Financial Advisory and Intermediary Services Bill, 2001 (“FAIS Bill”)

FINANCIAL SERVICES BOARD

Project of Policy Board for Financial Services and

Regulation

Regulatory gap : financial intermediaries

FSB participation– drafting– consultative process– promotion

Consumer protection

Financial Services Provider (Cl 1)

•Furnishes “advice”•Renders “intermediary service”•On “financial product”•As part of a regular business•To a “client”

Who is an fsp?

Whoever renders “financial services”

• Product suppliers• Intermediaries• Investment managers• Financial advisersNeeds licence

Specific exclusions from advice (cl 1(3))

• Mere factual advice– on procedures– on description of financial product– routine administrative queries– objective info re financial product– display promotional material

Specific exclusions from advice (cont.) (cl 1(3))

• Analysis or report on financial product without advice

• Advice by trustees of pension fund / medical scheme

• Exemption by registrar

Specific exclusions from intermediary services

• Bank acting merely as conduit (debit orders)

• Services rendered by product supplier– regulated as a financial institution– services regulated by law

• Exemptions by registrar

Who is a “representative”?(cl 1)

Renders “financial services”• Employee• Mandatory• Exclusions

– admin / clerical staff– no judgment– does not lead to transaction

Criteria for licensing of fsp(cl 8)

•Honesty and integrity•Competency and

operational ability•Financial soundness•Categories

Licences (cl 8)

•Not renewable•May be suspended (cl 9) /

withdrawn (cl 10)•Open/restrictions

Representatives (cl 13)

• Acts on behalf of fsp• Not licensed• Qualifications

– honesty / integrity– competent

• Responsibility of fsp• Register

Methods of regulation

•Entry requirements (cl 8)•Standards of market

conduct (codes) (cl 16)•Compliance (cl 17)•Record-keeping (cl 18)•Accounting (cl 19)

Flexibility

• Various categories of fsp’s (cl 8(1))• Differentiation in entry requirements• Open/limited licence (cl 8(4))• Differentiation in codes (cl 15(2))• Differentiation in compliance (cl

17(2))• Record-keeping (cl 18)• Accounting (cl 19)• Registrar’s discretion (Adv Com)

Proposed amendments to overcome controversies

• Banks– Specific code if advice on deposits do

not exceed a term of one year• Health brokers

– Brought under FAIS but accreditation remains with Medical Schemes Council

• PPR– New provision to provide for exclusion of fsp’s from PPR

Costs and benefits weighing up

• Recurring costs of R352 million per annum

• Estimated recurring quantifiable benefits of R1.15 billion per annum

• Quantifiable benefits are 3X larger than quantifiable costs

• Emerging brokers