F & P Guidelines for appointment of representatives

The new Fit and Proper regulations provide a wide range of prescriptions which FSPs should consider when appointing new representatives. It also has a potential bearing on current appointees who may be unrehabilitated insolvents.

Section 40 states:

(1) An FSP must ensure that where it appoints a person as a representative –
(a) the person –
(i) is not declared insolvent or provisionally insolvent;
(ii) is not under liquidation, provisional liquidation or business rescue; and
(iii) is not subject to any pending proceedings which may lead to an outcome referred to in subparagraph (i) to (ii;
(b) the person, in the case of a juristic representative, has sufficient operational ability and financial resources to perform the activities for which it is appointed as a representative; and
(c) such appointment does not –
(i) materially increase any risk to the FSP or to the fair treatment of its clients;
(ii) materially impair the quality of the governance framework of the FSP, including the FSP’s ability to manage its risks and meet its legal and regulatory obligations;
(iii) compromise the fair treatment of or continuous and satisfactory service to clients;
(iv) prevent the FSP from acting in the best interests of its clients; or
(v) result in key decision-making responsibilities being removed from the FSP.
(2) An FSP must ensure that any remuneration or fee paid in respect of an activity or function for which a person is appointed as a representative –
(a) is reasonable and commensurate with the actual function or activity; and
(b) is not structured in a manner that may increase the risk of unfair treatment of clients.
(3) An FSP must develop appropriate contingency plans to ensure the continued function of the FSP’s business and continued service to its clients in the event that the appointment of the representative is terminated or becomes ineffective.
(4) An FSP may not permit a representative to outsource or sub-delegate any activity or part thereof relating to the rendering of financial services that that representative performs on behalf of the FSP.

 Current Appointees

As the regulations become effective from 1 April 2018, it will impact on people currently appointed and to whom (1)(a) above may apply. In our view, such persons will have to apply to the Registrar for an exemption. Please approach your compliance officer for assistance.

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