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Even though we see our clients on a regular basis and are always available to provide input regarding queries and questions, we can’t tell everyone everything as and when news needs to be shared. We also understand that there is a perception that there is almost too much information in the marketplace and that this often hampers the flow rather than enhances it. For this reason, we have chosen to provide formal input on compliance-related matters to clients via a monthly newsletter that allows us to communicate key issues that we consider worthy of our clients’ attention on a more regular basis.
The newsletter is issued at the end of each month and has regular features that include, but are not limited to, news from:
The FAIS Ombud
And a variety of articles we have read from the marketplace that we consider to be worth our clients’ attention.
Some confusing commentary
We received input from a client who attended a presentation in Cape Town by the FSCA and raised some questions with us on the feedback, specifically on CPD matters, which appeared to contradict our comments regarding the hours required by FSPs licensed for both Short-term Personal and Commercial Lines.
We’ve been preaching that each of these is seen as a Class of Business, and if you’re involved in both you need 18 hours of CPD and not the 12 hours mentioned at the presentation. We raised this query with the Authority and received feedback that they had indeed stated 12 hours, which was an error and that 18 hours is in fact the hours needed.
We can see where the misunderstanding comes from as before the final version of the Fit & Proper Regulations were released, Personal and Commercial Lines were in one class, each being a sub-class, and two sub-classes meant 12 hours. Despite the confusion, there is some comfort in knowing that even the Authority can get overwhelmed by the volume of changes and don’t always get it right.
The same client also raised another concern, namely the transformation discussion. To quote both the questions (noted in Blue) and the feedback to our enquiry (noted in Red) from FSCA:
“The transformation discussion… the FSCA were particularly passionate about this and spent a good 15 minutes explaining the FSCA’s vision. These are the fleshed-out bullet points from my notes taken at the presentation:
- FSCA is becoming involved in transformation as they feel that B-BBEE is not doing enough to drive transformation – We are involved in transformation because Government feel the current B-BBEE framework is not achieving meaningful transformation in the financial sector.
- There are no real consequences in being non-compliant and there needs to be to drive transformation. FSCA elaborated by explaining that the only consequence was that one could not apply for government tenders and this was not enough of a consequence to drive transformation. True
- Currently, the FSCA is using a (previously suggested) proposal that was put forth… relating to the insurance industry as a starting point. It proposed that all businesses must be 50% black owned and 50% of that portion must be female owned. FSCA noted that the proposal was made in respect of the insurance industry, but because the FSCA has jurisdiction over the entire financial sector, they will likely apply it to the entire financial sector. NOT TRUE – this was a proposal by a political party made in parliament that was not adopted by Treasury, PA or the FSCA since we did not want to build specific targets into our laws – we believe targets should continue to be set by the FSC.
- FSCA went on to say that they will set requirements for transformation and that if these requirements are not met, the FSCA will have the authority to fine FSPs and even suspend licenses. The FSC will set the targets but we and the PA will be required to monitor an institution’s progress towards meeting their commitments in terms of the FSC (Financial Sector Charter) Code and build consequences for lack of transformation. These consequences could take many forms: fines, name and shame, limitations on acquisition – license withdrawal would be a very last resort. Remember this applies to anyone subject to the FSC (Financial Sector Charter) Code but at the moment is only written into the Insurance Act – a similar philosophy will be adopted under COFI (Conduct of Financial Institutions Act) for other institutions including banks and any other institutions subject to the FSC Code.”
It is clear that the transformation aspect of FSP licencing will be an emotive issue and your status in terms of the Financial Sector Charter is a key aspect in the application of these possible conduct standards.
A tag-on comment from FSCA arising from this same presentation was the issue of the R1,000 limit for immaterial financial interest (gifts and entertainment). The Authority’s comments on this were as follows:
“Another issue which I found (was) interpreted incorrectly was that I was asked whether we would consider increasing the R1,000 conflict of interest limit. I said no… this was meant to cover immaterial interest… Instead it is being used as a limit into which to squash all your conflicts. I would rather consider removing the R1,000 completely. It would seem some interpreted this statement as meaning any amount could be paid but really it would mean nothing could be paid. Of course, we have not done this. The R1,000 limit remains; I was simply emphasising that we were not open to increasing it.”
Well we guess that puts an end to the debate of increasing the limit!