Duties of Financial Service Providers

Jan 19, 2025

Notes on Task 4: Qualifying Criteria 1 - Duties of a Financial Service Provider (FSP)

Overview of FSP Duties

  • General Duties: Act honestly, fairly, with skill, care, and diligence in the interest of the client, maintaining the integrity of the financial service industry.
  • Specific Duties: Considerations in client interactions, contracts, and managing conflicts of interest.

Relevant Sections of the FASE Act and Code of Conduct

Section 17, Subsection 4 of the FASE Act

  • Annual and Ad Hoc Compliance Reports:
    • FSPs must submit compliance reports to the Registrar.
    • Reports are prepared by the Compliance Officer or the FSP if no officer is appointed.
    • Annual reports are required, with additional ad hoc reports as necessary.
    • FSPs with representatives must appoint a compliance officer.

Section 2 of the Code of Conduct - General Duties

  1. Be honest
  2. Be fair
  3. Be skilled
  4. Act with care and diligence
  5. Act in the interest of the client
  6. Maintain the integrity of the financial service industry

Section 3 of the Code of Conduct - Specific Duties

  • Considerations When Rendering Services:
    • Representations to clients must be factual, clear, and appropriate.
    • FSPs must manage conflicts of interest through a policy.
    • Must maintain accurate records and protect client confidentiality.

Representation Requirements

  1. Factual accuracy
  2. Understandable language
  3. Appropriate level of detail
  4. Timely provision of information
  5. Written documentation if requested
  6. Readable format
  7. Monetary amounts in Rand
  8. Updates on significant changes

Conflict of Interest Management

  • FSP must disclose:
    1. Measures to avoid/manage conflicts
    2. Ownership or financial interests
    3. Nature of relationships that create conflicts

Section 7 of the Code of Conduct - Information Disclosure

  • FSP must inform clients about:
    • Responsibilities for providing accurate information.
    • Obtain and provide a statement of account and financial products annually.
    • Three categories of information: General explanations, material information, specific disclosures.

Section 8, Subsection 1 of the Code of Conduct - Client Information Gathering

  • FSP must gather all available information about the client's situation before giving advice.
  • A financial needs analysis must be conducted.

Section 10 of the Code of Conduct - Custody of Client Assets

  • FSP must:
    • Acknowledge receipt of client documents/funds in writing.
    • Keep client funds in a separate bank account and deposit within one working day.
    • Ensure clients have access to their funds, less fees.

Section 12 of the Code of Conduct - Internal Control Procedures

  • The FSP and key individuals must structure internal control procedures to ensure:
    • Business operations are orderly and efficient.
    • Reliability of financial information.
    • Compliance with applicable laws.

Summary of FSP Responsibilities

  • FSPs must understand and adhere to these duties to ensure ethical and legal compliance in financial services.
  • Key considerations include maintaining clear communication with clients, managing conflicts of interest, and safeguarding client information.

Quiz Questions Recap

  1. Compliance Report Submission:
    • Annually to the Registrar; Monthly to FSP
  2. True Statements Identification:
    • Only B is true regarding representatives confirming mandates.
  3. FSP Duties in Advice:
    • All options A, B, and C are correct.
  4. Incorrect Disclosure Statement:
    • B is the incorrect statement about criticizing product suppliers.
  5. Financial Needs Analysis:
    • D is false; client intentions are not required for needs analysis.

Conclusion

  • Review all sections and quiz questions to ensure a deep understanding of the duties of FSPs.