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Whilst we see our clients on a regular basis and are always available to provide input to clients queries and questions we cannot tell everyone everything as and when news needs to be shared. Whilst we understand that there is a perception that there is almost too much information in the market place and that this often hampers the flow rather than enhances it we have chosen to provide formal input on compliance related matters to clients via a monthly newsletter. This is now supported by an AC Blog that allows us to communicate key issues that we consider worthy of a clients attention on a more regular basis as and when needed.
The newsletter is issued at the end of each month and has regular features that includes, but not limited to, news from;
· Associated Compliance
· The FSB
· The FAIS Ombud
· The FIC
· And a variety of articles we have read from the market place that we consider to be worth your attention
Proposed Amendments to Legislation
Draft changes to the FAIS General Code of Conduct and the FAIS Specific Code for Short-term Deposits Business were published by the FSB on 1 November 2017. The deadline for submission of comments is 28 February 2018. We do not expect implementation of any changes until the middle of 2018. In fact, the proposed start dates for advertising and complaints are already drafted as at 1 July 2018 and 1 January 2019 respectively and we all know how accurate proposed start dates
The FSB’s own overview of the proposed amendments provides a summary of the key changes and the rationale behind them. Click here to download it.
The two biggest changes by way of a number of regulatory requirements are advertising and complaints management. Each take up six pages of the
Both proposals seek to align the FAIS standards to those soon to apply to insurers via the Policyholder Protection Rules. The proposals demand a complete review of the current standards, especially complaints management as this has an impact on
Some notable aspects of the advertising standards are:
The key individual has direct responsibility for approval of advertisements
Prominence of the information contained has been clearly defined, including sound and speed of speech in audio-based adverts
Negative options advertisements will not be permitted
Unwanted direct advertising can be stopped by the client
Endorsements by third parties of products and/or providers must be real people/events and where people have been paid to do these this must be disclosed
Loyalty benefits or bonuses: The financial impact of providing this must be disclosed if the cost exceeds 10% of the premium/investment amount.
Some notable aspects of the complaints management standards are:
The long-anticipated change in the definition to “… any expression of dissatisfaction.”
There will be no need to record:
complaints finalised immediately by the person who received the complaint.
complaints finalised in the ordinary process of handling the matter, if this does not take longer than five days. Care will be needed to ensure such matters can be tracked and then recorded as and when needed.
any other matter that does not allow the provider a reasonable opportunity to record the details e.g. a passing comment from a client with no real substance.
The fear many FSPs had that ‘absolutely everything’ would need to be noted has been addressed in this more practical approach.
When complaints do need to be formally recorded, the level of detail needed is extensive. There are nine separate classifications of complaint (see section (4)(a)).
The Board or governing body of the FSP is responsible for management of the effectiveness of the process. The person responsible for management on a day-to-day basis must have the skills and be sufficiently empowered to do so. The days of the receptionist managing a complaints register are over.
Communication standards with clients who have lodged complaints are extensive and will demand specific letters and formats to allow for adherence to these standards.
It is made very clear that an FSP must try and resolve a matter and not simply expect the relevant Ombud to have to make determinations.
A provider must ensure that it monitors other determinations, publications and guidance issued by any relevant Ombud to identify risks and failings within their own organisation in a proactive manner.
Obviously, we will interact with our FSPs to ensure that current standards are reviewed and upgraded as required as and when the final versions are released.
Other highlights of the proposed changes:
Direct Marketing: The distinctions between a director marketer and a broker have effectively been removed. This will mean, among other things, the need for:
Direct Marketers to increase disclosures to a client before the sale is concluded (previously this could be done post sale).
The need to provide a documented record of advice. The proposal does allow for the use of data messages as the means for such confirmation.
This may well force the Direct Marketer to look critically at the product range it sells and whether advice should be part of the sales process. The impact of the Fit & Proper amendments around such delivery mechanisms and the related education and CPD standards will undoubtable also play a role in this.
The definition of Replacement is being improved to achieve better clarity as to what is needed and when (which will now include the Direct Marketer).
The FSB are looking to be able to prescribe, where appropriate, the format and the matters to be addressed in the record of advice. This is on the basis that this will improve compliance, the quality and costs.
The need for an FSP to act honestly, which is currently specific to when rendering a financial service, is to be amended to simply state must “at all times act honestly, fairly with due skill, care and diligence.” The FSB acknowledge that this is a broad phrase but should be taken in the context of the process being regulated. Clearly though, it extends the FSB’s reach without having to debate if a matter was part of a financial service.
The definition of a financial interest is to be amended to allow for enterprise development contributions – which must be a good thing.
Improved disclosure requirements so clients better understand when a non-financial product is not regulated by the FSB. We have always advised this along with the need to separate the cost of such products from the true premiums on any policy/product schedule.
Forecast, illustrations, hypothetical data or projected benefits and past performance data was only directly regulated when it came to advertisements. This is to be corrected by the inclusion of standards in Section 7 of the Code.
There will be several regulations to give effect to some of the RDR proposals that deal with:
Intermediary remuneration (Proposals HH – KK), specifically disclosures around fees and the services that can be expected for those fees,
Financial interest offered to Representatives (Proposal RR) dependent on quantity of business and that there are fair outcomes for customers and the need to evidence how this is done.
Advice provided to groups and their members (Proposal C) e.g. medical aids and pension funds must be such that the needs of those members must be considered.
Providing advice where a provider has limited options due to legal (e.g. licence restrictions) or contractual limitations (e.g. tied agency restrictions) and the potential for the wrong product being offered as a result will be further controlled by enhanced regulation forcing the provider not to recommend a product and advise the client accordingly.
The FSB were considering a “low advice” distribution model where a client makes or has a specific request or need and a full suitability analysis is not warranted. The proposal at this stage is that this “low advice” option will not be followed as it is felt the current regulations allow for such an approach and merely clarifying this in terms of the current regulations is all that is needed.
Please click below to download documents mentioned in the above months newsletter:
Please click below to download documents mentioned in the above months newsletter: