Compliance with the Financial Advisory

1
Compliance with theFinancial Advisory
Intermediary Services Act

• Presented by
• FAIS Department of the Financial Services Board
• and
• Compliance Institute of South Africa

2
Compliance risk management

• Presented by the Compliance Institute of South
  Africa

3
Supervision of FSPs
4
Supervision of FSPs

• FSPs will be supervised on a risk based
  supervision approach
• Risk based supervision is
• A supervision approach whereby the risk of
  entities on regulatory objectives are measured
  and managed while optimising the allocation of
  resources

5
Risk based supervision
6
Risks taken in consideration

• External risks
• Internal risk business control risk
• Examples of type of internal risks
• Financial soundness
• Nature of customer, services and products
• Treatment of customers
• Organisation structure
• Internal systems and controls
• Compliance culture

7
Supervision of FSPs

• Dynamic process and risk rating will change as
  FSPs internal and external risk factors changes
• Risk rating will determine the level of
  supervision and type of interaction with FSPs
• Risk based approached is being rolled out and
  FSPs will be informed of the progress
• Ratings and information on it will be only
  communicated to FSPs and treated as confidential

8
Obligations on FSPs
9
Comply with the Act

• Sect 19 Submission of financial
  statements audit reports
• Sect 11 Lapsing of licence
• Sect 17 Appointment of CO
• Sect 8 Disclose authorised FSP
• Sect 8 - Display licence certificate
• Sect 13 Representatives
• Sect 14 Debarment of representatives
• Sect 17 Submission of reports
• Sect 18 Recordkeeping

10
Comply with the Act

• Submission of financial statements audit
  reports
• Annual financial statements all FSPs
• Category I receive premiums and client funds and
  Category II and III
• Audited financial statements
• Prepared in terms of general accepted accounting
  practice
• Section 19(3) report if receive client funds in a
  separate account (refer section 10 of General
  Code of Conduct)

11
Comply with the Act

• Submission of financial statements audit
  reports
• Within 6 months after year-end
• Penalties late submission
• Receive acknowledgement of receipt
• Contact FSP only if there is a problem
• Method submission E-mail in .pdf format, post or
  deliver do not fax
• Address to FAIS Financial Statements
• E-mail address faisfins_at_fsb.co.za

12
Comply with the Act

• Lapsing of licence section 11
• Natural person died
• Partnership dissolve
• Close corporation or company Liquidated
• Trust dissolved
• Voluntary request for lapsing licence
• Address letter to Registrar and mark it FAIS
  Profile Changes provide reasons for request
• Post or fax it

13
Comply with the Act

• Appointment and resignation of compliance officer
  section 17
• Duty of compliance officer to inform Registrar of
  resignation
• FSP must immediately appoint a new compliance
  officer (FSP6 form)
• Address letter for attention FAIS Profile
  changesE-mail address faispfc_at_fsb.co.za

14
Comply with Codes of Conduct

• Recordkeeping
• Disclosure requirements
• Suitable advice
• Complaints
• Advertising
• Compliance function
• Client funds

15
Comply with licensing conditions

• Licensing conditions Annexure to licence
• Submit changes to application detail (Profile
  changes)
• Submit changes to representative
  register(Electronically or FSP5 forms)
• E-mail correspondence faispfc_at_fsb.co.za
• Posted addressed to FAIS Profile Changes
• Receive acknowledgement of receipt
• Final letter will be sent takes between 6 to 10
  weeks working on the backlog
• Questions 1 2 of the compliance report

16
Comply with other legislation

• Financial Services Board Act
• Payment of levies
• Financial Intelligence Centre Act other anti
  money laundering legislation
• Financial Institutions (Protection of Funds) Act
• Insurance Act
• Collective Investment Schemes Act
• Securities Services Act
• All other legislation applicable

17
Compliance report2005
18
Compliance report 2005

• Usage of the report
• Format of the report
• Specific questions
• Reporting period
• Submitting the report
• Electronic submission
• Hardcopy submission

19
Usage of the report

• Supervisory tool in RBS
• Identify areas in which FSPs are not complying
• Commit FSPs to identify developmental areas and
  to work on it
• FSPs can use it as a minimum checklist
  compliance function
• Source of information for onsite visits

20
Format of the report

• Easy for keeping information
• Lead the person completing it
• YES/NO Questions
• Not applicable - Validation
• Sampling Question 16

16. Provide a short description of the sampling
or other methodology used in the monitoring
procedures (testing) mentioned in this report in
a separate schedule and list the number of the
attachment in column 5
21
Format of the report

• Development areas
• Any control, process or compliance issue that
  has been identified during the monitoring of
  compliance as an area in respect of which the
  need for improvement of such control, process or
  compliance issues has been identified, and plans
  are in place to effect such improvements within a
  reasonable time
• AttachmentsLimit the attachments to what is
  required in the report we do not want detail on
  all questions
• Signing of the reportPerson completing report
  andKey individual must acknowledge report was
  sent

22
Specific Questions Highlighted
23
Question 1.3
1.3 Financial Products in respect of which FSP
renders financial services Condition 5
imposed by the Registrar in terms of section
8(4) of the Act
1.3.1 Does the FSP have internal controls and
procedures in place to ensure that any financial
product in respect of which the provider intends
to render a financial service, qualifies as a
financial product contemplated in the Act?
1.3.2 Did the FSP render financial services
relating to financial products that do not
qualify as financial products as contemplated in
the Act?
24
Question 1.4
1.4 Financial Products in respect of which FSP
renders financial services Authorisation in
terms of the licence of the FSP
1.4.1 Does the FSP have internal controls and
procedures in place to ensure that any financial
product in respect of which the provider intends
to render a financial service, qualifies as a
financial product contemplated in the Act?
1.4.2 Did you (compliance officer) perform
monitoring procedures (testing) on a sample
basis during the monitoring process to ensure
that the financial services rendered are in
terms of limitations on the category and
subcategory for which the licence is issued?
25
Question 3 4
3.3 Is a reference to the fact that a licence is
held contained in all business documentation and
advertisements?
4.2.1 Does the FSP have procedures in place to
ensure that representatives and key individuals
of representatives of the FSP are competent to
render financial services to clients taking in
account the requirements stipulated in the
Determination of Fit and Proper Requirements of
Financial Services Providers relating to
4.2.1.1 personal character qualities of honesty
and integrity and
4.2.1.2 competence and operational ability
26
Question 4
4.5 Debarment of representatives Section 14 of
the Act
4.5.1 Did the FSP during the reporting period
debar any representatives in terms of section
14(1) of the Act?
4.5.2 Did the FSP remove the names of the
representatives and its key individuals from the
register?
4.5.3 Did the FSP inform the Registrar
accordingly in terms of section 14(3) of the Act?
27
Question 5
5. Insurance cover Sections 5(e) and 13 of the
General Code of Conduct
5.1 Does the FSP have professional indemnity
cover? Provide the extent of the cover in
column 5
5.2 Does the FSP have fidelity insurance
cover? Provide the extent of the cover in
column 5
5.3 Does the FSP have guarantees in place as
contemplated in section 13 of the General
Code? Provide the extent of the guarantees in
column 5
5.4 Does the FSP disclose to clients in terms
of section 5(e) of the General Code whether it
holds guarantees or professional indemnity of
fidelity insurance cover?
28
Question 6 7
6.1 Is the compliance function established as
part of the risk management framework of the
business of the FSP?
6.4 Do you (compliance officer) have any
comments to make on the procedures contemplated
in section 17(3) of the Act which the FSP has
established as regards their maintenance and
efficacy?
29
Question 8
8.1.1 Did the FSP or its representatives during
the reporting period receive non-cash incentives
and / or other indirect considerations for the
rendering of financial services from another
provider, product supplier or other person?
8.2.2 Did you (compliance officer) perform
monitoring procedures on a sample basis to
ensure that the FSP disclosed relevant
information in terms of sections 4, 5 and 7 of
the General Code of Conduct to its clients where
applicable?
30
Question 9.1.2
8.3.2.2 Does the FSP use a standardised computer
programme to do the analysis?
8.7.1 Does the FSP act as a direct marketer?
9.1.2 Did the FSP during the period contemplated
in the exemption comply with paragraph 4 of the
exemption?
31
Reporting period

• Year-end
• January 2005
• February 2005
• March 2005
• April 2005
• May 2005
• June to Dec 2005

• Reporting period
• AU - July 2005
• AU August 2005
• AU September 2005
• AU October 2005
• AU November 2005
• AU December 2005

AU Authorisation date
32
Reporting period

• All year-ends 28 February
• FSP licensed 15 July 2004
• Authorisation date 30 September 2004
• Reporting period 30 Sept 04 31 Aug 05
• Submission of report before 31 Oct 05
• FSP licensed 15 March 2005
• Authorisation date 15 March 2005
• Reporting period 15 March 05 31 Aug 05
• Submission of report before 31 Oct 05
• FSP licensed 1 September 2005
• No report will be submitted for 2005

33
Reporting period

• All year-ends 31 December
• FSP licensed 15 July 2004
• Authorisation date 30 September 2004
• Reporting period 30 Sept 04 31 Dec 05
• Submission of report before 28 Feb 06
• FSP licensed 15 Sept 2005
• Authorisation date 15 Sept 2005
• Reporting period 15 Sept 05 31 Dec 05
• Submission of report before 28 Feb 06

34
Submitting the report

• Preferred method - Electronically with special
  programme
• Sign last page and scan in
• Do not have scanner submit per post
• Attachments in Microsoft can be electronically
  attached when submitting the report
• Compliance officer can use programme for multiple
  FSPs
• Hard copy only be accepted per post or hand
  delivered

35
Electronic submission

• Step 1 Register online
• www.fsb.co.za /FAIS/Compliance report
• Step 2 - Receive an e-mail with instructions
• Step 3 - Install programme according the
  instructions on PC automatically
• Step 4 - Complete Compliance officers / FSPs
  (if no CO required) details

36
Electronic submission

• Step 5 - Request FSPs details on website and
  upload it or capture manually (only have a
  few) Can do as may times as
  necessary It will only be the FSPs linked to
  compliance officer
• Step 6 - Complete the compliance report
• Step 7 - Attach the documents

37
Electronic submission

• Step 8 - Validate the report
• Step 9 - Export the report and sent to FSB via
  e-mail (it will be done automatically)
• Step 10 - Receive confirmation when successful
  upload and case no
• Step 11 We will contact you if necessary for
  additional information

38
Hardcopy submission

• Step 1 - Obtain the form FSB website .pdf
  format or Government Printers Forms will not
  be e-mailed or posted to FSPs
• Step 2 - Complete the form and
• mark attachments

39
Hardcopy submission

• Step 3 - Ensure that the form
• correctly completed Do not fill in anything
  on grey areas If the form is
  incorrectly completed it will be returned and
  penalties will be charged for late submission

40
Hardcopy submission

• Step 4 - Post the form
• No acknowledgement will be given to hand
  delivered forms it will be treated as a
  posted form
• Step 5 - Receive acknowledgement
• Without letter acknowledgement the report
  will be regarded as not submitted

41
Late submissions

• Penalties of up to a R1 000 per day will be
  charged for late submissions
• If we did not acknowledge the receipt of the
  report we did not receive the report and the FSP
  will be penalised
• Take 2 weeks acknowledgement of hardcopy after we
  received it trace the progress on the website

42
Thank you