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INDEPENDANT FINANCIAL
ADVISORS (IFAs) TELEMATIC CONFERENCE
PRESENTATION
Agenda
• Structure of the FAIS Division
• Exemption: Board Notice 193 of 2011
• Financial Statements guideline
• Regulatory Examinations: DOFA
• Qualifications List
• PI Cover and Fidelity guarantees
• License Certificate: Transfer of Book & License
• Debarments
• Conflict of interest
Structure of the FAIS Division
The FAIS Division is made up of 4 Departments all of
which perform very specific functions:
• Registration
• Supervision
• Compliance
• Enforcement
The departmental delegation of authority document sets
out what functions may be performed by which
department e.g. staff in the Supervision Department are
unable to lift suspensions as this function has been
delegated to FAIS Compliance.
FAIS Registration
New license applications
Profile Changes
Approval of compliance officers
Approval of mandates and application forms
Attending to qualification related and other Fit and
Proper queries
Lapsing of licenses
Liaison with foreign regulators
Levy collections
FAIS Supervision
▫ Receipt and analysis of annual compliance reports
▫ Receipt an analysis of annual financial statements
▫ Conducting risk assessment visits on FSPs
▫ Conducting od compliance practice reviews
▫ Organisation of annual conferences, tele-conferences
and various workshops
▫ Drafting and distribution of FAIS newsletter
▫ Queries relating to authorised FSPs
FAIS Compliance
▫ Investigation of unregistered business
▫ Oversee inspections done by Inspectorate of the FSB
▫ Debarment of representatives
▫ Suspension of licenses and reinstatements
▫ Withdrawal of licenses
▫ Complaints from consumers before 30 September 2004
▫ Handling of non advice related complaints after 30 September 2004.
▫ Referral cases from FAIS Supervision
FAIS Enforcement
• Deal with Enforcement Committee referrals and cases
in respect of FAIS legislation only.
• Enforcement Committee is an administrative body
established to adjudicate on all alleged contraventions
of legislation, regulations, codes of conduct, etc.
administered by the FSB.
• The Committee may impose unlimited penalties,
compensation orders and cost orders.
• Such orders are enforceable as if it was a judgment of
the Supreme Court of South Africa
Board Notice 193 OF 2011
• Section 19 of the Act originally required all authorised
FSPs to submit audited financial statements.
• Board Notice 193 of 2011 exempts certain FSPs from
submitting audited financials
• FSPs must register to make use of this exemption
• FSPs registered for the exemption still need to submit
financial statements, just not audited
• Only Category I FSPs that don’t receive client funds and /
or premiums
• Only Companies not required to prepare audited financials
in terms of the new Companies Act.
Board Notice193 of 2011 (cont.)
• Must complete the registration form available for
download on our website and e-mail to
• We have found some FSPs that aren’t allowed to
register have gone ahead and done so e.g. FSPs
receiving short term insurance premiums (must be
rectified)
• If an FSP is a company and has not registered for the
exemption then we will still expect audited financial
statements.
Financial Statements • Guide for sole proprietors and template that can be used to prepare own
financial statements is available for download on the FSB website
Financial Statements (Cont.)
Category Type of entity Receive client
funds / premiums?
Type of financials
I Sole proprietor No Income statement &
Balance sheet only
I Sole proprietor Yes Audited financials
I CC No Financials prepared by an
accounting officer
I CC Yes Audited financials
I Company No Same requirements as Companies
Act
I Company Yes Audited financials
II All N/a Audited financials
IIA All N/a Audited financials
III All N/a Audited financials
IV All N/a Audited financials
Financial Statements (Cont.)
• Often we find that sole
proprietors submit a balance
sheet that “doesn’t balance”
• Accounting equation: Assets = Owner’s Equity + Liabilities
• Owners equity is very simply
Total Assets - Total Liabilities
• Balance sheet will then
“balance”
Financial Statements(Cont.)
• Letter distributed to all FSPs on 6 July 2010, as from 31
July 2010 e-mailed copies of financial statements no
longer accepted
• Circular sent on 30 April 2012 reinforcing this
• Acceptable methods of submission:
▫ Electronic submission via the FAIS Online system
(preferred method)
▫ Post
▫ Hand Delivery
• Reminders sent to all FSP during the month of their
financial year end to remind FSP to submit and by
which date.
DOFA
• 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)
Implications of DOFA
Implications of DOFA
Qualifications
• Rules: BN 105 of 2008
• Recognised 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
Qualifications List
Qualifications List (Cont.)
Professional Indemnity Cover
• Helps protect FSPs from bearing the full cost of defending against a
negligence claim made by a client, and damages awarded in such
a civil lawsuit.
• In most cases, even with controls implemented, we do not have
control of the risk that may be caused by human errors which are
inherent in professional advice giving businesses.
• A professional indemnity cover (required in terms of BN 123 of
2009) was added as a requirement in terms of the FAIS Act.
• To manage the risk of false/ incorrect professional advice resulting
in lawsuits is inherent in most professional advice giving
businesses, hence the requirement for a PI cover as one of the
control measures to assist in the mitigation of these risks.
Suitable Guarantees
• A guaranty can be described as a promise by which one
person assumes responsibility for paying another's debts
or fulfilling another's obligations.
• 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.
PI Cover and Fidelity Guarantees
PI COVER & FIDELITY GUARANTEES(cont.)
Transfer of Clients / Book
• 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.
Transfer of license
• In terms of section 7 of the FAIS Act
▫ A person may not act or offer to act
▫ As a financial services provider
▫ Unless such person has been issued with a license
under section 8
• A license of the licensee cannot therefore be
transferred to another person
• Such person has to apply for authorisation per section 8
Debarment of Representatives (Section
14(1) of FAIS Act)
• Debarment by the FSP and not the Registrar
• Reasons for debarment
▫ Non compliance with fit and Proper requirements (
Honesty and integrity & Competency (Qualifications)
▫ Non compliance with the provisions FAIS Act
Debarment of Representatives
(Section 14(1) of FAIS Act) cont.
• FSP must Remove the representative from the
representative’s register and inform the Registrar
within 15 days
• Incomplete business must be transferred to another
representative
• Debarred Rep cannot lodge an appeal to the Registrar,
but should refer the debarment back to the FSP
Debarment of Representatives (Section
14A of FAIS Act)
• Debarment by the Registrar
• Any person (i.e.) compliance officer, key individual,
director and also a representative
• Reasons for debarment
▫ Personal character qualities of honesty and integrity
▫ Non compliance with the provisions FAIS Act
• Appeal can be lodged
Conflict of Interest
• What is Conflict of Interest
• Any situation where a provider or rep has an actual or
potential interest
▫ Interest that may influence the objective
performance of their obligations to clients
▫ Interest that may prevent a provider from rendering
an unbiased and fair service to clients
Conflict of Interest (cont.)
• What is actual/potential interest?
▫ Financial interest
▫ Ownership interest
▫ Any relationship with a third party
• Immaterial financial interest
▫ Monetary value not exceeding R1000
▫ In any calendar year
▫ From the same third party
Conflict of Interest (cont.)
• Financial interest means
▫ Any cash
▫ Cash equivalent
▫ Voucher
▫ Gift
▫ Accommodation
▫ Hospitality
▫ Benefit
▫ Discount
▫ Domestic/ foreign travel
▫ Sponsorship, etc
Conflict of Interest (cont.)
• Examples of conflicts that should generally be disclosed to clients:
▫ if you or an associated person have an interest in the financial product
that you are giving advice about
▫ if you or an associated person are related to the product supplier that
you are giving advice about
▫ if your remuneration is affected by product sales
▫ who owns the financial services provider
▫ if there is a third party relationship between the financial services
provider and the product supplier.
Conflict of Interest (cont.)
• In terms of BN 58 of 2010
▫ Avoid conflict of interest
▫ Change disclosure documentation
▫ Implement controls to ensure comply with
prohibitions on financial interest
▫ Compliance officer must ensure that do monitoring
on the COI policy
Important Contact Details
• FAIS related complaints- [email protected]
• Request for extension to submit financial statement-
• Request for profile changes- [email protected]
• Request recognising of qualifications-
• Checking of date of first appointment (DOFA)-
• Application for exemption- [email protected]
• Request for debarment and reappointments