Section 3A of the General Code of Conduct came into operation on 4 December 2014.
It decreed that “… No person may offer or provide a sign-on bonus to any person, other than a new entrant, as an incentive to become a Category I provider that is authorised or appointed to give advice.”
Two transgressions linked to one product provider came to light in recent Enforcement actions.
Discovery Life engaged with 4 persons with the view to employing them as representatives. Negotiations took place prior to 4 December 2014, including formulas to determine the quantum of the cash offers. The offer to pay sign-on bonuses as an incentive to become representatives of Discovery was finalised on 5 December, a day after Section 3A came into effect.
(The settlement agreement published on the FSB website states that the deals were concluded on 5 December 2015. Enquiries to the the FSB confirmed that the date was actually 5 December 2014.)
The agreed upon penalty and cost order of R2.5 million is made up as follows:
- The value of the sign-on bonuses recovered from the individuals listed in paragraph 2.3, amounting to R 840 000 (Eight Hundred and Forty Thousand Rand); and
- a penalty of R1.66 million (One Million Six Hundred and Sixty Thousand Rand).
Regal Financial Services
The Respondent is a juristic representative of Discovery Life under FSP license 18147.
Regal offered a sign-on bonus of R100 000 to Mr. T Davies as an incentive to become a representative of Discovery Life Limited in contravention of section 3A of the General Code.
Mr. Davies was also one of the four persons referred to in the Discovery Order mentioned above.
This offer was not made by Regal, in their capacity as an FSP, but formed part of the “CNO” offer made by Discovery Life Limited to Mr. Davies on 5 December 2014.
I was unable to discover what a “CNO” bonus is, but it appears to be a euphemism for sign-on bonus.
Bayport Financial Services
Between 01 November 2012 and 30 June 2015, the Respondent allowed its agents to render financial services in respect of assistance policies for and on its behalf without properly appointing these agents as representatives and satisfying itself that these agents complied with the prescribed fit and proper requirements in contravention of section 13 (2)(a) of the Act.
After consideration of the mitigating circumstances, the parties agreed to a penalty of R500 000 inclusive of costs.
One of the mitigating matters concerned reads:
“The Respondent discontinued its assistance policy business.”
The Enforcement Committee Order does not indicate whether Bayport Financial Services had arranged for its clients to be taken over by another assistance policy provider in the light of the above.
On a lighter note: I suggest we support the good work done by the Enforcement Committee. At this rate, we may in future be relieved of the burden of paying levies as penalties will cover the cost of regulation.