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Compliance is an ongoing requirement

The importance of having systems in place to ensure compliance was illustrated this week in a notice from the FSB Enforcement Committee.

Rule 5.1(a)(i) of the PPR Rules require that a registered entity should only do business with duly authorised FSPs. This should not only be ascertained at the contract stage, but on a continuous basis.

Below is an extract from the FSB notice on a case which illustrates what can happen if you don’t.

On 28 October 2010, AVBOB entered into an intermediary agreement with Mr T Nyadombo in respect of which Mr Nyadombo undertook to render services as intermediary in respect of, inter alia, a savings product that was underwritten by AVBOB.

On 10 December 2014 Mr Nyadombo’s authorization to render services as an intermediary in respect of certain financial products, which included savings products, was withdrawn by the FSB.

From 11 December 2014 until April 2016 Mr Nyadombo continued to render services as intermediary for and on behalf of AVBOB with regard to the savings product that was underwritten by AVBOB, whilst he was not authorised to render financial services in respect of this product. AVBOB therefore contravened Rule 5.1(a)(i) of the PPR Rules.

As aggravating factors the Registrar considered, amongst other factors, that AVBOB failed to demonstrate sound insurance principles and practice in the interests of the policyholders and that AVBOB was not aware of the license changes on Mr Nyadombo’s FSP license until the contravention was brought to its attention by the staff of the Registrar’s office. In mitigation the Registrar took into account, amongst other factors, that AVBOB accepted responsibility for the contravention, co-operated with the Registrar’s investigation and the subsequent enforcement action, and undertook to implement measures to prevent similar contraventions from recurring.

Consequently, the Registrar agreed to a penalty of R100 000, which penalty was imposed by the Enforcement Committee on AVBOB on 1 December 2017.

The report does not state whether action was also taken against Mr Nyadombo for submitting business whilst not authorised to do so.


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