FSP Representative Appointment Quiz

Representative Regulatory Exam Workshop Material (RE5)

• This document is a training manual for the RE5 regulatory exam
• The manual was updated in August 2024
• Covers topics like the FAIS Act, Financial Sector Regulation Act, and the FSB/FSCA

Table of Contents

• Includes a detailed table of contents with page numbers
• Covers various topics related to the RE5 exam

Introduction to the Material

• Introduces the material and its purpose
• Explains how the manual was developed, combining various sources

The History of FAIS – FAIS Act 37 (2002)

• Details the establishment of the Financial Services Board (FSB)
• Discusses the aim of the FSB - to supervise and regulate non-banking financial services
• Describes the history of the FAIS Act 37 (2002), including the drafting process which started in 1993
• Highlights the objectives of the Act, which include protecting consumers and enhancing the integrity of the South African financial services industry

Objectives of the FAIS Act

• Regulate the provision of financial advisory and intermediary services to clients
• Repeal or amend certain laws
• Provide for matters incidental thereto

Latest updates in the Financial Services Sector

• Discusses the replacement of the FSB with the FSCA (Financial Sector Conduct Authority)
• Details the objectives of the FSCA, which includes protecting customers, promoting financial literacy, and enhancing financial markets
• Outlines immediate changes in communications, regulatory actions, and decisions, with the FSCA website now live
• Explains the establishment of a Financial Services Tribunal, replacing the FSB Appeal Board

The relationship between the FAIS Act and the Financial Sector Regulation Act

• Explains the relationship between the FAIS Act and the Financial Sector Regulation Act (FSRA)
• Mentions the FSB and the Registrar, now referred to as the Commissioner and the FSCA
• Highlights the FSCA's role in overseeing the South African non-banking financial services industry

FAIS Division

• Defines FAIS as a division within the FSCA that administers the Financial Advisory and Intermediary Services Act (FAIS) Act of 2002
• Explains the purpose of FAIS - to protect investors and professionalize the financial services industry in South Africa
• Discusses registration and ongoing supervision of FSPs

FAIS Departments

• Lists the different departments of the FSCA, including Actuarial, Capital Markets, Collective Investment Schemes, Consumer Education, Credit Ratings, Information Centre, etc
• Specifies which department deals with FAIS and further department breaking down into further subdivisions

Glossary of terms, including the Role Players

• Contains definitions of various terms relevant to the FSP/financial services industry
• Defines terms like Representative, Key Individual, Auditor, Compliance Officer, Client, Support staff and more.

What is Financial Services

• Defines financial services as advice and intermediary services

What is Automated Advice

• Describes a process where advice is provided electronically through an automatic system
• Illustrates and defines advice providing examples such as "Make recommendations", and "Provide proposal" and "Financial nature"

Advice is not about:

• Lists specific tasks that are not considered "advice" for the purposes of the act

What is Intermediary Services?

• Explains intermediary services as actions other than giving advice
• Illustrates examples of activities, including "Buy, sell or otherwise deal in", "Collect or account from premiums", "Receive, submit or process client claims"

The Representative

• Defines a representative (Rep) as a person who renders financial services (advice and/or intermediary services) to a client on behalf of an FSP
• Explains the requirements for a representative; employed or mandated by an FSP
• Includes important notes concerning employment and mandates.

Appointment of representatives

• Outlines the requirements for appointing a representative.
• Explains when a representative doesn't need to be registered

Supervision of Reps

• Explains the meaning of "supervision" in the context of representatives
• Details the selection process for supervisors
• Outlines the responsibilities of supervisors

Representative under supervision (supervisee)'s responsibilities

• Explains the roles and responsibilities of a representative working under supervision
• Covers duties, record keeping, and disclosures

The requirements of a Rep

• Covers the requirements for a representative to be properly registered, including the aspects of employment and mandate
• Covers situations of debarment

When a Rep provides advice

• Explains steps for providing advice to a client
• Details the necessary steps to be taken to provide suitable advice to the client, emphasising the need for a financial needs analysis (FNA)
• Describes the elements of an FNA
• Includes considerations for making informed decisions

When a client receives advice from a rep

• Discusses instances when the client doesn't provide sufficient information, and the rep's responsibilities.
• Describes the aspects of choosing a different product.

The Fit & Proper Requirements that apply to Representatives

• Explains the ongoing nature of fit and proper requirements
• Outlines the elements of competence, including experience, qualification, and relevant regulatory exams

What does Honesty and Integrity refer to?

• Defines honesty and integrity in the context of financial services
• Outlines aspects that may indicate a lack of good standing
• Describes the process the Commissioner may follow

Maintaining a license

• Discusses undesirable business practices, their implications, and the disciplinary action taken by the Commissioner
• Includes details about suspension and withdrawal of a license, and how these processes are handled.

Suspension or Withdrawal of License

• States that the Commissioner can suspend or withdraw a license if the existing licensee does not meet the specified eligibility requirements
• Includes steps regarding process of suspension or withdrawal

Lapsing a license

• Describes scenarios where a license will automatically lapse.
• Details the process and the requirements by which the commissioner should be advised

Format of communication with the Regulator

• Details the format of correspondence with a regulator, including how it should be done

Disclosure requirements:

• Outlines disclosure requirements regarding finances and client details.
• Includes topics such as ethical conduct, termination, and confidentiality, and the need for transparent business practices.

What is an Automated Advice?

• Explains automated advice and important notes for the practitioner.

The FAIS Ombudsman

• Describes the role of the FAIS Ombudsman and its powers.
• Specifies instances when an Ombud can/cannot accept a complaint.
• Details the process, penalties and the rules.

Reportable Irregularities

• Outlines the responsibilities of FSP auditors
• Explains how to report an irregularity, specifying processes and information needed in the report
• Defines the process for approval withdrawal.

Approval of a Compliance Officer by the Commissioner

• Details the two-phase approval process by the Commissioner
• Explains the criteria needed to gain approval

Application as an Officer or Practice

• Describes the procedure to apply for approval from the Commissioner (FSCA) as an officer or practice.

Representative Register

• Discusses maintaining the representative register
• Details information required to be in the register

Debarring a Representative

• Outlines the procedure for debarring a representative (i.e., removing them from the register)
• Details the grounds for debarment and the recourse available to debarred representatives

Roles and Functions of a Compliance Officer

• Outlines the roles and duties of the compliance officer in the context of regulatory and compliance services

Outsourcing of functions to a person other than a representative of the FSP

• Explains the requirements and process for outsourcing functions to a third party
• Describes due diligence required when outsourcing functions.

Product Categories

• Summarizes the various categories of products within the FAIS framework

Transitional Provisions

• Explains the provisions for individuals registered before amendments in April 2018
• Covers qualifications, requirements of experience and product-specific training

Class of Business training

• Details requirements of training in specific class of business as required by the commissioner .Explains and details what training is required for specific categories

Experience requirements for Reps

• Outlines experience requirements for representatives, covering various aspects of practical experience, knowledge, skills, and expertise.

Operational requirements for Reps

• Details the operational abilities required from representatives
• Covers practical requirements and qualifications

Fit & Proper Requirements that apply to KI's

• Covers the Fit & Proper requirement required from key individuals

Management Responsibilities of the KI

• Explains the management responsibilities of key individuals
• Covers necessary systems and controls to be implemented by the FSP or representative, including adequate business address, appropriate communications, accurate record keeping, and relevant compliance procedures

Responsibilities of the FSP

• Details the overall responsibility of an FSP, including competency, regulatory compliance, training, policies, monitoring, and assessment

Operational Ability

• Outlines operational ability requirements for FSPs

Financial Soundness

• Defines and explains the financial soundness requirements for FSPs
• Discusses the necessity for FSPs to have financial resources and exceed their liabilities.

Application requirements to become an FSP

• Outlines specific requirements for FSP applications.
• Lists the information that must be provided to the Commissioner.

Glossary of terms

• Provides definitions for various key terms related to the financial industry (e.g., “Accountable Institution,” “Business Relationship,” “FICA”)

Record Keeping

• Details recordkeeping requirements for accountable institutions

Additional requirements applicable to FSPs that provide automated advice

• Provides extra specifications needed to be adhered to when providing automated advice.

Test your knowledge on the requirements and regulations surrounding the appointment of representatives by Financial Services Providers (FSPs). This quiz covers essential guidelines, prohibited activities, and conditions regarding remuneration to ensure compliance and service continuity.