introduces them to variety of goods and services.
Globalization allows companies to find lower cost rates to produce their products and services. It
also increases global competition which drives down prices and creates a logical variety of choices
for consumers lowered costs help that are developing and already developed countries live better in
less money.
Globalisation and technology resulted in many competing financial products appearing on local
- Easier to trade shares online
- Consumers can purchase foreign investments
Various courses available to teach clients how to manage their finances
Added pressure for local businesses to remain competitive!
No foreign business will invest in a country if the risk of losing investment
capital is too high. E.g State capture, Strikes, Water crisis and Power crisis
Regulatory environment (
Demographic environment (
Demographic environment, demographics are various treats that can be used to determine
product or service preferences or buying behaviors of consumers.
 Three treats of demographics
1. Purchasing Power- products and services appeal to different income groups and value is a
critical deciding factor of each product to buy or services E.g High dining establishments
painted to customers with higher income while those with lower income and hence waste
disposable income most likely to go to affordable restaurants. Another example, if your
businesses selling budget things to clothing items it is best to target people that have low
incomes through discount shops and wholesalers the business will not be successful at
selling to the boutiques in specialty retail shops where people with higher incomes go.
2. Geographic Region- geography also affects buying preferences and behaviors of customers
companies that want to grow sales and profits need to understand how geographic regions
impact consumer preference e.g a ski shop should place to store location near to mountains
and hills in colder regions putting a store like that in hot setting such as South Africa or
Singapore they'll generate no or next to nothing.
3. Age- products and services feel different age groups e.g millennials or people who are 55
years and below are early adopters of new gadgets such as the latest models of phones and
laptops and web access
 Changes within the population of the society
 Critical as they will impact on type of products and services that must be developed in order
to meet changing needs of population.
 Growth in households with two incomes
 Increase in single-parent families
Economic environment (
Economic environment, economic factors are connected with goods, services, and money.
Despite directly affecting businesses these variables refer to the financial state of the economy
at a greater level. whether that be local or global the reason for this is that the state of the
economy can decide many of the important details that come up in operating a company
including topics such as consumer demand, taxes, and asset value.
Factors in the economy which would have a direct impact on the financial services industry:
interest rates
economic cycle
 Section 1.9.1 - Trends in the financial services industry
Revenue-generating model (
Although most SA financial advisors are paid commission by the product supplier whose product
they have sold to the client, internationally there is a trend towards a fee-only model or a
combination of both commission and fees.
The type of revenue-generating model chosen by the financial advisor will depend on their
business model including the profile of their client base. The following revenue-generation
models are used:
 Commission
 Commission is a form of payment to a brokerage in which the brokerage receives a percentage
of the value of each transaction that the client orders and purchases. The brokerage then pays a
percentage to the financial advisor once the transaction is complete.
 This is a payment made by a product provider to a financial advisor on the sale of a
product to a client.
 It becomes due and payable on the acceptance of the investment or insurance contract
and/or over the term of the contract.
 Time-based fee
 Time based fee this key calculation is pretty simple advisers charge for the hours actually spent
working with the time, the advice or the financial planner will prepare a quote before getting
any advice and both the time for the hours that they actually spent working with the time
 This is a fee charged directly to the client by way of an invoice in respect of advice given or
services rendered.
 A time-based fee is usually calculated according to the number of hours taken to provide the
advice or services in question multiplied by a defined hourly rate.
 Per project carried out on behalf of client
 Per Project Carried out on the Client the financial planner would list the services that they
provide, and these services would be performed at a fixed fee for each service that is carried
 The financial advisor charges a specified amount for a specific piece of work being undertaken
on behalf of a client.
 Some financial advisors use a model that combines both commission and fees charged per item
of work undertaken on behalf of the client.
 Asset-based fee
 The asset-based fee structure the financial planner may charge at the percentage of assets as an
initial fee and then an ongoing fee expressed as a percentage of assets under management
being barricaded percentage of the assets that they are managing as a fee.
This fee is usually based on the size of the contract that the client agrees to pay the
financial advisor in respect of advice given and/or services carried out on behalf of the
Following agreement with the client, the fee can be collected by the product provider
from the client’s funds or contribution and paid to the financial advisor.
When there are assets under management the fee charged might be by some calculation
of net worth.
The fee can be expressed as a percentage of the assets invested or as a percentage of the
 Section 1.10 – Professional Membership bodies
Financial Planning Institute (1.10.1)
Financial services industry has a number of membership bodies within the different sectors of
the industry.
Each body plays a different role by representing the needs and interests of the members that
belong to it.
Membership and the level of membership is usually based on competence or involvement in a
particular sector.
In most cases, members must conform to a specific code of conduct.
- The South African institute of chartered accountant
Health professions council of South Africa
- The South African institute of architects SAIA
Financial planning institute is regarded as the leading independent professional body for
financial planners in South Africa professionalism in financial planning rests on competence and
ethics as the custodian of the profession the FPI is uncompromising in establishing and
maintaining world class professional financial planning standards ensuring that members remain
competent and ethical to retain their professional status.
Main membership bodies include Financial Planning Institute
Dedicated to the profession of financial planning. Standard setting membership body.
Can issue CFP certification to qualified members
Professional status that is globally recognised
- Membership levels
Certified Financial Planner (CFP®)
Financial Services Advisor (FSA™)
To become a member, advisor must comply with
a. Education requirements
b. Code of Conduct
c. Board examination
d. Experience level
Twin Peaks (1.12)
While South Africa’s financial sector is generally resilient it could be delivering better outcomes
for customers and the economy many customers in the financial sector are not treated fairly
and are often sold products or services that do not deliver value for money or complex and do
not perform as expected or not appropriate to their needs.
Twin Peaks is a comprehensive and complete system for regulating the financial system, it aims
to ensure better outcomes for financial customers and the wider economy by ensuring that
customers are treated fairly, that the funds are protected against the risk of institutions failing
and by reducing the risk of using taxpayer funds to protect the economy from systematic
Twin Peaks places equal focus on prudential and market conduct supervision by creating
dedicated authorities responsible for each of these objectives
Four objectives:
- Financial stability
- Consumer protection and market conduct
- Expanding access to financial services
- Combating financial crime
 Twin Peak also places a separate focus on financial stability
 Twin Peak system also represents a decisive ship by focusing on implementing with streamline
system of licensing, supervision, enforcement, customer complaints, appeals mechanism, and
customize advice and education across the entire financial sector.
 National Treasury issued a policy document (Feb 2014) – “A safer financial sector to serve South
Africa better”.
 Financial services sector has a large influence on the lives of South Africans - crucial it is wellregulated and stable.
 Fees charged in the industry must be more transparent, competitive and cost effective with
more South Africans having access to financial services.
 Intentions to introduce two regulatory bodies, “Twin Peaks” – Prudential Authority (SARB) and
Market Conduct Authority (FSCA).
 The Twin Peaks model refers two Peaks of regulation in the financial sector namely the
prudential Peak and the conduct Peak
- The Prudential Peak is called the Prudential Authority and functions as a subsidiary of
the South African Reserve Bank it is also called the system regulator and is mandated to
create any false prudential regulations.
The Conduct Peak is called the financial Sector Conduct Authority (FSCA) it's also called
good conduct by African authorities.
 Financial Sector Regulation Act 9 of 2017
Treating Customers fairly otherwise known as TCF is a framework that governs the way in which
FSP financial service provider conducts daily dealings with its clients ensuring that all clients are
treated fairly during all stages of the product life cycle and advise process.
Treating customers fairly published by the FSP in 2010 – aims to restrict abusive
practices within the industry thereby protecting the best interests of the consumer.
Focuses on the fair treatment of customers at all stages of the product life cycle (design,
marketing, advice, point of sale and after-sale).
Six desired outcomes of the TCF document:
1. Consumers should be confident that they are dealing with firms where fair treatment of
customers is central to corporate culture.
2. Products and services marketed and sold in the retail market should be designed to
meet the needs of identified consumers.
3. Advice should be suitable and take into account the consumers circumstances.
4. Consumers must be provided with clear information and kept informed before, during
and after the point of sale.
5. Consumers should be sold products that perform as firms have led them to expect,
within reasonable limitations
6. Consumers should not face unreasonable post-sale barriers imposed by firms to change
products, switch providers, submit claims or complain.
Retail distribution review (RDR) aims to stare the industry in the right direction to ensure that
clients are treated fairly, the question remains this would mean to the betterment of the
financial advisors and the sustainability of the industry?
- The implementation of RDR has been successful in countries such as the United
Kingdom and Australia showing improvements in service and product capability of
financial services and advice. However, they have been negatively infections as well such
as the decline in the number of advisers and increasing the number of unadvised clients
as they preferred financial decisions without any advice or they simply cannot afford the
fees charged by the professional financial plans or advisers
- RDR is changing the landscape of the emulation models of financial advisors with the
aim to ensure that clients receive fair treatment and advice which is not based on
commission earnings and incentives.
 FSB considering changes to remuneration models!
 Encourage the fair treatment of all consumers by ensuring that they are not
disadvantaged or overcharged.
Retirement reform is a process whereby government through policies seems to do the following:
- To encourage employees to save and provide adequately for the timing to ensure that
they retire comfortably and have income that lasts for their lives in retirement.
To encourage employers to provide retirement and saving plans to the employees as
part of the employment contract.
To ensure that employees receive good value for money for their retirement savings
and are treated fairly and that their savings are diligently managed and are kept
informed of their retirement savings to improve standards of retirement fund
governments and the protection of the members interests.
Draft legislation in place with regards to retirement reforms:
 Encourage individuals to make better decisions which will serve their long-term
 Ensure employers take greater responsibility for the financial well-being of their
 Section Part B – Regulatory environment | Role-players
1. Financial services Board (FSB)
2. South African Reserve Bank (SARB)
3. South African Revenue Service (SARS)
4. Financial intelligence Centre (FIC)
1. Financial planning institute (FPI)
2. Financial intermediaries associate of southern Africa (FIA)
3. Fiduciary institute of southern Africa (FISA)
MAIN ROLE PLAYERS PROIR-in terms of Twin Peaks model
1. South African Reserve Bank (SARB)
2. Financial sector conduct Authority (replaced FSB)
3. South African revenue services (SARS)
4. Financial intelligence Centre (FIC)
5. National credit regulator
6. National Consumer Commission
1. Financial Planning Institute (FPI)
 Has the responsibility of ensuring that relevant legislation is administered and enforced in
accordance with that legislation.
 Each body may have responsibility for a different sector or a different aspect of the financial
services industry.
 Long term insurers
 Short term insurers
 Pension and provident funds
 Unit trusts
 Stock exchanges
 FSCA -The financial sector conduct authority
 The financial sector conduct authority FSCA previously known as the Financial Services
Board (FBS) is the market conduct regulator of financial institutions which offer financial
products and financial services
 It is also the market conduct regulator of the license financial institutions which includes
banks, insurance, Retirement fund, administrators, and marketing infrastructure.
 The core mandate of the FSCA
- Enhance and support efficiency and integrity of the financial system
- Protect financial consumers by ensuring them fair treatment by financial institutions
- Assist in maintaining financial stability in South Africa
- Provide financial customers with financial education and information
- Hold accountable anyone who jeopardizes the financial well-being of customers.
- Financial service providers
Life insurance
- Short term insurers
- Reinsurers
- Pension funds
Provident funds
- Retirement annuity funds
Pension fund administrators
- Friendly societies
- Collective investment schemes
Financial market (JSE, SAFEX, BESA)
- Portfolio and investment managers
Participation bond schemes
Linked investment service providers
Insider trading
 SARB -The South African Reserve Bank
 The South African Reserve Bank is the central Bank of South Africa
 Primary purpose of the bank is to achieve and maintain price stability in the interests of
balanced and sustainable economic growth together with other institutions plays pivot role
ensuring financial stability.
 Responsible for foreign exchange regulations applying to SA currency
 Protection and enhancement of financial stability
 Statutory body
 South Africa’s central bank
 Regulates all banking institutions
 Responsible for foreign exchange regulations on SA currency
 SARS South African Revenue Service
 The mandate in the South African Revenue Service is to collect all revenues due, ensure
optimal compliance, tax and customs legislation, and provide a Customs and Excise service
that will facilitate legitimate trade as well as predicted economy and society.
 Statutory body, responsible for tax legislation
 Regulates aspects of retirement funds
 Responsible for collecting revenue on behalf of the state of South Africa
 FIC -financial intelligence Centre
 The purpose of the financial intelligence Centre is to establish and maintain an effective
policy, compliance framework, and operational capacity to identify in combat crime, money
laundering, and terror financing, in order for South Africa to protect the financial system,
develop the economy and be responsible global citizen.
 Provides a central point for all matters relating to money laundering in South Africa.
 Also collects information as specified in the Financial Intelligence Centre Act
 Created and governed by Financial Intelligence Centre Act No 38 of 2001 FICA
 Provides a central point for all matters relating to money laundering
 Including identifying proceeds of unlawful activities & money laundering activities
 Imposes duties on institutions and other persons that may be used for money
laundering purposes
The tribunal was established in terms of section 219 of the financial sector regulation act
came into effect on the 1st of April 2018 when it replaced FSB appeal board.
 The tribunal is responsible for the reconsideration of decisions made by decision makers
such as the on board, the financial sector conduct authority, even the financial services
provider and provides for a new appeal route when aggrieved party
 FSP’s financial service providers may sometimes find themselves on the wrong side as they
face ambit determination or regulatory action by the FSCA and maybe the dissatisfied with
FSB’s decision to debar him or her, the tribunal provides them with an Avenue for the
decision made against them to be reconsidered independent- however if an FSP or
representative for example wants to approach the tribunal they should understand the
parameters within which the tribunal has to operate and the various steps and timelines
which they need to follow. A decision made against them would have far reaching financial
and or reputational implications, following the rules carefully would give him a bigger
chance of being heard.
The Financial Sector Regulation Act 9 of 2017 (FSR Act) establishes the independent Financial
Services Tribunal in terms of Section 219 of the FRS Act.
This tribunal will replace the current FSB Appeal Board.
This Tribunal will reconsider decisions as defined in the Act and perform the other functions as
conferred on it by the Act and specific financial sector laws.
1. Banking Association South Africa- provides comments and submissions on regulatory
changes and consumer concerns
2. Insurance Sector Education And Training Authority INSETA- development of skills in the
insurance sector.
3. Institute Of Bankers In SA-IOB- provides education to the banking industry.
4. Institute Of Retirement Funds IRF- nonpolitical body that represents the retirement
industry in negotiations with the government and FSB.
Association For Savings And Investments ASISA- plays an important role in the
development of social, economic, and regulatory framework.
6. South African Insurance Association SAIA- creates awareness and understanding in the
short-term insurance industry.
7. South African Institute Of Financial Markets SAIFM- aims to promote professionalism and
integrity in the SA financial markets.
8. Compliance Institute Of South Africa CISA- aims to encourage and promote compliance
within the SA financial service industry.
Consumer protection and market conduct (1.13)
Ombudsman for banking services
Ombudsman for short term insurance
Ombudsman for financial service providers (FIAS ombud)
Pension funds adjudicator
Ombudsman for long term insurance
National credit regulator
 Financial compliance is all about enabling transparency and integrity in the financial markets,
while protecting customers, investors, the economy and society from financial crime, market
manipulation, ethical threats, and systematic risk.
The nature of financial products
 Are intangible
 Benefits only arise in the future
- A high degree of trust is needed between product supplier, FSP, representative and client!!
- In the past many clients were given incorrect advice and sold inappropriate products!!
Decision made to regulate the previously self-regulated financial services industry.
What is compliance?
 Compliance covers the actions, procedures, guidelines, and business culture that support the
adhering to government legislation, industry regulations, and internal policies.
 Financial compliance focuses on how the business, workforce, workflows, operations, and
relationships are managed at a financial services organization.
- “To act in accordance with”
- Meet the requirements of the legislation (FAIS)
- Provides for minimum standards of behavior that apply to certain people in the FS industry
- Must understand and implement all requirements and standards of the Act.
Why the need for compliance?
 Why the need for compliance? It helps to ensure financial institutions operate responsibly and
therefore maintain consumer confidence in the financial sector.
Since financial crisis of 2008 financial regulators have been ramping up their efforts to protect
investors, prevent market abuse, and pursue suspicious trading activities, while also imposing
penalties on law breakers
Low levels of understanding of financial products and services by consumers (especially in SA)
Unethical financial advisors
Complex financial products
The main objectives of compliance
 Sets standards and requirements for the industry
 To protect the members of the public
 Educating and informing the members of the public to make inform decisions
 To encourage financial advisors to follow good business practices
 To promote confidence in the financial services industry
 Protecting financial customers
 Promoting the fair treatment and protection of financial customers by financial institutions
 Supporting fair and transparent and efficient financial markets
 Promotion of innovation and the development of an investment in innovative technologies
processes and practices
 Promotion of trust and confidence in the financial sector
 Promotion of sustainable competition in the provision of financial products and financial
 Promote financial inclusion turning which will in turn promote transformation of the financial
sector as a whole
Compliance risk (non-compliance)
 The consequences of noncompliance are serious,
 Noncompliance constitutes a statutory criminal offence in South Africa they all maximum
penalties that are imposed on prevention of provisions of certain acts and laws in South Africa.
 Penalties can include one that is on monetary value and imprisonment.
Reputational risk
brand suffers in the industry
Legal risk
department of financial advisor
Financial risk
financial penalty
Who is responsible / accountable for compliance?
Key individuals and representatives
financial services provider
financial services board/FSCA
 Historically there has been no formal system of regulating financial advisors and
intermediaries, aggrieve clients had very little recourse against dishonest advisors more
 Processes to protect clients such as complaint policies and record keeping systems were not
formally regulated before the FAIS ACT.
- Prior to FAIS there were limited rules regarding furnishing of financial advice and selling of
suitable financial products to consumers
- As a consequence, consumers were given incorrect financial advice and sold unsuitable
financial products
Commonly used acronyms
o FSB financial services board
o FSCA financial sector conduct authority
o FAIS financial advisory and intermediary service act
o FICA financial intelligence Centre act
o FSP financial services provider
o KI key individual
o CPD continuous professional development
o CO compliance officer
o FAIS ombud the ombud for financial services providers
o MLRO money laundering report officer
What are the main objectives of the FAIS legislation? (2.1.2)
The aim of the act is to regulate the rendering of certain financial advisory and intermediary
services to clients (2.1.2)
The FAIS legislation has a strong emphasis on consumer protection in aims to create a formal
system of regulating financial advisors and intermediaries as a result of this a grief consumer will
be able to seek interest when they have been misled or misrepresented by representatives of
financial service providers.
The main objectives:
 To protect any person (a client) who is purchasing financial products and services
 To make sure clients are given enough information to make the right decision and choices about
their finances
 To regulate the selling of financial products and financial advice of FSP
 To professionalize the financial services industry
Outline of the FAIS Act (2.1.1)
 Chapter one I administration of the act
Registrar and deputy registrar
General provisions concerning registrar
Special provisions concerning the powers of the registrar
Delegation and authorizations
Fit and proper requirements
 Chapter two II authorization of FSPs
Authorization of if FSPs
Suspicion and withdrawal of authorization
Lapsing of license
Extensions in respect of products suppliers
 Chapter 3 III representatives of authorized f FSPs
Qualifications of representatives and duties of authorised FSPs
Department of representatives
Debarment by registrar
 Chapter 4 IV codes of conduct
Publication of codes of conduct
Principle of courts of conduct
 Chapter 5 V duties and authorised FSPs
Compliance officers and compliance arrangements
Maintenance of records
Accounting and audit requirements
 Chapter 6 VI enforcement
Office of Ombud for FSPs
general administrative powers
Powers of board
Receipts of complaints, prescription, Jurisdiction, and investigation
Record keeping
Application of the FAIS Act (2.1.3)
 No person may act as a financial services provider (FSP) unless they have been issued a license
(from the FSB) to do so (2.1.3)
 In terms of the FAIS act an FSP is defined as any person other than a representative who as a
regular feature of the business of such person furnishes advice or renders any intermediary
service or both this, could be an entity such as a large corporate also a product supplier or even
an independent brokerage.
- FSP’s as in natural person - sole proprietors
FSPS as legal entity- organ of state, companies, close corporations, partnership, trust,
anybody of persons- cooperate or unincorporated.
Key individuals 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 the distribution unit
in an FSP.
- Key Individual -A natural person employed by the FSP who is responsible for managing
and overseeing the activities of the FSP and all representatives
- Representative employee-a natural person who is employed by an FSP to provide
financial services to clients on behalf of the FSP
Representative mandatory -a representative who is contracted in the terms of a
mandate to carry out business on behalf of the FSP.
Important role-players (2.1.4)
Financial advice (2.1.6)
 Advice is defined as any recommendation, guidance, or proposal of the financial nature
furnished by any means or medium to a client or group of clients in respect:
- Purchase of or investment in any financial products
- Conclusion of any other transaction aim at incurring any rights or benefit or liability
in respect of financial product (including loan or cession)
- Variation, replacement, or termination of any financial product
 Applies regardless of whether: it is given during the financial planning process. it results in any
purchase, investments, transactions, variation, replacement, or termination
What is NOT considered as financial advice?
- The procedure for entering into a financial product transaction
- Description of a financial product
- Answering routine administrative questions
- Objective information about a particular financial product
- The display or distribution of promotional material
 Intermediary service refers to any activity other than the furnishing of advice that is performed
by a person for or on behalf of a client or product supplier in addition in each instance that
advice for intermediately service must relate to a financial product.
 Any act other than furnishing financial advice, performed which results in a client entering into
any transaction in respect of a financial product
With the aim of:
Buying, selling, or otherwise dealing in managing of (discretionary services), administering,
keeping in safe custody, maintaining a financial product.
Collecting or accounting for premiums or other money payable by a client
Receiving, submitting, or processing the claims of client in respect of financial product
Financial Sector Conduct Authority (2.2.1)
Role of the Financial Sector Conduct Authority (2.2.1)
 The role of the financial sector conduct authority FSCA is to assist in promoting fair customer
treatment by financial institutions which would include FSP's enhance the efficiency and
integrity of financial markets as a whole, provide financial education and promote financial
literacy and assist in maintaining financial stability.
- Performs an administration role and oversees compliance with the FAIS Act
- May issue notice and certain exemptions
- May require additional information from the FSP
- Require the FSP to appear before the Registrar on certain matters
Financial Services providers (2.3)
Financial services providers (FSP) (2.3)
 The simplest definition of a financial service provider is a business offering financial advice and
or intermediary services, examples of FSP’s are brokerages, insurance companies, banks, and
financial advisor business. E.g Discovery insure, Post office, Edgars, Investec, First National Bank
FNB, AVIS car sales
- Legal or natural
- Offer financial services to clients
- Meet fit and proper requirements
- Obtain license from FSCA
Definition of FSP
- Provide advice to clients
- Provide advice and any intermediary services
- Any intermediary services
Applying for license (2.3.1)
FAIS imposes definite requirements on the workloads and functions within the financial services
industry, financial service providers FSP must be licensed with the registrar before they may
legally operate in this role.
Entities and individuals must meet certain licensing requirements and all obliged in addition to
comply with a code of conduct before obtaining and there after returning their licenses.
FAIS also imposes definite requirements pertaining to education and experience before
financial service providers may give advice under various categories of financial products and
Applying for license
To be licensed as a financial services provider the applicant must submit an application to the
registrar in the form and manner determined by the registrar the application must be
accompanied by the information necessary to satisfy the register that the applicant complies
with fit and proper requirements for financial services provided the registrar will grant the
application for a license to be a financial services provider once satisfied that all the
requirements are met when an application is approved the registrar issues a license to the
applicant authorizing the applicant to act as a financial service provider.
Any person must meet the fit and proper requirements that apply to the category of license applicable
- FSP is accountable to the Authority for meeting compliance
- FSP is responsible for making sure that key individual/representatives meet the fit and proper
Categories of licenses (2.3.3)
Not all licenses issued are the same
Depends on which areas of financial services industry, the FSP have appropriate qualification
and experience
 Category I – all except admin and discretionary
Includes all FSP other than administrative or discretionary FSP
 Category II – discretionary – “investment manager”
A discretionary FSP renders intermediary services of a discretionary nature regarding the choice of
particular financial products
 Categories IIA – hedge funds
Applies to hedge fund financial services provide
 Category III – admin / intermediary services
Applies to administrative FSP’s who renders intermediary services in respect of financial products on the
instruction of a client, or another FSP, and through the method of bulking
 Category IV – business assistance FSPs
This category applies to assistance business financial services providers (assistance policies – e.g.,
insurance built into Foschini account)
How and where should a license be displayed? (2.3.6)
Displaying of licenses, all FSP licenses must be displayed license must always be available
reasonable to any person who has the right to request or wants to enter into a business
relationship with FSP, all advertisement, business documentation and promotional materials
must make reference to the FSP’s license, the license must be available for anyone with quests
proof that the business is license satisfied copies of the license mainly used for display purposes.
A copy of license, certified by commissioner of oath
Must be displayed in a durable manner in each of the business’ premises
In a prominent place in every business premises
The licensee must, at all times or within reasonable time, be available on request
Suspension or withdrawal of license (2.3.7)
The Registrar may subject to certain requirements anytime suspend or throw any license if
satisfied on the basis of available facts and information that the licensee has given the reason
for suspension or withdraw such reasons
- Don’t meet the fit and proper requirements
- Didn’t disclose all necessary information to Registrar
- Provided false or misleading information to Registrar
- Didn’t comply with any provision of FAIS
- Failed to pay penalty/levy/administrative sanctions to FSP
- Failed to comply with directive
- Failed to comply with condition/restriction
- Doesn’t have a key individual /a key to visual
What are the ‘fit and proper’ requirements that must be met? (2.4)
 Representatives of financial services providers offer financial services with respect to an array of
financial product and not acting for a variety of different financial services entities ranging from
insurance, and funeral brokers, investment institutions, financial planning entities, and core
 In order to protect investors from unethical and ill-informed advisors it is important that
standards be set for the preventatives of financial services providers in terms of honesty and
integrity and as well as product and regulatory knowledge
 In 2008 these tenants were raised by the introduction of a new fit and proper requirements in
terms of the FAIS act.
 A representative may initially be exempt from these requirements while rendering financial
services under supervision
 The FAIS Act spells out the standards of fit and proper that include the qualifications,
experience, and ethical character necessary to work in the financial services industry.
These include:
- Personal character qualities of honesty and integrity
- Competency
- Experience
- Qualifications
- Regulatory examinations
- Class of business training and product specific training
- Continuous professional development
- Operational ability
- Financial soundness
1. Personal character qualities of honesty and integrity
 Honesty and integrity the personal characteristics of representatives are clearly very
important as clients rely on representatives to guide them honestly with respect to
advice on financial services and products.
 The second property requirements state that in financial services provider may not
appoint a representative when evidence indicates one of the following
The applicant was found guilty within a period of five 5 years preceding the
application they were found guilty of criminal proceedings or liability in civil
proceedings by a way of court of law or fraud dishonesty unprofessional or
dishonorable activity
- The applicant has been found guilty by a statutory or professional body or
voluntary body of negligence incompetence or mismanagement
The applicant has been denied membership of a statutory professional or
voluntary body
- The applicant has also been found guilty by any regulatory or supervisory body
inside or outside the country who has not been authorized to carry on business
or they have been suspended withdrawn by any such body
- The applicant had a license granted by regulative body or had the license
withdrawn from the regulative body-the need to specify if it has been
The applicant has been disqualified from taking part in the management of any
company regardless of whether there is the disqualification has since been left
or not so meaning if they were disqualified from running the campaign but they
reinstated it doesn't matter it's still being disqualified so there needs to be
upfront wording by the client or the representative to say that they have been
disqualified from running the company representative also has the duty to
declare on her regular basis to the financial services provider whether he's
honesty and integrity status might have been affected.
 It is important to ensure that clients are dealing with persons who are honest and who
have integrity.
 Applicant is required to answer very specific questions as a means to determine their
honesty and integrity.
 If you answer yes to any of the questions, full details must be provided in a separate
Factors taken into account:
 Person acted fraudulently
 Dishonestly
 Unprofessionally
 Breach of fiduciary duty
2. Competency
 Under FAIS it is also mandatory for a financial advisor to conduct a thara needs analysis for the
client before giving advice.
 It is required to post a product comparison and explain the associated closing points imperative
that representative satisfies specific competency requirements before appointment.
 Reflective property requires the minimum experience and qualifications a key individual and
representatives must meet before appointment or must obtain whilst working under
 An FSP, key individual and representatives must meet the minimum competence requirements
and they are responsible for maintaining their competence.
Must have the ability to assess the appropriateness of products and services offered to clients.
FSP must be able to demonstrate and record the competence of key individuals – competence
Qualifications (Education)
 https://www.fsca.co.za/Regulated%20Entities/Pages/Qualifications.aspx
 Applies to all FSPs, key individuals and representatives
 Requirements do not apply to a Category I FSP, its key individuals and representatives that are
authorized to offer financial services in respect of long term insurance sub-category A and or
Friendly Society benefits; and
 A representative of Category I who is appointed to perform the execution of sales in respect of a
financial product
- Must involve the active and ongoing gaining of knowledge, skills and expertise required in terms
- Minimum practical experience based on categories
- For giving financial advice (2 months to 6 years)
- For intermediary services (2 months to 2 years)
Regulatory examinations
 The FPI administers the RE on behalf of FSCA for financial planners who are members of the FPI
 The second property requirements introduced regulatory exams these examinations have to be
completed by all the representatives and key individuals of financial services providers there are two
levels of regulation exams
- RE 1 (First level regulatory exam) - core
- RE 2 (Second level regulatory exam)
Regulatory Exam 1
 The first level of regulatory examinations are based on legislative and regulatory
understanding and applicable to all individuals at representatives no exemptions are
- Relates to financial sector law - FAIS, FICA
- Category I – LTI and Friendly societies (execution of sales exempt)
Regulatory Exam 2
 The second level of regulatory examinations are based on product specific knowledge and
applicable to representatives that do not hold minimum or recognise minimum
- Relating to the category or sub-category in respect of which the FSP, key individual or
representative are authorised to render financial services
 Representatives who are appointed for the first time from 2010 onwards have two 2 years
from date of appointment to complete the first level of regulated examinations they must
complete the relevant level two regulatory examination within six 6 years from date of first
Class of business training refers to training that focuses on general product category point in
relation to the line of business, whereas product specific training focus on the particulars of
the individual products offered by a product supplier IE the features, risks, benefits, and
characteristics of an individual product.
Class of business training and product specific training
Applies to all FSPS key individuals and representatives
Exemption applies to Category I FSPs in terms of Sub-category A and / or Friendly Society
benefits appointed to execute sales.
An FSP and its representatives are required to complete applicable class of business training.
FSP must ensure that its key individuals and representatives are proficient and understand
and have completed training on both the class of business in which the product falls as well
as the financial product itself.
3. Continuous professional development (CPD)
 Continuous professional development is the term used to describe the learning activities
professionals engaging to develop and enhance their abilities, it enables learning to become
conscious and proactive rather than passive and reactive
 It is the process of tracking and documenting the skills knowledge and experience you gain
beyond any initial training may have received.
 Highlight the importance of keeping up to date (relevant changes and trends in financial services
 Apply to FSP’s, key individuals or representatives
 Requires between 15 to 60 hours of development over a three 3 year-cycle
 Each individual is responsible for recording of all their CPD points
 If individuals hold membership in a statutory or voluntary professional body may be exempted
4. Operational ability (2.4.4)
 Operational ability refers to the functional skill capability and capacity of a person or
organization to perform certain duties to perform certain tasks and obligations.
 An FSP must ensure that the way the pointy representative that person must possess the
operation ability to effectively function as a representative for the FSP or perform the activists
for which that person was appointed for.
 Applies to both natural and legal
 Fixed business address
 Access to communication facilities
 Adequate storage and filing
 An account with a registered bank
 Systems and processes to ensure compliance
 Governance framework corporate governance, risk management
 Automated advice – Furnishing of advice through an electronic medium that uses algorithms
and technology without the direct involvement of a natural person
 Fit and proper requirements prescribe additional responsibilities of an FSP.
 Required to have adequate and appropriate human resources with the required competence to
understand the technology and algorithms used to provide automated advice.
Review and monitor to ensure quality and suitability of advice in compliance with FAIS
5. Financial soundness (2.4.5)
 Financial service providers must maintain financial resources that are adequately carry out their
activities and ensure that they can meet their liabilities as this fall due.
 FSP’s must, set up how it will ensure it has adequate financial resources and how it will manage
and monitor compliance with the financial soundness requirements applicable to their type of
 Must not be insolvent, under liquidation or provisionally liquidated
 Assets must exceed liabilities
 Liquid assets equal to 4/52 weeks of annual expenditure must be maintained
 When liabilities exceed assets by 10% this must be immediately communicated to the Authority
in writing.
 Must have adequate financial resources to cover risks it may be exposed to.
Fit and Proper requirements
Person character Honesty and
competence: experience
competence: qualification
competence: regulatory examination
competence : class of business
training and product specific training
operational ability
financial soundness
FSP (legal
FSP (Natural
The duties of an FSP (2.5)
 An authorized FSP once authorized must amongst other things
- Maintain a register of representatives
- Take reasonable steps to ensure that the representatives comply with the applicable codes of
conduct as well as other laws relating to conduct of our business
Be satisfied at all times that the representatives offered improper, meaning that they must be
competent in terms of qualifications and experience
Honest and have integrity or it operationally sound and a financially sound
FSPs must also display a certified copy of the licenses within every business premises and include
the reference to the license in all business documentation advertisements and promotional
FSPs must maintain proper accounting records in respect of the business carried on by the
authorized provider such records will have to be audited by an external auditor and approved by
the registrar
They must maintain records for a minimum period of five 5 years when signing various
transactions and complaints received amongst others.
Record keeping duties
 Documents must be kept for a minimum of 5 years
Documents to be kept:
- Known premature cancellation of transactions or financial products
- Complaints received together with an indication of whether the complaint has been resolved
- All the requirements specified in Section 8 (licensing and authorization)
- Any case of non-compliance with the act and reasons for noncompliance
- Continued compliance by representatives with the requirements specified in the act
The role of the key individual (2.6)
 A key Individual of an FSP is responsible for managing and overseeing the activities relating to the rendering
of any financial service
 Key individuals have an enormous responsibility to ensure that they carry out their duties with the
necessary due care, skill, and diligence.
 The Key individuals role is to ensure that the FSP has policies and procedures in place to ensure compliance
with the general code of conduct and the fitting properly clients, because of this Key individuals should
make sure that they are fully knowledgeable and understand what it means to manage and oversee a FSP
and should do so with great care and clear knowledge of the obligations and duties which they will have to
carry out.
- Natural person that manages a FSP
- Manages and overseeing the activities of a FSP
When can person start acting as a key individual? (2.6.3)
- Registrar must approve application
- Comply with fit and proper requirements
Duties and responsibilities of a key individual? (2.6.4)
- Conduct of the business
- Management of the business including day-to-day running of the business
- Oversight of the business
- Ensuring compliance
Representatives of authorised financial services providers (2.7)
 The role of a representative is to Provide financial services to clients for or on behalf of the FSP in this role
the representatives could be an employee of the FSP he could also provide the service in terms of any other
mandatory agreement with FSP this means that the representative may also be a consultant and outsource
person with temporary employee
 example would be John is employed by XL Life this agreement authorizing to provide financial services for
XL life clients, John is a representative for XL that authorize financial services provided.
Example, Jack is an independent broker he has a mandate with XL life this agreement authorizing him to
provide financial services on behalf of XL life to clients, Jack is a representative for XL life as well authorized
by FSP.
- Is an employee (natural or legal) of an FSP who renders financial services on behalf of FSP.
- The FSP accepts full responsibility for activities of their representative
Licensing of representative (2.7.2)
The representatives render intermediary service or gives a advice to clients on behalf of an authorized
FSP, as such the representative does not act for him/herself but for the FSP.
Representatives are pointed by the FSP and the FSP takes responsibility for their actions and
omissions of the representatives, it is important that the FSP ensures that the representatives will act
on its behalf in all the regulatory requirements.
- Representatives need to be able to provide proof at all times that they are authorized to act
as representatives of the FSP, the FSP has to confirm that it accepts responsibility for the
activities of its representatives.
- Do not need to be licensed by the FSCA
- FSP has the responsibility of ensuring that any representative meet the fit and proper
- The representative must be added onto the representative register, which is regularly updated
Representative Register (2.7.5)
The FSP must maintain a register of representatives and key individuals which must be regularly
updated and be available to the register for reference or for inspection purposes.
The register must contain every representative or key individuals name and business Admins and
state whether they representative acts for the FSP as employee or as mandator and specify the
categories in which the representatives are competent to render financial services
The purpose of the register is to supply sufficient information to the registrar so as to enable the
registrar to maintain and continuously update the central register of all representatives and key
- Must contain the name and business address of every representative
- State whether representatives act as employee or as mandatory
- It must specify the categories in which representative is competent to act
- Must specify whether the representative is acting under supervision
- This allows the registrar to keep a central register of all representatives
Supervision (2.7.6)
What is meant by acting under supervision, well when a representative does not meet the prescribed
fitting proper requirements of experience, qualifications, and regulatory examinations the
representative will be given a chance to work under supervision until he or she becomes compliant.
Representatives can only be offered the opportunity to work under supervision if the licensed if FSP
can satisfy the registrar that it has the required operational capability to facilitate services under
- Financial services carried out by a representative who do not meet the competency
- They can act under the guidance, instructions, and supervision
- This enables representatives to be appointed by FSPs
- RE1 – complete by 30 June, 24 months from date of first appointment
- RE2 – within 6 years from date of appointment
Direct supervision the representative is supervised on a regular basis daily and weekly
Ongoing supervision takes place on at least a biweekly or monthly
Responsibility of the FSP pertaining representatives
 A services contract/mandate agreement must exist
 FSP must accept responsibilities for the activities of the representatives (performed within
 FSP must be satisfied that all representatives employed are competent and fit and proper
 FSP ensure that representative comply with applicable code of conduct
 A register of representatives of the FSP must be maintained and regularly updated
Debarment of a representative (2.7.7)
 Debarment means that you have been excluded from being able to practice on behalf of an FSB.
 Representatives who no longer comply with the fit and proper requirements has to be excluded
by the FSP from providing financial services.
 The FSP is responsible for debarring the representatives
 The purpose of debarring is to remove representatives who are no longer fit or proper or have
been or have disobeyed the requirements or conditions of the FAIS act and ensure that they are
prohibited by the FSP from providing any new financial services in the future.
- Means that representative no longer acts on behalf of the FSP
- May not give advice or offer intermediary services
- The FSP withdraws the authority to act on its behalf
Why would a representative be debarred?
- No longer meets the fit and proper requirements
- Has contravened or failed to comply with the Act
Compliance officers and compliance arrangements (2.8)
Compliance officers (2.8)
 The role of a compliance Officer can be defined in three main functions namely support, monitoring,
and training.
 In terms of the FAIS act the following roles are explicitly mentioned in the legislation these roles are:
- Monitor compliance with the FAIS act
Submit compliance reports and other compliance related reports to the registrar
Take responsibility for liaising with the registrar
- Supervise the compliance function which is established by the FSP
Act with diligence, care, and degree of competency required from a compliance officer
- Provide the FSP with the written reports at least quarterly indicating the course of and
progress achieved with compliance monitoring, duties, and make recommendations to the FSP.
 Assist the FSP to establish and maintain compliance
 Three main areas of a compliance officer are monitoring, supporting, and training
Who must appoint compliance officers? (2.8.1)
 In terms of section 17 one of the FAIS act it prescribes that if an FSP with more than one key
individual or one or more representatives must appoint a compliance officer.
- Any FSP
- Has more than one key individual or one or more representatives
Who can be appointed as a compliance officer? (2.8.2)
Application for approval of a compliance officer must be submitted on form FSP 30 and must be
accompanied by all the information required for the purpose of assessing such application
 The information or proof required is as follows
Completed form FSP 13
Details of employment history that shows that an applicant has at least three 3 years’
experience in the financial services industry
A certified copy of an accounting or legal university or its equivalent or proof that a
person is already appointed as a compliance officer by virtue of other law or that the
applicant is a member of the compliance institute of South Africa.
Bank information that shows that the applicant complies with personal character
qualities of honesty and integrity
Proof that the applicant has sufficient knowledge of the FAIS act as well as the duties
and obligations imposed on compliance offices by state
Proof that the applicant has adequate resources to ensure proper compliance
monitoring support and direct access to management
Proof that the applicant has the ability to operate objectively and independently
Proof that applicant has the ability to function in a manner that ensures that there is
no actual potential conflict of interest
proof that the applicant has the ability to keep written records of all activities
undertaken the course of compliance monitoring
Proof that the applicant has the ability to leis directly with the registrar
- FSP may appoint an external compliance officer
- Must fulfill the qualification and experience requirements
- Ultimate responsibility for compliance with the requirements and standards of FAIS Act - FSP
- FSP may appoint an internal compliance officer
- Need not meet the qualifications and experience of external compliance officer
- FSP must apply for approval of the compliance officer from the FSCA
Duties of a compliance officer (2.8.3)
Monitoring compliance with the requirements and standards specified in the FAIS act
Submit a compliance report, annually
Creating, implementing, and monitoring systems and procedures to ensure compliance(controls)
organize and carry out training
Offer support with regard to compliance problems
Supervise the compliance function on behalf of the FSP
Liaise with the registrar