I was fortunate to be able to attend the last Compliance Report workshop for one-person businesses conducted by my colleague, Paull Lawrence. This document is scheduled to be replaced by a “Conduct of Business” report in 2017.
As part of the presentation, Paull selected a number of differences between the current report and the proposed new one and highlighted seven:
Changes in Personal Circumstances of Key Individuals
Detailed information will be required about KI remuneration structures, product specific training that representatives and key individuals attended, as well as steps taken to ensure that relevant training does in fact take place.
Under the heading “Management Information”, the FSP will be required to indicate whether customer service/satisfaction surveys were conducted (over and above the complaints register) as well as specific financial information. Under “Risk Management” you will need to provide details and explanations of risks identified in the business during the reporting period, and management of identified risks.
Instead of just confirming that you have cover in place, and providing a copy of such insurance, you will in future need to provide confirmation from your insurer regarding any claims received or, alternatively, confirmation from your Insurer that no claims were received. Very importantly, you will also need to show how you ensure that the value of the cover is appropriate in relation to the nature of the business. Saying that you have PI cover for R1 million because that is what the law requires, will not be sufficient.
Furnishing of advice and record of advice
You will be required to indicate how you ensure that relevant disclosures are made in terms of the requirements of the General Code of Conduct. In particular, you will need to describe the information provided and process followed if a cancellation / termination / lapse results in any penalties or fees being charged, and show how the risk to customers is being mitigated. Full details will also be required of the process you follow when you recommend a financial product to replace another financial product for a client.
Those who elect to advertise new services or products will be subject to a string of new requirements to make sure that the information is accurate, clear, fair and not misleading. You will also be required to maintain a register of advertisements issued. Samples of recent advertisements will also need to be submitted as part of the Conduct of Business Report.
There will be a huge focus on this, going forward. Simply keeping a record is not enough.
You will be required to report on whether you analysed the underlying cause of the complaints, your findings and what action(s) you took to ensure that the complaint does not recur. In addition, you will be asked to explain the most significant trend identified, and whether any complaints resulted in any litigation.
In the Conduct of Business report, you will be asked to explain the compliance monitoring process and provide the latest monitoring report. You will also have to provide details of breaches identified in the latest monitoring session and reported to senior management of the FSP, as well as indicate how the FSP actions and monitors the recommendations that emanate from the compliance monitoring report.
Note, these are still draft regulations and the final Conduct of Business Report may well have different requirements from the above. However the intention of the regulator is clear.
Firstly, the days of “tick-a-box, any box” compliance are over. You will not only have to confirm that you are doing the right thing – you will also be required to demonstrate how you are doing it.
Secondly, it could be disastrous to wait until the submission deadline date before you start collecting all the required information.
Thirdly, these additional measures apply to one-person businesses who are not obliged to appoint a compliance officer. Can you imagine how much more will be added to the already huge burden of bigger practices?
The information published above forms part of the draft documents published for comment, which closed at the end of February 2017. We are of the view that most of this will be implemented, as it is in line with the Regulator’s stated intent of acting in a more pro-active manner.
The fact of the matter is that you will be required to report on this for 2017, which means that that you will have to implement steps to ensure that you are able to provide the information required in tangible format.