Task 4 talks about adhering to the specific codes of conduct. Task 4 has 14 qualifying criteria. Let's look at Task 4, Qualifying Criteria 1. Describe the general and specific duties of a provider. Here we are going to cover the specific and general duties of an FSP.
We therefore need to look at a few different sections to find this information. Section 17 subsection 4 of the FASE Act covers the FSP's duty to submit annual and ad hoc compliance reports to the Registrar. Section 2 of the Code of Conduct covers the general duties of the FSP to act honestly, fairly, with skill, care and diligence in the interest of the client and with integrity of the financial service industry.
Section 3 of the Code of Conduct states that the FSP has specific duties when rendering a service. They need to consider what they say to clients. how they contract and deal with clients, and any possible conflicts of interest.
Section 7 of the Code of Conduct details what information the FSP must provide when giving advice to a client. Section 8, subsection 1 of the Code of Conduct states that certain information must be obtained by the FSP before giving the client financial advice. Section 10 of the Code of Conduct outlines the FSP's duties when dealing with the custody and or safekeeping of financial products and funds of clients and the separation between the FSP assets and funds and the client's assets and funds.
Section 12 of the Code of Conduct states that the FSP must structure internal control procedures. to provide reasonable assurance that the business can be carried out in an orderly and efficient manner. The financial and other information used or provided will be reliable and all applicable laws are complied with.
Let us discuss each section in more detail. It is important to understand what the duty of the provider is in each section. Let's explore Section 17, Subsection 4 of the FASE Act in detail. Here we have an illustration of a financial service provider and all the key role players that make up an FSP, being the key individuals, the representatives and the compliance officer.
the compliance officer or where there is no compliance officer appointed by the fsp then it becomes the duty of the fsp to submit compliance reports to the registrar as and when required there are annual and ad hoc documents that need to be submitted it is important to note that the legislation sometimes refers to the registrar or the commissioner or the authority which may be confusing but these are just different names for effectively the same body being the fsca it is always the fsp's ultimate responsibility to ensure that the compliance reports and information has been submitted by the compliance officer if it has appointed one note that An FSP with one or more representatives or more than one key individuals is obligated or must appoint a compliance officer. Let's explore Section 2 of the Code of Conduct in detail. The general duties of an FSP is to 1. Be honest, 2. Be fair, 3. Be skilled, 4. Act with care and diligence, 5. Act in the interest of the client, 6. Act with care and diligence, 7. Act with care Act in a manner or conduct that maintains the integrity of the financial service industry or sector when rendering financial services to a client.
Let's explore Section 3 of the Code of Conduct in detail. First, we start with the FSP. When FSPs render financial services, they need to consider what they say to clients, how they contract and deal with the client, and any possible conflicts of interest. First, we cover representation. Representations are what is said to the client and the information provided by FSPs.
must meet specific requirements. Second, we cover conflicts of interest. FSPs must always be aware of conflicts of interest and put in place a conflict of interest management policy to help them manage this. Third, we cover contracted.
The FSP must render financial service in terms of a contractual relationship, making sure everything is done properly and on time. The FSP must keep records and we will look at what and how and for how long these records must be maintained. The FSP must also not disclose confidential client information without the written permission and consent of the client concerned.
We will have a look into all the detail surrounding this as well. Let's look at representation. in detail.
As mentioned, representations are what is said to the client and the information provided by the FSP must meet specific requirements. The eight requirements are 1. Be factual. Representation and information provided must be factually correct.
Representation and information provided must be in plain and understandable language. must be adequate and appropriate based on known or reasonable assumed level of knowledge of the client. 4. Be timely. Representation and information provided must be provided timelessly so the client has enough time to make an informed decision.
Representation and information provided must, when provided in writing, be in readable print. This refers to size of font, spacing, etc. 7. Amounts to be in Rand values. Representation and information provided must reflect amounts in monetary terms, therefore South African Rand values.
If amounts can't be reasonably determined, then a description of the calculation must be adequately described. 8. Information must be repeated if significant changes happen. Representation and information provided does not need to repeat or duplicate information unless material or significant changes affect the client. Next, let's focus on the conflict of interest in detail.
As mentioned previously, an FSP must always be aware of conflicts of interest and put in place a conflict of interest management policy to help management in managing this. Any conflict of interest between the FSP and the client and or the representative and the client must be avoided or reduced where it cannot be avoided. An FSP or its representative can be a good alternative. must inform the client of the conflict of interest management policy and how the client can access it. So an FSP must have a conflict of interest management policy document prepared and available for the client to read.
Where a conflict of interest has arisen, then as a minimum requirement, the following must be disclosed. 1. What measures will be taken to avoid or reduce the conflict? 2. What ownership interest or financial interest, either than immaterial financial interest, that the FSP or representative may be or has become eligible for and or entitled to. 3. The nature of any relationship or arrangement with a third party that gives rise to a conflict of interest. In enough detail for the client to know, and understand the exact nature of relationship and conflict of interest.
Let's now turn our focus on contracting in detail. As mentioned previously, the FSP must render financial service in terms of a contractual relationship, making sure everything is done properly and on time. Services must be rendered as per the contract and reasonable requests from the client. Action of the contract or request from the client must be executed as soon as reasonably possible.
The client's interest must be reasonably considered over the interest of the FSP. transactions of the client must be accurately accounted for now let's take a look at the fsp's duties when it comes to keeping of records one of the most important requirement in the phase act the fsp must keep records and we will look at what how and for how long these records must be kept and maintained. The FSP must have systems in place to record, store, retrieve and safeguard the documents of its clients. The FSP does not have to physically keep the records themselves within their premises, but they must have access to retrieve or make available to them within seven days of the registrar's request. Therefore, the FSP has seven days to retrieve records from its third party that stores on its behalf.
The FSP must keep client records for at least five years after termination of products or rendering of the financial services. Therefore, the FSP must safeguard client's records for at least five years after the termination of a relationship with that client. The FSP can keep records in an appropriate electronic and recordable formats that can be reduced to writing or printed.
What's the FSP's requirements with regards to disclosing clients'information? The FSP must not disclose confidential client information without the client's written permission or consent. Let's look into all the details surrounding this confidentiality. Confidential information about a client or product supplier cannot be shared unless or except written permission and consent is obtained first.
or required in the public interest or required under any law. This applies to information received from the client or from a product supplier in regard to such a client or product supplier. But it is important to remember that Under Section 4, Subparagraph 1, the FSP has a duty to provide a client with information of the product supplier. The following is required to be disclosed about the product supplier to the client under Section 4, Subparagraph 1. If information is provided verbally or orally, then it must be reduced into writing within 30 days.
The product supplies information, its name, address and contact details. The product supplies information, being its name, contact details, details of its compliance officer and complaints department the fsp's contractual relationships with the product supplier any conditions or restrictions imposed by the product supplier with regards to the type of products or services that can be rendered by an fsp lastly where the FSP holds an interest in the product supplier. An interest in a product supplier is considered to be more than 10% of the shares or equivalent in the product supplier, or more than 30% of the remuneration received in the previous 12 months from the product supplier.
So we have gone through the whole of Section 3 of the Code of Conduct, dealing with the specific duties of the FSP. Let's explore Section 7 of the Code of Conduct in detail. This section deals with the information that an FSP must provide the client with regards to the financial service they are rendering. When an FSP gives advice to the client, the FSP must disclose and provide certain information relating to the financial services being rendered. The FSP must inform the client of their responsibility in terms of providing accurate information.
It is important to remember that the client provides the FSP with certain information in order for the FSP to provide and or render a financial service. Therefore, it is important that the information received from the client is accurate as well. Otherwise, the FSP cannot give the correct advice or financial service. It is also important to note that an FSP may not request the client to sign any written or printed documents or documents. unless all the required information has been included or sign a blank document.
So here we can see that this sets up the relationship between the parties. The client must give accurate information and the FSP cannot ask the client to sign anything unless the FSP has provided all the required information per Section 7. The FSP must, at the request of the client, provide a statement of account in connection with the financial service rendered to the client. The FSP must provide a client with a statement of identifying and listing financial products still in existence at least annually.
This statement must include specific information. We will explore this information. a bit later let's start with when the fsp gives advice to the client they must provide certain information relating to the rendering of the financial service provider we can divide this information into three categories one General explanations. 2. Material information.
In terms of material information, the FSP is to provide the client with material contractual information facts, illustrations, projections, or forecasts that they have. In terms of specific disclosure, Section 7 of the Code of Conduct goes into detail as to what needs to be disclosed. Section 7, Paragraph 1c states the following. Information must be disclosed at the earliest reasonable opportunity or time.
The name, class or type of financial product. 2. The benefits of the financial product and how they are calculated, accrued and paid out. 3. the specific information for financial products marked as an investment product or has an investment component for the obligation to the product provider nature extent and frequency of monetary obligation and escalation increases or additions 5 the obligation to the fsp nature extent and frequency of monetary obligation six any special terms and or exclusions seven any guaranteed minimum benefits eight how accessible will the funds be nine any early termination consequences 10 tax implications 11 the cooling off period 12 The nature, extent and frequency of payment of commission, fees and or brokerage fees. 13. Any and all risks associated with the product.
The amount of the increase in premiums over the first 5 years, then the basis of the increase over years 6 to 20 years, not exceeding 20 years. Section 7, paragraph 1c, subsection 3, states that specific information for financial products marked as an investment product or has an investment component needs to be provided and disclosed. Therefore, when a financial product has an element of investment, then there is additional disclosure requirements that need to be provided to the client. about the financial product.
Let's go through these disclosures. Firstly, the fees being levied in terms of 1. The amount and frequency of the fees 2. Who receives the fees 3. The services or purpose of the fees fees based on performance then we must include the frequency performance measure period and or other criteria and five where the structure of the investment has other underlying financial products then we must include the manner in which the client can determine the net value of the investment next We need to disclose how the value of the investment is calculated and the details of the underlying of other financial instruments. We need to disclose the details on the past performance of the investment 1. On the request of the client 2. Over intervals that are reasonable for type of product And three, include a warning that past performance is not an indicator of future performance.
We also need to disclose the details of any rebate on fees passed on to the client. Lastly, any platform fees that are being charged to the client. So now we have covered all the elements relating to when the FSP gives advice to the client.
What information the FSP must provide or disclose when rendering the financial service. In terms of specific disclosure, Section 7 of the Code of Conduct goes into detail as to what needs to be disclosed. We will now cover facts that the FSP must tell and inform the clients of their, the client's, responsibility in terms of providing accurate information. It is the client's responsibility to ensure all facts disclosed are accurate and complete.
Any information completed and submitted by the fsp the client must ensure it's accurate and complete the fsp must inform the client of possible consequences of misrepresentation or non-disclosure simply put the results of giving incorrect and incomplete information The FSP must supply the client, on request, a copy or record of any transaction requirements within reasonable time. So we have seen that the client needs to ensure that they provide the FSP with accurate information and that any information that is used by the FSP is accurate because any misrepresentation or non-disclosure could have an adverse effect on the advice given and or provided. Next, we cover the fact that an FSP must provide a client with a statement of identifying, listing and mentioning products that are still in existence, at least annually. These statements must include specific information. This specific information is Obligations The ongoing monetary obligations of the client Benefits The main benefits provided by the product Value of the investment, if any Where a product has been identified as an investment or has an investment component then the net value of that investment to the client must be disclosed.
Commissions and Fees Any ongoing incentives, commissions, fees and brokerage fees payable to the provider must be disclosed. This statement need not be used to declare the payment of the investment. be provided where the client is aware or should be aware that the FSP does not render or has stopped rendering ongoing financial services in respect of the products concerned.
We have now covered all of Section 7, dealing with the information that the FSP must provide the client with regards to the rendering of the financial service. Note that this section is long with a lot of details, so make sure you go through it and understand all the requirements laid out. Let's explore Section 8, Subsection 1 of the Code of Conduct in more detail. Before giving advice to a client, an FSP must Take steps to get from the client all available information about the client's situation, financial product experience and objectives to enable the FSP to provide the client with appropriate advice.
The FSP must then conduct a financial needs analysis. also known as the F&A, based on this information provided by the client in order to give advice. From this analysis, the FSP will identify the financial products that will be appropriate and suitable based on the client's risk profile and their financial needs.
This will however be subject to any limitations by the Act or existing contracts. Once the FSP has identified financial products, the FSP must then take steps to determine If the financial products identified wholly or partially replaces an existing financial product or product held by the client. Take note that when existing financial products are to be replaced by new financial products, there is some disclosure that needs to be made. So as mentioned earlier, with a financial product, or product held by a client is replaced wholly or partially, the FSP should fully disclose the actual and potential financial implications relating to cost and consequences of such a replacement, including where possible the following.
Difference in fees and charges between the products. Special terms and conditions. which may be applicable to the replacement product as compared to the terminated product. Examples of these special terms and conditions may be exclusions of liability, waiting periods, loadings, penalties, excesses, restrictions, and circumstances where benefits won't be provided.
Impacts of age and health Changes on the premium to be paid. Difference in tax implication. Material differences between the investment risk of the replacement product and the terminated product.
Penalties or unrecovered expenses deductible or payable due to termination of product. To what extent the replacement product is readily realizable or relevant funds are accessible compared to the terminated product. Vesting rights, minimum guaranteed benefits or other guarantees or benefits that will be lost as a result or consequence of the replacement product.
Any incentives, remuneration, consideration. fees received directly or indirectly by the FSP in relation to the financial services offered for either or both the terminated and or replacement products. Let's now explore Section 10 of the Code of Conduct in detail. Here we have the client and the FSP.
The FSP's assets can be divided into four components, being 1. The client's assets and products. 2. The client's funds. 3. The FSP's Assets 4. The FSP's Funds As you can see, we have the top half that relate to the client's assets, products and funds and the bottom half which relate to the FSP's assets and funds. When the FSP receives documents and or funds from clients to keep safe and or in custody on their behalf, the FSP must acknowledge and confirm receipt of such documents and funds in writing. Here we have an illustration of third parties'involvement.
It is important to understand that we may have third parties acting on behalf of the client and or the FSP. The FSP and or any third party needs to put in adequate safeguards and security when handling and dealing with clients'financial products and or funds. This makes sense and it is important that an authorized FSP that handles and deals with a client's financial products or funds need to ensure that they can keep them safe.
An FSP is to keep and have a separate bank account for the client's funds. The FSP is to deposit the client's funds into a separate bank account within one working day of receipt of those funds. The client's funds and the FSP's funds must be kept separate. The idea here is that the FSP has its own funds that it uses to run its business, which must be completely separate from the funds the FSP receives from its clients that needs to be invested or looked after.
The general bank charges on the client's account is to be paid out of the FSP's funds account. This would be costs that are not specifically attributable to the client such as monthly bank charges. Other hand, any interest on the client's funds and specific bank charges relating to deposits and withdrawals of the client's funds would be charged directly to the client's accounts.
There is one exception from this requirement. FSPs that receive, hold, or in any other matter deals with premiums under a short-term insurance policy do not require to follow the mentioned steps. If we think about it, this makes sense in that for short-term insurance policies, you pay premiums to cover an event and or something that might happen or not happen.
in an unforeseen future but you will never really get the money back so effectively you are paying the fsp to take the risk should something happen as compared to the other scenario where the fsp is investing on your the client's behalf in order to generate a return on your money you have invested in this case funds need to be kept separate An FSP must make sure that all financial products and funds of its client are dealt with in accordance with the signed mandate or instructions given to them by the clients. Clients'assets, products and funds held by the FSP must be kept separate from the assets and funds of the FSP, as described earlier. The client must have access to his or her funds less any required deductions, charges or fees.
The FSP must take into account the contractual requirements. Basically, this is just saying that an FSP cannot just keep client's money, but the client will be liable for charges, fees, etc. should they want to exit or terminate early. The client enters into or gives the FSP a signed mandate and instructions on what to do with his or her funds with regards to the rendering of the financial services. Any document between the FSP and the client, the client must receive the original agreement and document. The last section to explore in detail is section 12 of the Code of Conduct.
In this section, we are dealing with the internal control procedures that an FSP must put in place. You will notice that the green ring is before representatives are considered. This is because the section specifically excludes representatives from this requirement.
Therefore, it is the FSP and key individuals'responsibility. Section 12 states that An FSP and or key individual, excluding a representative, must structure internal control procedures to provide reasonable assurance that 1. Business can be carried out in an orderly and efficient manner. 2. Financial services and other information used, provided or rendered will be reliable. 3. All applicable laws are complied with.
A representative is excluded. as it is the responsibility of the FSP and or key individuals to ensure that a certain level of control procedures are implemented within the organization and not the responsibility of someone at a representative level. Remember that Section 12 of the Code of Conduct, below, does not limit Section 11 summarized above.
Both must be taken into consideration. Section 11 of the Code of Conduct requires the FSP and or key individual to have control measures at all times and effectively employ resources, procedures and appropriate technological systems that can be expected to eliminate as far as reasonably possible the risk that clients... Product suppliers and other providers or representatives will suffer financial loss through theft, fraud, dishonest acts, poor administration, negligence, professional misconduct and or culpable omissions. We have now covered all the general and specific duties of the FSP. It is important for you to go through these sections and understand what the general and specific duties of the FSP, key individuals and representatives are.
We will look at some possible questions to test yourself if you understood the information that has been imparted thus far. Question 1. How often does the compliance officer need to submit compliance reports to the registrar? A. Monthly B. Quarterly C. Bi-annually D. Annually The answer is option D.
Annually. Remember, disclosure will take place as and when required, however, at least on an annual basis. Question 2. How often does the compliance officer need to submit compliance reports to the FSP?
A. Monthly. B. Quarterly. C. B. Annually.
D. Annually. And the answer is option A, monthly. Note the difference in this question from that of question 1. In question 1, we refer to the commissioner and in this question, we refer to the FSP.
And remember... The compliance officer works for and is appointed by the FSP, so the reporting is required more often as the FSP needs to ensure that they are maintaining compliance as set out in the FASE Act. Question 3. Which of the following statements are true? A. An FSP may disclose confidential information acquired or obtained from a client, if the client's employer requests an information verbally and in writing.
b. Representatives must confirm that they represent the FSP in terms of a mandate or contract and that the FSP accepts responsibility for the activities of the representatives accordingly. c. Complaints must be recorded in accordance with the complaints policy of the FHCA. D. It is the compliance officer's duty to ensure that client's information is securely filed and protected against any misuse by any unauthorized person.
Pause the video here for a bit and read through and understand the question. Remember, we are looking for the statements that are true. The answer is option B.
which is true note why the other options are not true option a is not true as the fsp cannot share clients information without the client's written authorization or permission or consent option c is not true as complaints must be dealt with based on the fsp's internal control policies and procedures and not that of the fsca Option D is not true, as the compliance officer's role is one of oversight. It is the FSP's duty, and therefore the key individual's duty, to ensure that client's information is securely filed and protected against misuse by any unauthorized persons. Question 4. FSPs and their representatives have specific duties when giving and or rendering financial advice to their clients. Which of the following statements are true? a.
Must provide specific monetary terms relating to amounts, sums and fees unless not reasonably determined. b. Representations must be factually correct. c. Representations must be in plain language, readable and a clear format.
d. All of the above. Again, pause the video here for a few seconds and read through all the options and identify the correct answer. The correct answer is option D, being all of the options are true.
Remember to use all the questions you read and go through as a learning tool as they often give you insight and understanding of the theory. Question 5. What should Sagi tell and disclose to his client about the FSP when rendering financial services choose the incorrect statement a registration number b criticize or make claims regarding any financial products suppliers fsps or representatives c full business and trade names d name and contact details of the relevant compliance and complaints departments once more pause the video here and read the question again remember we are looking for the incorrect statement in other words what should saki not tell his clients and the correct answer is option b Saki should not criticize or make claims regarding any financial product or products, product providers or suppliers, FSPs or representatives. Often you see people do this in society when they tell you why this company is not good or why this product is not good because they want to sell and or market their financial products. When representatives are rendering and or providing financial advice, they need to make sure that they are doing what's best for the client and not what's best for themselves or their own pockets. Question 6. In order for Zama, a representative, to determine her client's requirements, she would have to conduct a financial needs analysis for her client.
This would include specific information that Zama would need to get from the client. Which statement is false and is not required? a.
How much the client earns, total income b. How much of his income is available for savings and investment purposes c. How much of his income is available for savings and investment purposes What type of transactions the client needs to carry out and how many per month?
D. What the client intends to do with the funds? Again, pause the video here and take a minute to read through the question and consider the options.
Remember, you are looking for what Zama does not need to know from the client. The correct answer is option D. Zama does not need to know what the client intends doing with the funds in order to do a needs analysis question seven mohow wants to purchase shares mohow only has a grade 10 certificate or qualification and is a retired pensioner with little or no understanding of financial investments mohow approaches musa an investment advisor at Kepitec, to assist him in purchasing shares. Mohau wishes to invest a sum of R10,000 and seeks a stable, non-volatile share option to invest in. Choose the correct options below.
So let's go through a final overview of what has been covered. Let's recap. We looked at the role of the compliance officer and the FSP in terms of reporting to the authority, also commonly referred to as the registrar, commissioner or the FSCA. Then we looked at the general duties of the FSP, key individuals and representatives. We then went into detail as to what the FSP, key individuals and representatives needed to consider when rendering financial services.
Then we looked at what information an FSP, key individuals, and representative must provide the client. We also looked at what the FSP, key individuals, and representative must do before giving financial advice to a client. We also looked at the separation of clients and FSP assets and funds. We noted that there was one exclusion to this with regards to short-term insurance policies.
We then covered the importance of the client's mandate and instruction when dealing with client products and funds. And lastly, we covered the importance of the internal control procedures that need to be in place by the FSP and key individual to ensure the FSP carries out business in an orderly and efficient manner. The financial information used is reliable and that they comply with the applicable laws and regulations. A responsibility that excludes the representative.
We hope you enjoyed the video and learnt a lot. Please make sure to check out our other ORI videos. Thank you.