Recent Exemptions: BN 193 of 2011

DOFA Qualifications CPD PI cover, IGF, Fidelity guarantees Binder agreements Bulk transfers of clients, transfer of

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Exemption of FSPS from audited financial statement requirements

“FSP” means an authorised Category I FSP who does not receive premiums (contemplated in the Short-term Insurance Act, 1998, and the Long-term Insurance Act, 1998) or otherwise receive or hold clients’ money or assets;

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“FSP limited by product” means an authorised Category I FSP who renders financial services limited to financial products belonging to Long-term Insurance subcategory A or friendly society benefits provided by a friendly society contemplated in paragraph (d) (ii) of the definition of “financial product” in section 1 (1) of the Act and who receives or holds clients’ money;

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(1)  An FSP is exempted from section 19 (2) (a) and (3) to (6) of the Act unless—

(a) it is obliged by law to cause financial statements to be audited and reported on; or(b) it is otherwise obliged by law to cause financial statements to be independently reviewed by an independent reviewer or otherwise prepared, in which case section 19 (2) (a) and (3) to (6) applies with the necessary changes.

(2)  An FSP limited by product, unless obliged by law to cause financial statement to be audited and reported on, is exempted from section 19 (2) (a) and (3) to (6) of the Act to the extent that reference is made to an auditor, audit or statement or report by an auditor subject to the conditions that it—

(a) must appoint an accounting officer approved by the Registrar;(b) the accounting officer must certify and report on the financial statements referred to in section 19 (1) of the Act in conformity with the practices of the accounting officer’s profession; and(c) section 19 (2) to (6) applies with the necessary changes to the accounting officer, any certification and report by the officer and termination of appointment.

(2)  The exemption does not apply where an FSP limited by product is otherwise obliged by law to cause financial statements to be independently reviewed by an independent reviewer, in which case section 19 (2) (a) and (3) to (6) of the Act applies with the necessary changes.

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(3)  An FSP and FSP limited by product who wish to benefit from this Notice must within six months after publication of the Notice or upon application for authorisation in case of an unauthorised FSP—

(a) register the exemption with the Registrar within the prescribed format and manner; and(b) must inform the Registrar in writing within 15 days after the change has taken place, of any change in respect of the information that was submitted for purposes of registering the exemption.

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DOFA = date of first appointment This is the date a person is

appointed for the first time as:– A representative in respect of

specific financial categories or subcategories of financial products

– A KI for specific categories or subcategories

– A sole proprietor (FSP)

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Rules: BN 105 of 2008 Recognise qualifications as: G – Generic S or SP – specific recognition:

– S applies to people in industry between 2004 and 2009, as per appointment in this period

– SP – applies to people entering industry from 2010 onwards, or people who amend their licensing conditions from 2010 onwards

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This means the qualification is recognised as

specific for people appointed between 2004 and 2009 for this subcategory

This qualifications is recognised as specific for all appointments from 2004 onwards

This means the qualification is not recognised for this

subcategory

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means a process of learning and development with the aim of enabling a financial services provider, key individual, representative or compliance officer to maintain the competency to comply with this Act;

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means an organisation that is approved by the Registrar to provide CPD programmes and/or activities, including but not limited to:– regulators, – industry associations, – professional bodies, – financial advisor networks, – compliance practices, – training providers, – institutions of Higher Education, – employers and product suppliers who offer annual CPD

programmes to members, employees and other participants

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Ethics, corporate governance, compliance, fraud and risk. Any relevant legislative/ regulatory aspect that influences

the advice, intermediary service, products, or business aspects, or similar aspects.

Business skills, including Financial skills, Business writing, Systems and processes and Policies and procedures.

Any topic relevant to the improvement of services offered.

Customer service skills, techniques to improve how the financial service is rendered and any other topic relevant to the improvement/ development of business skills.

Management skills. Financial planning. Practice management.

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A professional indemnity cover (required in terms of BN 123 of 2009) was added as a requirement in terms of the FAIS Act to protect the businesses of providers.

In most cases, even with controls implemented to ensure compliance we do not have control of certain risks which are inherent in professional advice giving businesses.

The risk of false/ incorrect professional advice resulting in lawsuits is inherent in most businesses, hence the requirement for a PI cover as one of the control measures to assist in the mitigation of these risks.

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Existing FSPs:– authorised before publication:– In force from 21 September 2010

Newly authorised FSPs:– Within 6 weeks of authorisation

Existing FSP, add Cat II, IIA, III or IV:– Must meet the requirements for

these categories

Category Choose one of the requirements

below:

Suitable guarantees PI Cover

I, II or IV Minimum of R1

million

Minimum of R1

million

IIA Minimum of R5

million

Minimum of R5

million

Category Choose one of the requirements below:

Suitable guarantees PI Cover and Fidelity

Insurance Cover. This can

be a combined policy, but

each type of cover must be

at least:

I or IV Minimum of R1

million

Minimum of R1 million

II, IIA or III Minimum of R5

million

Minimum of R5 million

each

A guaranty can be described as a promise by which one person assumes responsibility for paying another's debts or fulfilling another's responsibilities.

Suitable guarantees refer to guarantees obtained through another entity, which is not provided in the form of insurance. Typically such guarantees are issued by a registered Bank.

In the case of a Bank such guarantees can be issued after they have satisfied themselves that all the requirements have been met.

Where an FSP forms part of a group of companies, the guarantees or PI cover may be obtained at group level, provided that:– each FSP that is covered by the group policy is

clearly identified in the guarantee/policy documentation, and

– the value of the guarantee or amount of cover is sufficient to cover the amounts required for each individual FSP’s situation, and

– each FSP has a certified copy of the guarantee/ PI cover available for scrutiny by the Registrar should it be required.

Binder functions are collective term for functions that a binder holder performs as the agent of the insurer

Binder holder acts on behalf of insurer, as if the insurer

Binder functions identified in Act are –– enter into, vary or renew a policy– determine the wording of a policy– determine premiums under a policy– determine the value of policy benefits under a policy– settle claims under a policy

Only a non-mandated intermediary can be a binder holder.

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Promulgated with effect from 1 January 2012

All agreements concluded before or on the date on which the regs commenced must be aligned within one year

All agreements concluded after the date on which the regs commenced must immediately comply

SERVICES TO POLICY-HOLDER

[not covered by commission]

INTERMEDIARY

SERVICES

[covered by commission]

BINDER SERVICES

[covered by binder fee]

SERVICES TO INSURER

[not covered by binder fee or commission]

SERVICES TO INSURER

SERVICES TO POLICYHOLDER

Underwriting manager

Non-mandated intermediary

Administrative FSP as defined in FAIS Act (ONLY LT)

• Person that renders a service to an insurer only

• Representative or independent intermediary

• As defined in FAIS Code of Conduct for authorised FSPs & Representatives

• May “render services as an intermediary” other than marketing or selling

• May notMay not hold written mandate from policyholder to terminate policy or perform act that binds policyholder. Prior approval necessary (no “moving book”)

• May hold a written mandate from policyholder to change the underlying investment portfolio of a policy

• May be a binder holder for another insurer in respect of same class if all insurers agree in writing

• May not also be mandated intermediary

ST exemptions: hold covered

Does not apply in termination period

Underwriting manager

Non-mandated intermediary

Administrative FSP as defined in FAIS Act (ONLY LT)

• May not conduct business with a mandated or non-mandated intermediary or their representatives that are associates

• May not conduct business with an Admin FSP that is its associate

• May not conduct business with a mandated intermediary that is its associate

• Exemption:Exemption: insurer that is holding company

• Exemption: Exemption: insurer that is holding company

May perform binder functions

May not further delegate binder functions

In terms of section 20 of the General Code of Conduct

Providers who cease to operate must immediately notify all affected clients accordingly and take reasonable steps to ensure that any outstanding business is completed promptly or transferred to another provider

It is important to note that it is the responsibility of the outgoing provider to inform clients.

Product suppliers should also be notified.

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