The Fia Code of Conduct
&
Facing the FAIS Ombud
Presented by
Anton Swanepoel
The FIA Code of Conduct
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Welcome and introduction
The Fia Code of Conduct
Documentation required in terms of FAIS
The contractual relationship between FSPs and their clients
Vital information to be recorded to prevent client complaints
Recording process and documentation (templates) in respect of Short-term
insurance products – New clients
Recording process and documentation (templates) in respect of Short-term
insurance products – Renewals
Tea Break
Recording process and documentation (templates) in respect of Health care
products
Recording process and documentation (templates) in respect of Long-term
insurance products
Comfort break
Recording process and documentation (templates) in respect of Investment
products
Close
Introduction
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2.
3.
4.
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6.
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9.
Presentation content and templates on www.cebs.co.za
Launch date 7 August 2013
Access requires registration
No charge to independent providers and Fia members
Copyright conditions
Disclaimer
Website not a free compliance consulting business
Website will be updated regularly
The service is free for now, but may become subscription
based in future
10. Website goes live on Wednesday morning 7 August 2013
Introduction
1. How many clients does it take to build a sustainable
business?
2. How many clients does it take to ruin a business?
3. Can you face the FAIS Ombud if any of your clients should
complain?
4. Why do you say so?
5. What will you offer in your defense?
6. Do you have a specific strategy to reduce your advice risk?
Managing your advice risk
Great
Good
Average
Below average
Beginners
0
1
2
3
4
5
6 7
Years
8
9
10 11 12
The Fia Code of Conduct – Helping you to set new standards
1. The Fia Code of Conduct is aligned with your business process
2. The Fia Code of Conduct is aligned with the General Code
3. The Fia Code of Conduct was presented to the FSB FAIS
Supervision Department
4. The Fia Code of Conduct was presented to National Treasury
5. The Fia Code of Conduct Manual was presented to the FSB FAIS
Supervision Department
6. The Fia Code of Conduct and the Fia Code of Conduct Manual
has never been critisised or attacked
7. The Fia Code of Conduct was built on a sound foundation –
good quality record-keeping and the law of contract
•
The
FAIS
Ombud
Rules
Cases are won or lost based on facts.
• If we have the right evidence, chances are slim for us to
find against the financial services provider.
• Poor record-keeping
determinations.
is
at
the
center
of
our
Charles Pillai
30 March 2006
(Institute for International Research Seminar - Rosebank)
Hope for the best – plan for the worst
1. How does one determine the facts in any client complaint?
•
Look at the evidence
2. What is the right evidence?
•
Don’t tell me – show me?
3. What constitutes poor record-keeping and what constitutes good
quality record-keeping?
4. Does the General Code state that transactions must be accurately
accounted for?
5. If so, what is needed to comply?
6. What are you counting on to succeed against the Ombud?
7. If you do not use contracts when concluding transactions your
business is built on a weak foundation
Section 20(3) of the FAIS Act
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 (reasonable, impartial, just, even-handed,
justifiable, fair) in all the circumstances (conditions,
situations, environments), with due (owed) regard
(respect, favour, honour, concern) to –
(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.
General
Code of
conduct
Section 3(1) of the General Code of conduct
(d) the service must be rendered in accordance with
the contractual relationship and reasonable
requests or instructions of the client, which
must be executed as soon as reasonably possible
and with due regard to the interests of the
client which must be accorded appropriate
priority over any interests of the provider;
(e) transactions of a client must be accurately
accounted for
Transactions
1. How do estate agents account accurately for a transaction?
2. How does a bank account for a transaction when they grant a
loan?
3. How do you account accurately for a transaction when you
buy a car?
4. How do you account for a transaction when you sell your
shares in your business?
5. How would you accurately account for buying somebody
else’s business?
6. How does an insurer keep an accurate account of the
transaction between the insurance company and the client?
Section 8(1) of the General code of conduct
A provider other than a direct marketer, must, prior to
providing a client with advice –
(a) take reasonable steps to seek from the client
appropriate and available information regarding the
client’s financial situation, financial product
experience and objectives to enable the provider to
provide the client with appropriate advice;
(b) conduct an analysis, for purposes of the advice, based
on the information obtained;
(c) identify the financial product or products that will be
appropriate to the client’s risk profile and financial
needs, subject to the limitations imposed on the
provider under the Act or any contractual
arrangement;
Section 7(1) of the General code of conduct
A provider … must(a) provide a reasonable and appropriate general
explanation of the nature and material terms of the
relevant contract or transaction to a client, and
generally make full and frank disclosure of any
information that would reasonably be expected to
enable the client to make an informed decision;
(b) whenever reasonable and appropriate, provide to
the client any material contractual information
and any material illustrations, projections or
forecasts in the possession of the provider;
Section 9 of the General Code of Conduct
(1)
A provider must, subject to and in addition to the duties imposed by section 18
of the Act and section 3(2) of this Code, maintain a record of the advice
furnished to a client as contemplated in section 8, which record must reflect
the basis on which the advice was given, and in particular(a) a brief summary of the information and material on which the advice
was based (client’s needs);
(b) the financial product which were considered;
(c) the financial product or products recommended with an explanation of
why the product or products selected, is or are likely to satisfy the
client’s identified needs and objectives; and
Provided that such record of advice is only required to be maintained where, to
the knowledge of the provider, a transaction or contract in respect of a financial
product is concluded by or on behalf of the client as a result of the advice furnished
to the client in accordance with section 8.
The law of contract
1. Dr Franso van Zyl – Author of the FAIS Manual
I agree fully…that the law of contract fundamentally underlies all final
rendering of financial services under FAIS, and constitutes the final
‘accountability’ factor.
2. Prof Robert Vivien – Prof of insurance at Wits
3. RH Christie – Author of The law of contract
4. The late Charles Pillai – See the Birkin Case
Dr Birken FOC 2629/05/GP(1)
8 December 2006
An Investment Advice Agreement was entered into on the 29th
of October 2004. The agreement defines the contractual
relationship. [Par 4]
It is clear from section 20(3) of the FAIS Act that due regard
will be paid to the contractual arrangement or other legal
relationship between the complainant and any other party to
the complaint. [Par 25]
Consideration must be given to the provisions of the
agreement.
Charles Pillai
Documentation required in terms of FAIS
1.
2.
3.
4.
5.
6.
Disclosure document
Client information, Needs analysis & risk profile questionnaire
Service agreement, client request or instruction [Section 3(1)(d)]
Written proposal and quotation(s)
Present the proposal
Product advice-, service- and risk agreement [Section 3(1)(d), 7(1) and
8(c)]
7. Application form
8. Record of advice as a closing letter [Section 9]
9. Minutes of meetings…
10. Client service requests / instructions
The contractual relationship between providers and clients
1. A contractual relationship between two parties are based on
offer and acceptance
2. Offer (proposal) and acceptance = Agreement
3. Agreement = Contract
4. Provider offers to render a specific service – on acceptance
by the client = Contract
5. Provider offers a policy or an investment proposal to a client
– on acceptance by the client = Contract
6. There are various contracts that are concluded between the
parties when a transaction is concluded
The Fia Code of Conduct
1.
2.
3.
4.
5.
6.
7.
8.
A professional introduction
Gathering information
Service agreement
Conducting an analysis and preparing a report and
recommendations
Presenting the client report and recommendations
Advice and intermediary service agreement
Implementation
Ongoing advice and services
Vital information to be recorded
1. The needs of the client
2. The risks the client is willing to accept
3. The specific service that was required / Specific service
request
4. Demonstrate the suitability of the product
5. Disclosure of the relevant material terms, conditions,
exclusions and fees
6. Record the agreement with regards to the product that was
recommended and accepted by the client
7. Send a confirmation letter / Record of advice
SHORT-TERM INSURANCE – NEW CLIENTS
1. The Fia Code of Conduct
2. Compliance documentation
3. Contracts
4. Facing the FAIS Ombud
The Fia Code of Conduct
1.
2.
3.
4.
5.
6.
7.
8.
A professional introduction
Gathering information
Service agreement
Conducting an analysis and preparing a report and
recommendations
Presenting the client report and recommendations
Advice and intermediary service agreement
Implementation
Ongoing advice and services
Documentation required in terms of FAIS
1.
2.
3.
4.
5.
6.
Disclosure document
Client information, Needs analysis & risk profile questionnaire
Service agreement, client request or instruction [Section 3(1)(d)]
Written proposal and quotation(s)
Present the proposal
Product advice-, service- and risk agreement [Section 3(1)(d), 7(1) and
8(c)]
7. Application form
8. Record of advice as a closing letter [Section 9]
9. Minutes of meetings…
10. Client service requests / instructions
Needs and risk profile – New clients
1.
2.
3.
4.
5.
6.
Assets or risks to be insured
The sum for which the assets or risks should be insured
The events that must be insured
The term of insurance
The price / premium of the insurance
Which risks are the client prepared to fund himself
The Suitability Test – New clients
1. Assets or risks to be insured defined in quotation / proposal
2. The sum for which the assets or risks should be insured
defined in the quotation / proposal
3. The events that must be insured defined in the quotation /
proposal
4. The term of insurance defined in the quotation / proposal
5. The price / premium of the insurance defined in the
quotation / proposal
6. Disclosure of relevant terms, conditions, exclusions and fees
7. Written acceptance
Advice agreement - New clients
1.
2.
3.
4.
5.
6.
7.
8.
Written offer and acceptance of product benefits - Cover
Assets and risks covered
The level of cover / extent of cover
The events that must be insured defined in the quotation /
proposal
The term of insurance defined in the quotation / proposal
The price / premium of the insurance defined in the
quotation / proposal
Disclosure of relevant terms, conditions, exclusions and fees
Written acceptance – Hard copy contract / Electronic
Electronic contracting
1.
2.
3.
4.
5.
Send electronic confirmation of discussion
Send electronic policy schedule
Ask for confirmation of correctness within three days
Use a standard clause to demonstrate care and diligence
Follow up three days later with standard clause to
demonstrate care, skill, diligence and professionalism
6. If there is no response, send final closing letter / record of
advice with standard clause to eliminate advice risk
Electronic contracting – Standard clause (first email)
Attached is confirmation of our discussion and agreement of the
relevant policy cover, applicable terms, conditions, exclusions
and fees. Please review the content and confirm its correctness
within 3 (three days) as from today. If there are any aspects that
have not been addressed, please notify us as a matter of urgency
so that we can include the cover. Please note that, if we do not
receive a response within this period, we will accept that our
confirmation is correct and accepted by you. Please also note
that if we receive no response from you, the policy will pay out in
accordance with our confirmation to you and the policy terms as
it stands now in the event of a claim.
Electronic contracting – Standard clause (second email)
We refer to our previous correspondence dated
________________ (three days ago). This email / letter serves as
a friendly, but urgent reminder to confirm the correctness of our
attached confirmation of our discussion and agreement of the
relevant policy cover, applicable terms, conditions, exclusions
and fees. Please review the content and confirm its correctness
as a matter of urgency. It is very important to understand that,
should we do not receive a response, we will have to accept that
you are in full agreement with the policy terms and you accept
that, should there be a claim, the policy will pay out in
accordance with our confirmation to you and the policy terms as
it was recorded.
Electronic contracting – Standard clause (third email)
We refer to our previous correspondence dated
________________ and ________________ (three days ago).
We hereby confirm that the policy will pay out in accordance
with our confirmation to you and the policy terms as it was
recorded in the attachment.
We take pleasure in attaching our record of advice for your
records. Please contact us if you have any questions in this
regard.
Electronic contracting – Record of advice
1.
2.
3.
4.
Executive summary of the client’s needs
Which products were considered
Which product was recommended
The reason for selecting the specific policy
•
•
•
•
Appropriate in view of the client’s needs
Terms and conditions were acceptable
Competitive premium
Other
SHORT-TERM INSURANCE – RENEWALS
1. The Fia Code of Conduct
2. Compliance documentation
3. Contracts
4. Facing the FAIS Ombud
The Fia Code of Conduct
1. Gathering information
2. Service agreement – annual renewal
3. Conducting an analysis and preparing a report and
recommendations if new assets / risks have to be
insured
4. Presenting the client report and recommendations
5. Advice and intermediary service agreement
6. Implementation
7. Ongoing advice and services
Documentation required in terms of FAIS
1.
2.
3.
4.
5.
6.
7.
8.
Disclosure document – none required unless there are changes on your
business profile
Client information, Needs analysis & risk profile questionnaire
Service agreement, client request or instruction [Section 3(1)(d)]
Written proposal and quotation(s)
Present the proposal
Product advice-, service- and risk agreement [Section 3(1)(d), 7(1) and
8(c)]
Application form – written instruction to renew with changes
Record of advice as a closing letter [Section 9]
Needs and risk profile – Existing clients
1.
2.
3.
4.
5.
6.
Assets or risks to be insured
The sum for which the assets or risks should be insured
The events that must be insured
The term of insurance
The price / premium of the insurance
Which risks are the client prepared to fund himself
The Suitability Test – Existing clients
1. Assets or risks to be insured defined in quotation / proposal
2. The sum for which the assets or risks should be insured
defined in the quotation / proposal
3. The events that must be insured defined in the quotation /
proposal
4. The term of insurance defined in the quotation / proposal
5. The price / premium of the insurance defined in the
quotation / proposal
6. Disclosure of relevant terms, conditions, exclusions and fees
7. Written acceptance
Advice agreement - Existing clients
1.
2.
3.
4.
5.
6.
7.
8.
Written offer and acceptance of product benefits - Cover
Assets and risks covered
The level of cover / extent of cover
The events that must be insured defined in the quotation /
proposal
The term of insurance defined in the quotation / proposal
The price / premium of the insurance defined in the
quotation / proposal
Disclosure of relevant terms, conditions, exclusions and fees
Written acceptance – Hard copy contract / Electronic
Electronic contracting
1.
2.
3.
4.
5.
Send electronic confirmation of discussion
Send electronic policy schedule
Ask for confirmation of correctness within three days
Use a standard clause to demonstrate care and diligence
Follow up three days later with standard clause to
demonstrate care, skill, diligence and professionalism
6. If there is no response, send final closing letter / record of
advice with standard clause to eliminate advice risk
Electronic contracting – Standard clause (first email)
Attached is confirmation of our discussion and agreement of the
relevant policy cover, applicable terms, conditions, exclusions
and fees. Please review the content and confirm its correctness
within 3 (three days) as from today. If there are any aspects that
have not been addressed, please notify us as a matter of urgency
so that we can include the cover. Please note that, if we do not
receive a response within this period, we will accept that our
confirmation is correct and accepted by you. Please also note
that if we receive no response from you, the policy will pay out in
accordance with our confirmation to you and the policy terms as
it stands now in the event of a claim.
Electronic contracting – Standard clause (second email)
We refer to our previous correspondence dated
________________ (three days ago). This email / letter serves as
a friendly, but urgent reminder to confirm the correctness of our
attached confirmation of our discussion and agreement of the
relevant policy cover, applicable terms, conditions, exclusions
and fees. Please review the content and confirm its correctness
as a matter of urgency. It is very important to understand that,
should we do not receive a response, we will have to accept that
you are in full agreement with the policy terms and you accept
that, should there be a claim, the policy will pay out in
accordance with our confirmation to you and the policy terms as
it was recorded.
Electronic contracting – Standard clause (third email)
We refer to our previous correspondence dated
________________ and ________________ (three days ago).
We hereby confirm that the policy will pay out in accordance
with our confirmation to you and the policy terms as it is
recorded in the attachment.
We take pleasure in attaching our record of advice for your
records. Please contact us if you have any questions in this
regard.
Electronic contracting – Record of advice
1.
2.
3.
4.
Executive summary of the client’s needs
Which products were considered
Which product was recommended
The reason for selecting the specific policy
•
•
•
•
Appropriate in view of the client’s needs
Terms and conditions were acceptable
Competitive premium
Other
LONG-TERM INSURANCE
1. The Fia Code of Conduct
2. Compliance documentation
3. Contracts
4. Facing the FAIS Ombud
The Fia Code of Conduct
1.
2.
3.
4.
5.
6.
7.
8.
A professional introduction
Gathering information
Service agreement
Conducting an analysis and preparing a report and
recommendations
Presenting the client report and recommendations
Advice and intermediary service agreement
Implementation
Ongoing advice and services
Documentation required in terms of FAIS
1.
2.
3.
4.
5.
6.
Disclosure document
Client information, Needs analysis & risk profile questionnaire
Service agreement, client request or instruction [Section 3(1)(d)]
Written proposal and quotation(s)
Present the proposal
Product advice-, service- and risk agreement [Section 3(1)(d), 7(1) and
8(c)]
7. Application form
8. Record of advice as a closing letter [Section 9]
9. Minutes of meetings…
10. Client service requests / instructions
MEDICAL SCHEMES
1. The Fia Code of Conduct
2. Compliance documentation
3. Contracts
4. Facing the FAIS Ombud
The Fia Code of Conduct
1.
2.
3.
4.
5.
6.
7.
8.
A professional introduction
Gathering information
Service agreement
Conducting an analysis and preparing a report and
recommendations
Presenting the client report and recommendations
Advice and intermediary service agreement
Implementation
Ongoing advice and services
Documentation required in terms of FAIS
1.
2.
3.
4.
5.
6.
Disclosure document
Client information, Needs analysis & risk profile questionnaire
Service agreement, client request or instruction [Section 3(1)(d)]
Written proposal and quotation(s)
Present the proposal
Product advice-, service- and risk agreement [Section 3(1)(d), 7(1) and
8(c)]
7. Application form
8. Record of advice as a closing letter [Section 9]
9. Minutes of meetings…
10. Client service requests / instructions
INVESTMENTS
1. The Fia Code of Conduct
2. Compliance documentation
3. Contracts
4. Facing the FAIS Ombud
The Fia Code of Conduct
1.
2.
3.
4.
5.
6.
7.
8.
A professional introduction
Gathering information
Service agreement
Conducting an analysis and preparing a report and
recommendations
Presenting the client report and recommendations
Advice and intermediary service agreement
Implementation
Ongoing advice and services
Documentation required in terms of FAIS
1.
2.
3.
4.
5.
6.
Disclosure document
Client information, Needs analysis & risk profile questionnaire
Service agreement, client request or instruction [Section 3(1)(d)]
Written proposal and quotation(s)
Present the proposal
Product advice-, service- and risk agreement [Section 3(1)(d), 7(1) and
8(c)]
7. Application form
8. Record of advice as a closing letter [Section 9]
9. Minutes of meetings…
10. Client service requests / instructions