Financial Advisory and Intermediary Services Act

Financial Advisory and Intermediary

Services (FAIS) Act - 2002

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Financial Advisory and Intermediary Services (FAIS) Act - 2002

• Provide consumer protection in terms of financial

products; and

• Enhance the integrity of the South African financial

services industry.



The FAIS Act regulates the following aspects…

• Authorisation of Financial Services Providers

• Representatives of Authorised Financial Services

Providers

• Codes of Conduct

• Duties of Authorised Financial Services Providers

• Enforcement where the law is transgressed



The FAIS Act…


• Requires all FSPs to be registered;

• Ensures that representatives of all authorised service providers are

adequately qualified;

• Creates a code of conduct;

• Defines duties in terms of compliance,

• Establishes guidelines for record maintenance and accounting and

audit requirements;

• Provides mechanisms for enforcement and complaint procedures;

and

• Establishes a Financial Advisory and Intermediary Services Ombud.


The FAIS Act is applicable to any person who…


• Furnishes advice

• Furnishes advice and renders any intermediary service

• Renders an intermediary service


A consumer of financial services is entitled to…


• Ask for a copy of the “Disclosure and appointment letter”

• Receive trusted and appropriate advice and solutions based on affordability

and suitability tests

• Insist to be treated with honesty and integrity, transparency and a culture

of discipline

• Know details about costs and how the amount will be paid

• Know the commission charge

• Receive a yearly report to keep you updated about your financial product

• Receive a copy of the agreement within 30 days of signing the agreement,

and

• Recourse


A letter of disclosure and appointment includes …


• Who the person is;

• The name and contact details of the business he/she works for;

• What products the person is allowed to give advice on or provide

intermediary services against;

• The product supplier(s) the person may give advice on or provide

intermediary services against – the names of the companies must be

listed on the document;

• How much commission they earn, and

• How this is made up; who should you contact if you are not satisfied

with the service you receive.


The FIAS Act and Advertising …


• Advertising may not contain any statements; promises or forecasts

which are fraudulent; untrue or misleading.

• All advertising must have references, dates, basic assumptions for

forecasts (including returns; costs and charges);

• Advertising must make clear that there are no guarantees and

include a risk warning;

• There must be a clear indication of investment return dependence.

• Records of all telephonic or electronic advertising must be kept and a

copy provided to the registrar on request.


Diret marketers must provide consumers with…


• Business or trade name of the marketing company;

• FSP licence details;

• Contact details unless contact was initiated by the Consumer;

• Professional and indemnity insurance details;

• Legal status and relationship with product supplier;

• Product details and enquire whether the financial product or products are

appropriate to the Consumers risk profile,

• Needs and circumstances analysis;

• Cooling off rights;

• Actual and potential financial implications,

• Costs and consequences of a new financial product replacing and existing one.

• Electronic and telephonic records must be kept and provided on request


Telephonic information by a direct marketer must…


• Confirm the information in writing within 30 days.

• This information should also include details about benefits;

charges and fees; commission, consideration, charges and

brokerages; details of investment performance; consequences

of non-compliance with monetary obligations; concise details

of any special terms and conditions; and exclusions, waiting

periods, loadings, restrictions, penalties, excesses, restrictions

or circumstances in which benefits will not be provided.


The FIAS Act Code of Conduct compels a FSP to disclose…


• The operational ability of FSPs to manage financial records, maintain

internal controls, keep client records and deal with client funds;

• The ability of FSPs to deal with clients, including providing a financial needs

analysis to a client; properly disclose who they are, specify the financial

products and services they are permitted to provide, who supplies the

products and give specific information relation to the nature and features of

the products as well as the cost for the client in obtaining any product or

service;

• Proper conduct for advertising, marketing and canvassing;

• The FSP having a complaints procedure; and

• A structure and contingency plan on how a FSP will be closed down.


Penalties for non-compliance to the FIAS Act…


Penalties for not complying with the FAIS Act include

fines up to R1 million and/or imprisonment for up to 10

years, as well as the withdrawal of the FSP’s licence or

debarment of a representative.



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Financial Advisory and Intermediary Services Act