gap analysis e-brochure final - masthead.co.za · masthead solution action plan and responsible...

Gap AnalysisBoard Notice 194 of 2017 – FIT AND PROPER

If you are part of an FSP or you are a Key Individual or a Representative in an FSP, then BN 194 of 2017 affects you. That’s because this Board Notice, that came into effect on 1 April 2018, brought with it a number of Fit and Proper requirements that you need to meet.

It can be quite daunting working your way through all of these requirements, so we have put together this brochure to help you navigate your way through them. It is designed to:

- help you see what is facing you,

- let you know when the various elements become effective,

- help you see how far you’ve come and/or still need to go – in other words, what the gap is.

If, as you go through this self-assessment, you feel you’re in too deep, feel free to contact Masthead.

Working your way through this document.

• We start off with a roadmap of the key dates showing what has been introduced and when it becomes effective. You’ll see that some things have already come into effect and others only kick in at the end of July 2019.

• Next, we’ve set out all the requirements, section by section and under each of the requirements, we cover 4 areas:

1. We set out a brief description and recommendation of what the BN requires you to do.

2. We point out the documented evidence that should be in place.

3. We then ask you to objectively assess your documented evidence where you indicate that:

a. It is in place;

b. It is in place, but needs to be reviewed;

c. It is not in place;

d. You need or want help to put in in place.

4. The last area we cover is to ask you to write out your action plans, together with the name of the person responsible for the work and the date by when this should be done.

• Read through the roadmap so that you have a broad idea of what needs to be done and by when.

• Then, we suggest that you go through each section and do a thorough and honest self-assessment of your business. You can complete this document electronically or in paper format.

• Once you have gone through this gap analysis you should have a clear understanding of the Fit and Proper requirements, where the gaps are in your business, and the changes you will need to implement. You will also know where you can sleep easy and where you need to do some work.

We can help you!

If, at any time during or after this process, you feel you need help in meeting these Fit and Proper requirements, feel free to contact Masthead. We will gladly help you understand the impact on your business and help you address what is needed with tools, templates and onsite implementation.

Welcome to the Masthead GapAnalysis iro BN 194

Contents

Fit and Proper Roadmap

Honesty, Integrity & Good Standing

Competence Policy and Processes

Basic Operational Ability

Governance Framework

Automated Advice

Outsourcing Policy and Processes

Appointment of Representatives

Representative Operational Ability

Key Individual Operational Ability

Financial Soundness

22

24

26

28

32

I Conduct Risk Management

II Business Plan

III Risk Management Policies, Processes and Systems

IV Accounting Policies and Processes

V Remuneration Policy for all staff

VI Business Continuity Policy

VII Financial Recovery Plan

VIII Regular monitoring of systems, processes and internal controls

11

13

14

16

17

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19

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4

6

8

10

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30

Fit and Proper Roadmap

Fit and Proper Roadmap Page 2

Gap Analysis – FIT AND PROPER

1 MAY2018

30 JUN2018

1 AUG2018

1 MAR2019

30 SEPT2018

31 JUL2018

1 JUN2018

1 APR2018

• Start Licence Application for Structured Deposits and CIS Hedge Funds• Honesty, Integrity & Good Standing• Competence Policy & Processes• Governance Framework• Basic Operational Ability Requirements• KI & Rep Operational Ability• Financial Soundness requirements• Early Warning Processes• Outsourcing Policy & Processes• Financial Strategy

1 JUN2019

1 MAR2019

1 JUN2019

1 AUG2019

1 FEB2020

• Competence Register• Competence Review & Record Keeping• Product Specific Training Requirements start

• DEADLINE for submission of Application to add CIS Hedge Funds and/or Structured Deposits• Update Rep Register with those product categories automatically added to the licence

• CPD Cycle Starts• CPD Training Plans• CPD Policy & Processes

• DEADLINE for Reps Under Supervision (Cat I) at 1 April 2018 to complete Product Specific Training

• DEADLINE to notify FSCA of Classes of Business each Cat I Key Individual manages

• Financial Soundness Requirements for Juristic Representatives

• Class of Business Training requirement starts

• Reps appointed under supervision after 1 December 2018 must have a Supervision Agreement aligned to FSCA FAIS Notice 86 of 2018.

• Reps appointed under supervision before 1 December 2018 must have a Supervision Agreement aligned to FSCA FAIS Notice 86 of 2018.

• Class of Business Training deadline• Applicable to FSPs, KIs and Reps appointed/approved between 1 April 2018 and 1 Aug 2018• Applicable to FSPs and KIs who applied for approval prior to 1 Aug 2018

• Class of Business Training deadline• Applicable to Reps under Supervision appointed before 1 Feb 2019 NOTE: Reps under Supervision appointed after 1 Feb 2019 have 12 months from DOFA date

• CPD Cycle Starts• CPD Training Plans• CPD Policy & Processes (review and update if necessary)

Requirement

Brief description and recommendation

Documented evidence required to be in place

Develop and implement a process to regularly review the Honesty, Integrity and Good Standing of the FSP, Key Individuals, Representatives and Directors. This should include:

• a process which ensures that the FSP and all Key Individuals, Representatives and Directors are aware that they must inform the FSP if there are any changes to their status;

• training to ensure all parties understand the requirements; and a Declaration to be completed and signed at a specified frequency.

Honesty, Integrity & Good Standing

1. Documented policy and process w.r.t. review of Honesty, Integrity and Good Standing.

2. Signed Fit and Proper Declarations as per the FSP’s process.

1.

2.

Assess your documented evidence: (Refer to the list above)

In place In place but needs to be

reviewed

Not in place

Require help

Honesty, Integrity and Good Standing Page 4


Masthead solution

Action plan and responsible person

• Masthead Fit and Proper Declaration.

• Masthead Member Code of Conduct for Masthead Financial Advisors Association.

• Code of Ethics, Standards and Conduct template.

• Online Learning:

- Ethics and Corporate Governance

- Cybersecurity

• Masthead can facilitate a session with the staff of an FSP to help the FSP to identify and consolidate ‘your culture’ which will include identifying values and an assessment of the risks attached to the day-to-day activities of the FSP and the impact on Honesty, Integrity and Good Standing.

Action date

Honesty, Integrity and Good Standing Page 5


Requirement



Develop and implement a policy and processes which include development, implementation and monitoring of FSPs, Key Individuals and Representatives’ minimum qualifications, experience, regulatory examinations, Class of Business and Product Specific Training in all categories and subcategories and CPD. Where relevant it may include required soft skills training e.g. sales skills or presentation skills for representatives and administrative employees.

Competence Policy and Processes

1. Competence Policy and Process.

2. Competence Register.

1.

2.



reviewed

Not in place

Require help

Competence Policy and Processes Page 6


Masthead solution


• Masthead will provide an example Competence Policy and a Competence Register, which must be customised by the FSP.

• Masthead can assist FSPs to document and implement a customised Competence Policy and Register.

Action date

Competence Policy and Processes Page 7


Requirement



• Fixed physical business address.

• Full time telephone or cell phone service.

• Adequate communication facilities.

• Adequate storage and filing systems for safe keeping of records, business communications and correspondence.

• Bank account.

• Adequate and appropriate Key Individuals to manage and oversee the FSP.

• There must be at least 1 Key Individual per Class of Business.

Basic Operational Ability

A record of how each basic operational ability requirement is met, which can form part of the Operations Manual.

Assess your documented evidence: (Refer above)


reviewed

Not in place

Require help

Basic Operational Ability Page 8


Masthead solution


• A template to form part of the FSP’s Operations Manual which must be customised.

• Masthead can assist FSPs to document and implement an Operations Manual which is customised to the specific FSP’s business.

Action date

Basic Operational Ability Page 9


Requirement



The Corporate Governance framework will consist of the structure, rules, practices and processes by which it is directed and controlled. A key element of this framework must balance the interests of the FSP and its various stakeholders, e.g. shareholders, management, customers, product providers, and the community.

Governance Framework

1. Corporate Governance Policy and Processes which can form part of the FSP’s Operations Manual or other documented evidence setting out the structure, control and decision-making processes.

2. Organogram.

1.

2.



reviewed

Not in place

Require help

Governance Framework Page 10


Masthead solution • A Corporate Governance Policy template which can form part of the FSP’s Operations Manual that must be customised by the FSP.

• Masthead can assist the FSP to design and implement a customised Operations Manual.



Conduct Risk Management

FSPs must explain how it will identify, mitigate and monitor Conduct Risk. Conduct Risk is defined as risk to the delivery of fair customer outcomes and touches every part of an FSP’s Governance Framework and business.

1. Code of Conduct and Ethics.

2. Risk Management Policy and Process.

3. Risk Management Plan.

1.

2.

3.



reviewed

Not in place

Require help



Action plan and responsible person Action date

I

Masthead solution • A Risk Management Plan template either provided by the compliance officer or as part of a Risk Management Plan seminar.

• Masthead offers two seminar options:

- An information session which include templates which must be customised by the FSP.

- An implementation seminar.

• Masthead can assist FSPs to design a Risk Management Policy.

• Templates to form part of the FSP’s Operations Manual which must be customised plan.

• Masthead Member Code of Conduct for Masthead Financial Advisors Association.

• Code of Ethics, Standards and Conduct template.





Business Plan

• Setting out the aims, scope of the business, the business strategies and related matters, e.g. financial assumptions to remain fit and proper w.r.t. its financial soundness requirements and ultimately to run a sustainable business.

• Setting out short, medium and long-term strategies, including financial assumptions.

• Incorporate fair treatment of customers as part of the business culture.

Documented Business Plan.

Assess your documented evidence: (Refer above)


reviewed

Not in place

Require help

Masthead solution • Masthead will provide a Business Plan template which must be customised by the FSP.

• Alternatively, we offer two seminar options:

- An information session which include templates that must be customised by the FSP.


• Masthead can assist FSPs to document and implement a customised plan.





II


Risk Management Policies, Processes and Systems

• Risk Assessment policies and processes which identify risks relating to the FSP’s processes, systems and the level of risk tolerance.

• Include the philosophy and tolerance towards risk and a Risk Management Plan.

• Effective processes to ensure compliance with the FAIS Act and other applicable laws including FICA.

• How to safeguard information against cybercrime including physical security of records, back-up and disaster recovery plans and processes to ensure complete timeous processes of data, reporting, data integrity and cybersecurity.

• Effective processes to ensure compliance with decisions and decision-making processes at all levels of the FSP, to detect any risk of failure by the FSP and to put measures in place to minimise risk, that provide corrective actions to be taken in respect of non-compliance, weak oversight, failure of controls or lack of sufficient management.

• Systems and processes that are adequate to safeguard the security, integrity and confidentiality of information including electronic data security and internal and external cybersecurity, physical security of assets and records, system application testing, back-up and disaster recovery plans and processes for systems and electronic data, systems and processes to ensure accurate, complete and timeous processing of data, reporting of information and the assurance of data integrity.

1. Risk Management Policy and Process.


3. Operations Manual containing all policies and processes.

1.

2.

3.



reviewed

Not in place

Require help




III





• Masthead can assist FSPs to design a Risk Management Policy.

• Templates to form part of the FSP’s Operations Manual which must be customised.

• Masthead can assist FSPs to document and implement an Operations Manual that is customised to the specific FSP’s business.

• Regulatory Update information session seminar.

• Masthead can assist the FSP to implement a customised Business Continuity Policy and Disaster Recovery Plan.

• Online Learning:

- POPI

- Cybersecurity

- Updated FICA





Accounting Policies and Processes

This must include how the FSP will record, report and deliver financial reports which are a true reflection of the businesses’ financial position and which comply with the applicable reporting and accounting standards to the Regulator. Employ or outsource monthly management accounts to a bookkeeper or implement software e.g. Quick Books, Pastel, etc.

1. SLA with third party.

2. Accounting Policy and Process.

3. Software Program.

Masthead solution • Masthead offers two Financial Management seminar options:



• SLA with third party service provider template.

1.

2.

3.



reviewed

Not in place

Require help





IV


Remuneration Policy for all staff

This must align the interests of the FSP with its clients. Remuneration policies must avoid promoting the taking of excessive risks and unfair treatment of customers.

Remuneration Policy for all staff members (administrative and representatives).

Masthead solution • A template that must be customised.

• Masthead can assist the FSP to implement a customised Remuneration Policy.



reviewed

Not in place

Require help





V




Business Continuity Policy

This must explain how losses will be limited, essential data and functions will be preserved and how the FSP will be able to continue with its activities as an FSP if there is any interruption to systems and processes.

Disaster Recovery and Business Continuity Plan.

Masthead solution • A Disaster Recovery and Business Continuity Plan template that must be customised.

• Masthead can assist the FSP to implement a customised Business Continuity Policy and Disaster Recovery Plan customised to the specific FSP’s business.



reviewed

Not in place

Require help



VI


Financial Recovery Plan

Detail how the FSP will restore its financial situation if there is a significant deterioration. This should include a viable resolu-tion plan setting out options for the orderly resolution of the FSP in the case of failure.

Financial Recovery and Resolution Plan.

Masthead solution Masthead can assist the FSP with a framework for a Financial Recovery and Resolution Plan.



reviewed

Not in place

Require help





VII

Regular monitoring of systems, processes and internal controls


Regular monitoring and evaluation of the adequacy and effectiveness of the FSP’s systems, processes and internal control mechanisms and measures to address any deficien-cies and to determine whether it serves reasonably to ensure:

• Risk detection and compliance with applicable legislation.

• The integrity of the FSP’s business practices, including the treatment of clients with due care, skill and diligence and in a fair, honest and professional manner.

• Appropriate segregation of key duties and functions, particularly those duties and functions which when performed by the same individual, may result in undetected errors or may be susceptible to abuses which expose the FSP or its clients to inappropriate risk.

1. Risk Management Policy and Processes.


3. Organisational Strategy.

4. Organogram.

5. Performance Management Policy and Processes, which includes Position Agreements, Performance Contracts and Development Plans.

1.

2.

3.

4.

5.



reviewed

Not in place

Require help




VIII





• Masthead can assist FSPs to design a Risk Management Policy. Masthead can facilitate a session with the staff of an FSP to help the FSP to identify and consolidate ‘your culture’ which will include identifying values and an assessment of the risks attached to the day-to-day activities of the FSP and the impact on Honesty, Integrity and Good Standing.

This session can include a document which lists the identified risks, its impact on values, and measures to mitigate these for incorporation into the Risk Management Plan.

• Relevant Human Resources templates which must be customised.

• Masthead can assist FSPs to customise and implement an Organisational Strategy which includes updating the FSP’s Operations Manual with the relevant policies and processes.




Requirement



Have adequate and appropriate resources that have the required competence to ensure:

• An understanding of the technology, algorithms, methodological approaches and assumptions including preferences or biases in relation to these approaches.

• Understand the risks, rules and its impact to clients and monitor and review to ensure quality and suitability of advice including compliance with the Act.

Automated Advice

1. Qualified and competent staff.

2. Appropriate technology.

3. Policies and processes relating to automated advice including monitoring processes, suitability of advice and compliance with the Act.

4. Risks documented in the Risk Management plan.

1.

2.

3.

4.



reviewed

Not in place

Require help

Automated Advice Page 22


Masthead solution Masthead can assist with a framework which the FSP can use as a basis to engage and consult with external experts.

Automated Advice Page 23



Requirement



This must include the due diligence process prior to outsourcing, the requirement to conclude an agreement in writing, the ongoing supervision or management of the outsourcing and the process to terminate the outsourcing.

Outsourcing Policy and Processes

1. Outsourcing Policy and Process which can form part of the Operations Manual.

2. Service Level Agreement.

1.

2.



reviewed

Not in place

Require help

Masthead solution Masthead can assist FSPs to develop and implement a customised Outsourcing Policy and Process which will include the Due Diligence and Ongoing Monitoring processes as well as a Service Level Agreement for all outsourced services.

Outsourcing Policy and Processes Page 24



Outsourcing Policy and Processes Page 25


Requirement



Develop and implement a process that includes the necessary Human Resources policies and processes which should include a Recruitment and Selection Policy.

Appointment of Representatives

1. Human Resources Policies and Processes.

2. Recruitment and Selection Policy and Processes.

1.

2.



reviewed

Not in place

Require help

Masthead solution • Recruitment and Selection Policy and Process template to form part of the FSP’s Operations Manual with templates which must be customised.

• Masthead can assist FSPs to develop and implement a customised Human Resources Policy and Processes.

Appointment of Representatives Page 26



Appointment of Representatives Page 27


Requirement



Detail what Representatives will require to efficiently carry out their duties in accordance with their Contract with the FSP and Job Description and the process which the FSP will follow to ensure that these requirements are maintained.

Representative Operational Ability

1. Representative Agreement.

2. Job Description.

3. Documented description of the Operational Ability Requirements for each Representative which can form part of the Operations Manual.

4. Documented process setting out how the operational ability will be monitored which can form part of the Operations Manual.

1.

2.

3.

4.



reviewed

Not in place

Require help

Representative Operational Ability Page 28


Masthead solution


Masthead can assist FSPs to develop and implement a customised framework in order to assess a Representative’s Operational Ability Requirements and the FSP’s process to ensure that these are maintained. This solution should form part of the FSP’s Operations Manual.

Action date

Representative Operational Ability Page 29


Requirement



• The Key Individual must be able to demonstrate that operational ability to effectively manage and oversee the FSP is in place. This is relevant where a Key Individual is appointed on more than one FSP or where the person is appointed in different roles e.g. Key Individual and Representatives.

• An FSP must assess the operational ability of its Key Individual on a regular basis and confirm that they are able to perform their functions effectively. This could be by way of a declaration or, in larger FSPs, a presentation to the Board or other type of evaluation process.

Key Individual Operational Ability

1. Document setting out the specific roles and responsibilities of each Key Individual.

2. Documented process setting out how frequently the Key Individuals will meet so that each Key Individual can report back on their area of responsibility.

3. Minutes of Key Individual Meetings.

4. Documented process setting out how the FSP will assess the ongoing operational ability of each Key Individual.

Key Individual Operational Ability Page 30


1.

2.

3.

4.

Assess your documented evidence: (Refer to the list on the previous page)


reviewed

Not in place

Require help

Masthead solution Masthead can assist the FSPs to develop and implement a customised framework in order to assess Representative operational ability. This solution should form part of the Operations manual.

Key Individual Operational Ability Page 31



Requirement



FSPs must set out how it will ensure that it has adequate financial resources and how it will manage and monitor compliance with the Financial Soundness Requirements applicable to their type of FSP.

Financial Soundness

1. Accounting Policy and Processes.

2. Monthly management accounts which must include a financial income and expense budget tracked monthly and balance sheet.

3. Assets must exceed liabilities - monthly sign-off that all financial requirements have been met by the necessary margin.

1.

2.

3.



reviewed

Not in place

Require help

Financial Soundness Page 32



Masthead solution We offer two seminar options:

• An information session which include templates that must be customised by the FSP.

• An implementation seminar.

If you require any further information or assistance, please contact one of our regional offices. Cape Town 021 555 4121Bloemfontein 051 401 8300Durban 031 267 5650Johannesburg 011 602 0200Port Elizabeth 041 390 2900Pretoria 012 424 3400

To read our Fit and Proper series where we unpack the changes and various requirements that need to be implemented, please click here.

Head Office021 686 [email protected] © 2018 Masthead (Pty) Ltd. All rights reserved.


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gap analysis e-brochure final - masthead.co.za · masthead solution action plan and responsible...

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