Compliance Monitoring

This topic is covered in FAIS Newsletter 16, published on 13 December 2013. It is of particular importance to FSPs who tend to think that complying with the FAIS Act and the General Code of Conduct is all that is required to run a compliant practice.

Based upon the types of queries received, as well as the information gathered during onsite visits, the FAIS Department has identified the need to include a short article on compliance monitoring.

“Compliance” by FSPs is essentially at two levels:

  1. Compliance with external rules and legislation imposed upon the FSP e.g. FAIS, FICA, the Labour Relations Act etc.; and
  2. Compliance with the FSPs internal systems of control and processes that have been implemented to ensure that the FSP complies with the externally imposed rules and legislation.

Compliance monitoring is then conducted to:

  1. Review the internal systems of controls and processes implemented to assess their effectiveness; and
  2. Identify any areas of weakness and improve upon these areas.

Feedback received from the FSB last year pointed out that documentation relating to internal processes and practices were often found to be sub-standard. In many instances, FSPs managed to get hold of a template which they simply copied, often omitting to insert their own details where applicable.

Internal documentation relating to risk management, succession planning and the complaints procedure, in particular, proved to be cumbersome for many DIY specialists. Ticking the right boxes might conform to the letter of the Act, but not the spirit thereof.

As pointed out before, the shifting of the focus of legislation, from rules to outcomes, requires the industry to adopt a new approach to compliance.

FSPs will, in the near future, be required to design and implement a document outlining their policy and procedures concerning Treating Customers Fairly. The question which many will be faced with is not whether they have such documentation, but whether it will serve the purpose of ensuring fair outcomes for clients.

This will also necessitate a review of all current internal control documents to ensure it is aligned with the TCF documentation.

We trust that guidance will be provided by the regulator to assist the industry in complying.

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