17 November 2011.
Advertising
Direct marketing
2
Background
Objectives of the FAIS Act
Ensure consumer protection.
Uphold the integrity of the financial services
industry.
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Prescribed minimum registration
requirements - Fit & Proper
General Code of Conduct
Adjudication of disputes between clients
& FSPs via FAIS Ombud
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Section 8 (8) of the FAIS Act:
– reference to the fact that the provider is
authorised.
Intention :
– give clients comfort that providers are
registered
– clients protected when doing business with
registered providers.
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Compliant
• Authorised financial services
provider
Noncompliant
• Authorised FSP
• FSP 000
Nice, not
obligatory
• Authorised financial services
provider , 000
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Face to face – orally
Writing:
business docs,
newspaper,
pamphlets,
bill boards etc.
Electronically:
e-mail,
website,
online communication media.
Voice
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Business cards
– What must be stated?
– How visible?
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Example: Business Card
Joe Soap
Investment Executive
Soap’s Best Investment Services
Tel: 0669 233890
Soap’s office park
Soapville
Soap Town
000
Authorised Financial Services Provider 000
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Soap’s Best Investment Services
absolutely most amazing
investment services ever!
We offer the
Always on your side, unlike others in the market
Contact us today if you are a winner in life!
FSP 000
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Survey conducted to determine whether
FSPs gave effect to the intention of the
FAIS Act.
Looked at TV, Newspapers, Magazines
advertisements.
Listened to Radio advertisements.
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1.
Print media & TV
– Information not visible.
– No/ little effort by FSPs to give effect
to the intention of the legislation
2. Radio – audible enough
– When to disclose
– promotional ads VS invite of FSP employee
by the Radio Station
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Direct Marketing
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Direct Marketing – rendering of financial
services by means of telephone, internet,
media insert, direct mail, or electronic mail
excluding advertisements not containing
transaction requirements.
Direct Marketer – a provider who provides
all or predominant part of financial services
in the form of direct marketing.
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Minimal compliance with provisions of
Section 15 of the General Code of Conduct
Approved telesales scripts do not address all
required disclosure information.
Lack of call centre facilities e.g voice logging
facilities.
The identity of the entity rendering financial
services withheld, due to;
- Misinterpretation of principal vs agency
capacity.
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- Exclusive right to market or distribute
financial products.
- One party claiming ownership of client
relationship e.g provides contacts or
database for the 2nd entity to sell. Challenge
is that client has recourse on the FSP (seller)
& not the relationship owner.
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Some FSPs set very high sales targets for call
centre consultants resulting in a focus on
quantity and a compromise on providing the
client with the best product (i.e. quality of
service), which is not in line with the Conflict of
Interest requirements.
Value added products are often sold to clients
without establishing whether the client needs
the product and can afford it.
Call centre consultants rush through
disclosures in terms of the General Code of
Conduct.
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Quality assessment of calls is not focused
on whether the call centre consultants
made the required disclosures.
Lack of disclosure of the product supplier
by the FSP, the product is sold as if the
FSP is also the product supplier.
Misleading marketing, i.e. making
“empty promises” about what the FSP
can provide for the client.
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Speaking negatively about other
FSPs/product suppliers when attempting
to sell a product.
Failure to list all the call centre
consultants involved in the rendering of
financial services on the representatives
register.
Background checks are not conducted on
representatives.
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Failure to implement supervision process for
representatives that should be rendering
financial services under supervision.
Lack of training/awareness of FAIS and FICA
requirements.
Appointment of key individuals that can
practically not be able to oversee the
activities of representatives.
Lack of monitoring of calls by the
Compliance Officer
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“Direct marketing”, means the
rendering of financial services by way of
telephone, internet, media insert, direct
mail, or electronic mail, excluding any
such means which are advertisements
not containing transaction requirements.
– GCoC - definitions
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“Direct marketer” means a provider
who, in the normal course of business,
provides all or the predominant part of
the financial services concerned in the
form of direct marketing.
– GCoC: Definitions
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Provide clients with info about:
– Direct marketer
– FSP
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Name
of FSP
Details
Contact
Info
Business
name
FSP?
Tel # DM
PI
Cover?
If DM a
rep
Details
of FSP
Trade
name
Products
A/ I.S
Tel # CO
of DM
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Provide info about
product supplier
• Risk profile
• Financial needs
• Circumstances
• Business/ trade
name
• Legal status &
relationship
• Name, class or
type
• Nature and
extent of
benefits
• Manner in
which such
benefits are
derived or
calculated
• material
investment or
other risks
Financial Product
appropriate
Info about Product
Client rights
• Monetary
obligations
• Payment
methods
• Whether
cooling off
rights are
offered
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take reasonable steps to establish whether the
financial product identified is wholly or
partially a replacement for an existing
financial product of the client and, if it is such
a replacement, inform the client of actual and
potential financial implications, costs and
consequence set out in clause 8(1)(d) of this
Code before any transaction is concluded.
[Para (c) substituted by BN 43/2008 with effect
from 14 May 2008]
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• Completely
• Partially
Replacement
product?
• Actual / potential
financial implications
• Costs
• Consequences
• Refer to section
8(1)(d) for detail
• Before any
transaction
is concluded
Inform client
Do this
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Compare
Fees & Charges
Explain
Terms & conditions
exclusions of liability
Waiting periods
Different tax implication
loadings, penalties, excesses
loadings, penalties, excesses
Different investment risks
Restrictions where benefits not
provided
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Insurance
product
Termination
Replacement:
extent
What is lost?
Terminated/
replacement
Provider
receives/
payable
incentives
Age & health
Penalties
Readily
realisable
Vested rights
consideration
Minimum
benefits
Impact on
premium
Unrecovered
expenses
Fund
accessability
remuneration
commission
fee
Other
guarantees
brokerage
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Telephone contact details: Compliance department of the product supplier
Extent that product is readily realisable and/or the funds concerned are accessible
Details of manner in which benefits will be paid;
Early termination or withdrawal: restrictions, penalties, other effects
Charges and fees: amount and frequency thereof
net investment amount ultimately invested for the benefit of the client;
DM: Commission, consideration, fees, charges or brokerages
Paid by the client, or by the product supplier or by any other person;
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On request
provide
Explain
Insurance
product –
explain:
• past investment performance of the product
•Consequences of non-payment by client
•escalations, increases or additions;
•abbreviated disclosures of contractual increases;
•special terms and conditions,
Concise details •exclusions, waiting periods, loadings, penalties, excesses, restrictions or
circumstances in which benefits will not be provided
Guarantees
Recordings
•Any guaranteed minimum benefits or
•other guarantees where appropriate.
• Will be available upon request
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S9(1)(a) to (d)
Record telephone
calls
S 4, 5 and 7
•Provide – where appropriate - a record of
advice in writing.
• Store & retrieve
• Copy provided o client or Registrar in
reasonable time
• Provide info to client
• In writing
• Within 30 days of concluding transaction
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Is it clear to the client who he/she is
dealing with?
Can they see whether the product/
service is a regulated/ non-regulated
product?
If a client reacts to an invitation on a
website to inquire about a product or
service – the normal disclosures would
apply & record keeping requirements
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