RE5

• FAISAct

  Regulatory framework introduced in 2002, effective from 30 September 2004, to regulate financial services providers and protect consumers
• FAISAct

  • Requires all institutions and persons who wish to render financial services to obtain authorization from the regulator before they can provide such services to the public
  • Aims to protect consumers of financial products against financial services providers
• Financial Sector Conduct Authority (FSCA)


  Regulator that replaced the Financial Services Board (FSB), responsible for market conduct, market efficiency, integrity, and consumer education
• Financial Services Providers (FSPs)


  Financial institutions authorized by the FSCA to sell financial services, including intermediary services and/or giving advice
• Financial Services Providers (FSPs)


  • Fully responsible for implementing and maintaining compliance with the FAIS Act and relevant codes of conduct
  • Some FSPs who lend money may need to become authorized credit providers under the National Credit Act instead of the Phase Act
• Key Individuals (KIs)


  Employed by FSPs to ensure compliance with the FAIS Act, responsible for management and oversight of the business
• Representatives (Reps)


  Employed by FSPs to sell financial services to clients, including call center agents, brokers, consultants, financial planners, advisors, and insurance agents
• Compliance Officers


  Employed or contracted by FSPs to help with compliance matters as required by the Phase Act, part of the FSP's risk management processes
• FAIS Ombud


  Resolves complaints submitted by clients about an FSP and/or its representatives
• The FAIS Act follows a functional approach, regulating certain functions across institutions, rather than an institutional approach focused on specific institutions
• The FAIS Act applies to FSPs who give advice or provide intermediary services to clients, not just those who give advice in relation to financial products
• Compliance officers are appointed by FSPs, not the FSCA, but the FSCA approves the compliance officers appointed by the FSPs
• A key individual may function both as an FSP and a key individual
• The statement "compliance officers are appointed by the FSCA to monitor compliance as required by the Phase Act" is false
• Advice


  A recommendation on a financial product, guidance on a financial product, or a proposal of a financial product to a client that results in a client making an informed decision
• Intermediary service


  Any service, other than giving advice, performed by an FSP, KI or rep on behalf of a client or a product supplier, based on the client's instruction after making an informed decision
• Intermediary service


  • Dealing in financial products on behalf of a client, collecting premiums from clients, receiving, submitting, processing or settling claims on behalf of a product supplier
• Financial products classified under the FAIS Act

  • Securities and instruments (shares, debentures, money market instruments, warrants, options, derivatives, bonds)
  • Participatory interests in one or more collective investment schemes or unit trusts
  • Long-term and short-term insurance products
  • Pension funds and friendly societies
  • Foreign currency denominated investments
  • Long-term and short-term deposits
  • Health service benefits under medical aid schemes
• License categories


  Category 1 - FSPs who only give advice and render financial services

  Category 2 - Discretionary FSPs (fund/investment managers)

  Category 2A - Hedge fund FSPs

  Category 3 - Administrative FSPs

  Category 4 - FSPs that intermediate between insurance companies and assistance business FSPs
• All license categories except for Category 1 are specialist categories
• FSPs applying for a FAIS license would also have to apply for a specific product subcategory
• intermediary

  An activity, other than giving advice, that is performed by a person for or on behalf of a client or product supplier
• Dinero's bank providing a platform for her to make payments to her insurer is not an intermediary service
• Intermediary service only relates to factual information given by a representative to a client about a financial product
• Categories of financial service providers (FSPs) under the FAIS Act

  • Category 1 Ordinary category 2 Discretionary. Category 2 A Huge fund. Category 3 Administrative. Category 4 Assistance business
• All persons authorized as administrative FSPs are in Category 3, not Category 4
• Sectors that fall under financial services as defined in the FAIS Act

  • Long-term insurance
  • Collective investments
  • Banks
• Postal services do not fall under financial services as defined in the FAIS Act, unless they extend into financial services
• Activities that are considered financial services under the FAIS Act

  • Rendering of intermediary services
  • Providing advice
  • Providing both advice and rendering an intermediary service
• Examples of financial products under the FAIS Act

  • Deposits
  • Cell phone insurance
  • Unit trusts
• Loans are not financial products under the FAIS Act, they are covered by the National Credit Act
• Needs to be considered when offering a client a product


  Establishing the client's objective financial background and financial knowledge and experience
• A policy can be regarded as invalid under the FAIS Act if the FSP or insurer underwriting the policy does not have a license from the FSCA
• Handing out brochures and explaining factual information about products to clients is not considered rendering a financial service
• Updating policy details of clients and sharing own opinion about financial products and recommending some are considered rendering a financial service
• Products governed by the FAIS Act

  • Short-term insurance policies
  • Collective investment schemes
  • Fixed deposits
• Main requirements of giving advice to clients

  Establishing the suitability of products and keeping a record of advice
• Shares, debentures, health service benefits, and life insurance are examples of financial products under the FAIS Act
• Property is not a financial product under the FAIS Act
• Compliance officer


  A natural person or legal entity appointed by an FSP to help with compliance requirements of the FAIS Act