Compliance with theFinancial Advisory &

Intermediary Services Act

Presented by

FAIS Department of the Financial Services Boardand

Compliance Institute of South Africa

Compliance risk management

Presented by the Compliance Institute of South Africa

Supervision of FSPs

Supervision of FSPs FSPs will be supervised on a risk

based supervision approach

Risk based supervision is:

A supervision approach whereby the risk of entities on regulatory objectives are measured and managed while optimising the allocation of resources

Risk based supervision

Risk RatingImpact x Probability

Intensity Supervision

Complaints

Financial Statements

Onsite reviews

Enquiries Public

Profile changes

Application ComplianceReports

Enquiries FSP

Inspection

Theme work

MediaInternet

Regular meetings

Audit reports

Risks taken in consideration

External risks Internal risk – business & control risk Examples of type of internal risks

Financial soundness Nature of customer, services and products Treatment of customers Organisation structure Internal systems and controls Compliance culture

Supervision of FSPs Dynamic process and risk rating will

change as FSPs’ internal and external risk factors changes

Risk rating will determine the level of supervision and type of interaction with FSPs

Risk based approached is being rolled out and FSPs will be informed of the progress

Ratings and information on it will be only communicated to FSPs and treated as confidential

Obligations on FSPs

Comply with the Act Sect 19 – Submission of financial

statements & audit reports Sect 11 – Lapsing of licence Sect 17 – Appointment of CO

Sect 8 – Disclose authorised FSP Sect 8 - Display licence certificate Sect 13 – Representatives Sect 14 – Debarment of representatives Sect 17 – Submission of reports Sect 18 – Recordkeeping

Comply with the Act Submission of financial statements &

audit reports Annual financial statements – all FSPs Category I receive premiums and client

funds and Category II and III Audited financial statements Prepared in terms of general accepted

accounting practice Section 19(3) report if receive client

funds in a separate account (refer section 10 of General Code of Conduct)

Comply with the Act Submission of financial statements &

audit reports Within 6 months after year-end Penalties late submission Receive acknowledgement of receipt Contact FSP only if there is a problem Method submission: E-mail in .pdf format,

post or deliver – do not fax Address to FAIS Financial Statements E-mail address: faisfins@fsb.co.za

Comply with the Act Lapsing of licence – section 11

Natural person – died Partnership – dissolve Close corporation or company –

Liquidated Trust –dissolved Voluntary request for lapsing licence

Address letter to Registrar and mark it FAIS Profile Changes provide reasons for request

Post or fax it

Comply with the Act Appointment and resignation of

compliance officer – section 17 Duty of compliance officer to inform

Registrar of resignation FSP must immediately appoint a new

compliance officer (FSP6 form) Address letter for attention

FAIS Profile changesE-mail address: faispfc@fsb.co.za

Comply with Codes of Conduct

Recordkeeping Disclosure requirements Suitable advice Complaints Advertising Compliance function Client funds

Comply with licensing conditions

Licensing conditions Annexure to licence Submit changes to application detail

(‘Profile changes’) Submit changes to representative register

(Electronically or FSP5 forms) E-mail correspondence faispfc@fsb.co.za Posted addressed to FAIS Profile Changes Receive acknowledgement of receipt Final letter will be sent takes between 6 to

10 weeks – working on the backlog Questions 1 & 2 of the compliance report

Comply with other legislation

Financial Services Board Act Payment of levies

Financial Intelligence Centre Act & other anti money laundering legislation

Financial Institutions (Protection of Funds) Act

Insurance Act Collective Investment Schemes Act Securities Services Act All other legislation applicable

Compliance report2005

Compliance report 2005

Usage of the report Format of the report Specific questions Reporting period Submitting the report Electronic submission Hardcopy submission

Usage of the report Supervisory tool in RBS Identify areas in which FSPs are not

complying Commit FSPs to identify

developmental areas and to work on it

FSPs can use it as a minimum “checklist” compliance function

Source of information for onsite visits

Format of the report Easy for keeping information Lead the person completing it YES/NO Questions Not applicable - Validation Sampling – Question 16

16. Provide a short description of the sampling or other methodology used in the monitoring procedures (testing) mentioned in this report in a separate schedule and list the number of the attachment in column 5

Format of the report Development areas

Any control, process or compliance issue that has been identified during the monitoring of compliance as an area in respect of which the need for improvement of such control, process or compliance issues has been identified, and plans are in place to effect such improvements within a reasonable time

AttachmentsLimit the attachments to what is required in the report we do not want detail on all questions

Signing of the reportPerson completing report andKey individual must acknowledge report was sent

Specific Questions Highlighted

1.3 Financial Products in respect of which FSP renders financial services

Condition 5 imposed by the Registrar in terms of section 8(4) of the Act

1.3.1 Does the FSP have internal controls and procedures in place to ensure that any financial product in respect of which the provider intends to

render a financial service, qualifies as a financial product contemplated in the Act?

1.3.2 Did the FSP render financial services relating to financial products that do not qualify as

financial products as contemplated in the Act?

Question 1.3

1.4 Financial Products in respect of which FSP renders financial services

Authorisation in terms of the licence of the FSP

1.4.1 Does the FSP have internal controls and procedures in place to ensure that any financial product in respect of which the provider intends to

render a financial service, qualifies as a financial product contemplated in the Act?

1.4.2 Did you (compliance officer) perform monitoring procedures (testing) on a sample basis during

the monitoring process to ensure that the financial services rendered are in terms of limitations on

the category and subcategory for which the licence is issued?

Question 1.4

3.3 Is a reference to the fact that a licence is held contained in all business documentation and advertisements?

4.2.1 Does the FSP have procedures in place to ensure that representatives and key individuals of

representatives of the FSP are competent to render financial services to clients taking in account the requirements stipulated in the Determination of Fit and Proper Requirements of Financial Services Providers relating to

4.2.1.1 personal character qualities of honesty and integrity; and

4.2.1.2 competence and operational ability

Question 3 & 4

4.5 Debarment of representativesSection 14 of the Act

4.5.1 Did the FSP during the reporting period debar any representatives in terms of section 14(1) of the Act?

4.5.2 Did the FSP remove the names of the representatives and its key individuals from the register?

4.5.3 Did the FSP inform the Registrar accordingly in terms of section 14(3) of the Act?

Question 4

5. Insurance coverSections 5(e) and 13 of the General Code of

Conduct5.1 Does the FSP have professional indemnity cover?

Provide the extent of the cover in column 5

5.2 Does the FSP have fidelity insurance cover?Provide the extent of the cover in column 5

5.3 Does the FSP have guarantees in place as contemplated in section 13 of the General Code?

Provide the extent of the guarantees in column 5

5.4 Does the FSP disclose to clients in terms of section 5(e) of the General Code whether it holds

guarantees or professional indemnity of fidelity insurance cover?

Question 5

6.1 Is the compliance function established as part of the risk management framework of the business of the FSP?

6.4 Do you (compliance officer) have any comments to make on the procedures contemplated in section 17(3) of the Act which the FSP has established as regards their maintenance and efficacy?

Question 6 & 7

8.1.1 Did the FSP or its representatives during the reporting period receive non-cash incentives and / or other indirect considerations for the rendering of financial services from another provider, product supplier or other person?

8.2.2 Did you (compliance officer) perform monitoring procedures on a sample basis to ensure that the FSP disclosed relevant information in terms of sections 4, 5 and 7 of the General Code of Conduct to its clients where applicable?

Question 8

9.1.2 Did the FSP during the period contemplated in the exemption comply with paragraph 4 of the

exemption?

Question 9.1.28.3.2.2 Does the FSP use a standardised computer

programme to do the analysis?

8.7.1 Does the FSP act as a direct marketer?

Reporting periodYear-end

January 2005February 2005

March 2005April 2005May 2005

June to Dec 2005

Reporting periodAU - July 2005AU – August 2005AU – September 2005AU – October 2005AU – November 2005AU – December 2005

AU – Authorisation date

Reporting periodAll year-ends 28 February

FSP licensed 15 July 2004 Authorisation date = 30 September 2004 Reporting period = 30 Sept 04 – 31 Aug 05 Submission of report = before 31 Oct 05

FSP licensed 15 March 2005 Authorisation date = 15 March 2005 Reporting period = 15 March 05 – 31 Aug 05 Submission of report = before 31 Oct 05

FSP licensed 1 September 2005 No report will be submitted for 2005

Reporting periodAll year-ends 31 December

FSP licensed 15 July 2004 Authorisation date = 30 September 2004 Reporting period = 30 Sept 04 – 31 Dec 05 Submission of report = before 28 Feb 06

FSP licensed 15 Sept 2005 Authorisation date = 15 Sept 2005 Reporting period = 15 Sept 05 – 31 Dec 05 Submission of report = before 28 Feb 06

Submitting the report Preferred method - Electronically

with special programme: Sign last page and scan in Do not have scanner – submit per post Attachments in Microsoft can be electronically

attached when submitting the report Compliance officer can use programme for

multiple FSPs

Hard copy – only be accepted per post or hand delivered

Electronic submissionStep 1 – Register online

www.fsb.co.za /FAIS/Compliance report

Step 2 -Receive an e-mail with instructions

Step 3 -Install programme according the instructions on PC automatically

Step 4 -Complete Compliance officer’s / FSP’s (if no CO required) details

Electronic submissionStep 5 - Request FSPs details on

website and upload it orcapture manually (only have a few)Can do as may times as necessaryIt will only be the FSPs linked to compliance officer

Step 6 - Complete the compliance report

Step 7 - Attach the documents

Electronic submissionStep 8 - Validate the report

Step 9 - Export the report and sent to FSB via e-mail (it will be done automatically)

Step 10 - Receive confirmation whensuccessful upload and case no

Step 11 – We will contact you if necessary for additional information

Hardcopy submissionStep 1 - Obtain the form

FSB website .pdf format orGovernment PrintersForms will not be e-mailedor posted to FSPs

Step 2 - Complete the form andmark attachments

Hardcopy submission

Step 3 - Ensure that the form correctly completed

Do not fill in anything on grey areas

If the form is incorrectly completed it will be returned and penalties will be charged for late submission

Hardcopy submissionStep 4 - Post the form

No acknowledgement will begiven to hand delivered forms –

it will be treated as a posted form

Step 5 - Receive acknowledgementWithout letter acknowledgementthe report will be regarded as not submitted

Late submissions Penalties of up to a R1 000 per day

will be charged for late submissions

If we did not acknowledge the receipt of the report we did not receive the report and the FSP will be penalised

Take 2 weeks acknowledgement of hardcopy after we received it – trace the progress on the website

Thank you