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Input on Proposed Guidance Notice

The Deputy Registrar of Financial Services Providers invited industry input on a proposed Guidance Note on the interpretation and application of section 13(1)(c) of the Financial Advisory and Intermediary Services Act, 2002.

This section, which became operative on 30 May 2014, determines, amongst others, that a person “…may not render financial services or contract in respect of financial services other than in the name of the financial services provider of which such person is a representative.”

The purpose of this Guidance Note is to:

  • clarify the application of section 13(1)(c) of the Financial Advisory and Intermediary Services Act, 2002 (the FAIS Act), in a manner that is consistent with its purpose; and
  • reflect the manner in which the Registrar of Financial Services Providers (Registrar) will apply that section for regulatory purposes.

The practical problems experienced by the Regulator appears to stem from “…the undesirable business practice of “renting a licence”.

“It has come to the attention of the Registrar that juristic representatives, increasingly so, are contracting in their own names with product suppliers for the distribution of the latter’s products without the FSP being aware of such contracts or with whom such contracts were concluded. The same ignorance applies when thereupon the representative contracts with clients not knowing that the representative actually acts on behalf of a FSP.”

“For obvious reasons, the latter position is not desirable, is contrary to the legal position of a representative as contemplated by the FAIS Act, and creates uncertainty and the likelihood of disputes that may be prejudicial to clients. In addition, it creates an unacceptable weakness in the governance of the FSP’s business…”

The deadline for input is 13 October 2014. Please click here to download the invitation to comment which contains comprehensive background information on what led to the need for the issuance of such a guidance notice.

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