Secondary

FAIS Department 2014 Annual Report

The information below was extracted from a supplementary report to the FSB’s Integrated Annual Report which provides an overview of activities of all divisions in the FAIS department for the year which ended March 2014.

Registrations

During the period ending March 2014, 514 new licence applications were approved, including 53 for category II and IIA business. Sixty-eight applications were declined and 661 licences were voluntarily lapsed. The registrar received 19 476 profile change applications during the period and completed 94% of these (18 396).

The department embarked on nationwide training initiatives in the funeral insurance industry to increase awareness of legislation governing the activities of funeral parlours operating in the insurance industry. Training workshops were held with different industry associations and funeral parlours. A dedicated team of training facilitators was appointed to provide customised training to funeral parlours, and 30 workshops were conducted during the period. The FSB also targeted industry participants who operate without authorisation to educate them on the importance of getting their businesses authorised in terms of the FAIS Act.

Compliance Division

Since 2010 the department has made a concerted effort to address non-compliance among providers, focussing mainly on non-payment of levies, and failure to submit compliance reports and financial statements. The resulting sharp increase in regulatory action cases peaked in 2012, dropping by 47% in 2014 due to the successful implementation of regulatory examinations.

Complaints

Complaints have increased in recent years, reflecting both stakeholder awareness of the Regulator’s functions and renewed efforts by the department to ensure that non-compliance is proactively identified and addressed. In the 2014 financial year, complaints received rose 9% to over 1 500, compared to just over 800 in 2010. The number of finalised cases as a percentage of received cases was 99%, but includes cases received prior to the reporting period.

Suspensions and withdrawals

During the year, the registrar suspended 945 licences, compared to 1 489 in the previous year. The decrease by 36.5% reflects the impact of regulatory examinations on general compliance by providers. Some 740 suspensions were lifted after providers complied with conditions imposed within the 90 days normally allowed. In the period under review, 458 licences were withdrawn – down 6% from the previous year.

Debarments

During the year, 231 people were debarred under section 14A of the FAIS Act, compared to 90 in the previous period. This increase reflects improved use of resources and enhanced processes to deal with section 14A recommendations by the registrar. Some 182 debarred people were reappointed during the year, up from 147 in the previous period. This 23% rise is mainly a reflection of the number of people who passed regulatory examinations.

Appeals

Any person who feels aggrieved and is affected by the Registrar’s decision under the FAIS Act may appeal to the Board of Appeal established by the FSB Act. In 2014, 62 appeals were lodged against decisions of the registrar. Of these, 41 were finalised and 21 are ongoing. Of those finalised, 28 were reversed, two were dismissed by the appeal board and 11 were withdrawn after receiving the registrar’s reasons.

Supervision

This department supervises FSPs using a risk-based approach, which is continually reviewed and enhanced given the changing regulatory landscape, international trends and results of on-site visits.

FSP On-Site Visits

The department’s major focus remains risk assessment visits, with 521 visits conducted in the review period. Management meetings were held with 28 FSPs to discuss changes and developments in their businesses. There was a marked improvement in 14 of the 15 highest-ranking issues raised in feedback to FSPs after on-site reviews, particularly in terms of improved disclosures made to clients. The one area showing no improvement concerns the updating of the FSP’s details with the registrar. The FAIS Report shows details of all 15 issues, and should be regarded as compulsory reading for all those wishing to avoid pitfalls unwittingly.

Compliance practice on-site visits

During the period, the department reviewed 15 independent compliance practices. Although most practices provided acceptable compliance services to their clients, some areas for improvement were identified and addressed with the respective practices. The main issue resulting from these reviews is the frequency and manner of monitoring conducted by compliance officers for FSPs with discretionary licences, and for FSPs with branches and representatives in multiple locations. A risk-based framework to record information on compliance practices was developed and introduced in the review period to enable supervisors to proactively focus on specific concerns relating to external compliance officers.

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