Secondary

Errata on Compliance Information

Very little escapes the eagle eye of Alan Holton, a compliance practitioner and associate of Moonstone.

He came across a publication which contains compliance related articles, and brought the following to our attention to share with our readers. The object of the exercise is not to criticise others, but merely to help provide clarity in a world where extensive regulations can cause even the most experienced among us to falter at times.

This is Alan’s view:

There are two statements in the XYZ newsletter that may cause some confusion.

On page 5, under the comments on Juristic Representatives, it reads:

If a separate licence is not an option then arrangements need to be made to achieve the following:
All contracts with product providers, be they agency, binder or outsource agreements, will need to be amended to that of the licence holder.

The appointment as a binder holder or outsource service provider is a Short Term Insurance Act matter and has no relevance to any FAIS related issues. Binder functions and outsourced services must, by definition, relate to services other than intermediary services – i.e. financial services as referred to in S 13 of the FAIS Act. The only circumstances where a binder relationship will have to be looked at, are when the binder holder is also a non-mandated intermediary (by way of a separate agreement that is subject to S 13(1)(C)) or where the binder holder is a UMA and renders financial services on behalf of the insurer – also in terms of a separate agreement that is also subject to S 13(1)(c). Binder agreements are not impacted at all by S 13(1)(c).

On page 7, under the comments on the new Fit and Proper arrangements for representatives, it reads:

To remind you what the regulations now demand;
In the past, every representative had to be able to produce what we have referred to as a Section 13 Certificate/mandate letter. It is now a requirement that every representative must produce this evidence prior to rendering a financial service;
The Section 13 Certificate/mandate letter must now also extend to include reference to the representative meeting the fit and proper requirements;

I do not agree with the latter statement.

S 13(1)(b) has two distinct aspects to it:

  • S 13(1)(b)(i) provides that a person may not act as a representative of an authorised financial services provider, unless such person, prior to rendering a financial service, provides confirmation, certified by the provider, to clients that a service contract or other mandate to represent the provider exists and that the provider accepts responsibility for those activities of the representative performed within the scope of, or in the course of implementing, any such contract or mandate.
  • S 13(1)(b)(iA) provides that a person may not act as a representative of an authorised financial services provider, unless such person meets the fit and proper requirements.

These are separate requirements and should not be read together.

Confirmation of the Fit and Proper requirements does not have to be provided to the client at all.

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