WELCOMEINFINITUS FAIS SUPERHEROES CONFERENCE

UNMASKING FIT AND PROPER AND

OTHER REQUIREMENTS FOR 2018INFINITUS FAIS CONFERENCE 2018

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CPD REQUIREMENTS

Sign in and out

To register on FinED online system to create user profile and access

certificate

Will send steps for registration

Update Competence Register

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PURPOSEUNDERSTANDING THE PRACTICAL IMPLICATIONS OF NEW LEGISLATION

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During this presentation our focus will be on the

practical implementation of new regulatory

requirements: what it means and what the impact

is on you and your FSP

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BACKGROUND

The arrival of the Financial Sector Conduct Authority

In a recent letter to stakeholders, Abel Sithole, in his capacity as Commissioner of the newly established Financial Sector Conduct Authority (FSCA), announced that the Financial Services Board (FSB) had been “transformed” into the FSCA as of 1 April 2018.

As of 1 April 2018, the FSB transforms into the FSCA. Both the FSCA and the Prudential Authority have been formally established.

The FSCA's mandate is to ensure improved market conduct outcomes and it has an impressive regulatory toolkit to ensure this.

There will not be a “big bang” approach to the implementation of the FSCA's mandate. The FSCA will make gradual changes over the current year.

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Newsletters - Infinitus

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REGISTER ON INFINITUS WEBSITE

Compliance support to independant financial advisers | Infinitus

Click on REGISTER

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BOARD NOTICE 194 OF 2017DETERMINATION OF FIT AND PROPER REQUIREMENTS FOR FINANCIAL SERVICES PROVIDERS

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So what does it take to be a superhero?

“ A hero is an ordinary individual who finds the

strength to persevere and endure in spite of

overwhelming obstacles.”

- Christoper Reeve

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1 APRIL 2018

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ARRANGEMENT OF SECTIONS

CHAPTER 1

1. Definitions

2. Purpose of Determination

3. Categories of FSPs

4. Fit and Proper requirements

5. On-going compliance with fit and proper requirements

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Fit and proper requirements for each of the categories of FSPs, Key Individuals and Representatives are:

a) Personal character qualities of honesty and integrity

b) Good standing

c) Competence

d) Continuous professional development

e) Operational ability

f) Financial soundness

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On-going compliance with fit and proper requirements

For FSP, Key Individual or Representative to remain authorised, approved or appointed that person MUST

at all times comply with the fit and proper requirements

Transitional arrangements and new financial products

Participatory interest in a CIS hedge fund

Structured Deposit

Short-term Insurance Personal Lines A-1

Long-term Insurance subcategory B1-A

Long-term Insurance subcategory B2-A

Previously 20 financial product licence categories for Category I

And 15 for Category IIINFINITUS RISK MANAGEMENT SERVICE 18

NEW FINANCIAL PRODUCTS

TO APPLY FOR:

1.26 Participatory interest in a CIS hedge fund

1.24 Structured Deposit

1.25 Securities and Instruments

AUTOMATICALLY ADDED BY FSCA TO APPROVED PRODUCTS OF FSP LICENCE IF CORRESPONDING CATEGORY ALREADY HELD:

1.23 Short-term Insurance Personal Lines A1

1.22 Long-term Insurance subcategory B1-A

1.21 Long-term Insurance subcategory B2-A

FSP TO ADD TO PROFILES OF REPRESENTATVE

WHAT ABOUT KEY INDIVIDUAL?

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FSP PROFILE ON FSCA WEBSITE

FSP name and number

FSP type

Registration number

Date authorised

Contact information

Compliance Officer

Representatives

Key Individuals

Sole Proprietors

Products ApprovedINFINITUS RISK MANAGEMENT SERVICE 20

KEY INDIVIDUAL VS REPRESENTATIVE

Key Individual or combination of Key Individuals stand in for all Products Approved

Principal

To add new financial product categories therefore implies appointment of a new Key Individual OR

To obtain experience under a different FSP licence

A Key Individual can never be under supervision

Only a Representative can be under supervision

For what reasons?

How is this indicated on the website?

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CHAPTER 2: HONESTY, INTEGRITY AND GOOD STANDING

Applies to all FSPs, Key Individuals and Representatives

FSP and Key Individual disclose to Registrar (on application and via compliance report)

Representative discloses to its FSP (on appointment and regularly thereafter)

Good standing is new requirement = corporate behaviour or conduct

All information relevant in determining whether that person complies or continues to comply

Evidence that a person does NOT comply is tested by way of fit and proper questions

Handouts\FIT AND PROPER DECLARATION BY KI REP 2018.docx

FSP must measure the seriousness of situation or facts at hand

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We now move on from the general requirements to

the specifics required

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CHAPTER 3: COMPETENCE REQUIREMENTS

PART 1: GENERAL REQUIREMENTS

FSP, Key Individual and Representative MUST HAVE adequate, appropriate and relevant

skills, knowledge and expertise iro financial services, financial products and functions that it

performs

Comply with the requirements as set out

Maintain their competence

FSP must establish, maintain and apply adequate policies, internal systems, controls and

monitoring mechanisms

Evaluate and review on regular and appropriate intervals

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COMPETENCE REQUIREMENTS

1. Experience

2. Qualification

3. Regulatory Examinations (RE)

4. Product Specific Training (PST)

5. Class of Business Training (COB)

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PART 2: MINIMUM EXPERIENCE

FSP and Representative must have adequate and appropriate experience in the rendering of a

particular financial service iro-

Particular financial product

Particular category of FSP (ie Category I and/or II)

Key Individual must have adequate and appropriate experience to manage or oversee the

rendering of a particular financial service

At least one (1) year specifically to the above

Experience lapses if Key Individual or Representative has not rendered the particular financial

service iro a particular financial product relevant to a particular category of FSP for a period of

five (5) consecutive years (Page 32 of Fit and Proper Handout)

Handouts\8 SUMMARY OF MINIMUM EXPERIENCE REQUIREMENTS.pdfINFINITUS RISK MANAGEMENT SERVICE 27

PART 3: MINIMUM QUALIFICATIONS

FSP, Key Individual and Representative must have a qualification recognised by the Registrar

Published as recognised qualification on website of FSCA

Supervision period for completion of qualification is by 30 June after the expiry of 72

months from DOFA for existing representatives under supervision

For representatives under supervision appointed after 1 April 2018 – supervision requirements

still to be finalised and confirmed by FSCA

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CREDITS VS QUALIFICATIONS?

Prior to 2010 any key individual or representative were required to only hold 30 – 60 credits

on either level NQF4, 5 or 6 to comply with the “qualification/credit” requirement

After 2010 the requirement is for an approved qualification

What is the difference? Does 120 credits = a qualification? NO

Credits were issued for the completion of certain unit standards that might have formed part

of a module or modules forming part of an eventual qualification BUT is not a qualification as

such

If after 2010 financial products are added to a licence issued before that date – the

requirement is that the key individual already holds a qualification (not only credits)

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PART 4: REGULATORY EXAMINATIONS

FSP, Key Individual and Representative must successfully pass applicable RE

prior to authorisation, approval or appointment

For current Representatives under Supervision: to complete RE5 by 30 June

after the expiry of 24 months

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PART 5: PRODUCT SPECIFIC TRAINING (PST)

Product Specific and Class of Business Training replaces the level 2 RE product exams

Key Individual and Representative registered as such on 1 April 2018 is DEEMED TO HAVE

COMPLETED this training

Person can be appointed as Representative but may not render financial services unless PST

has been completed

New appointments after 1 April 2018

Current Representatives under Supervision have 3 (three) months from 1 May to comply with

this requirement

Cut-off is 31 July 2018

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PART 5: PRODUCT SPECIFIC TRAINING (PST)

Registrar agrees that product suppliers should take responsibility for PST training as this

would align with TCF principles

FAIS Act however does not empower the Registrar to place requirements on product

suppliers

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RECORDKEEPING REQUIREMENTS

COMPETENCE REGISTER 2018

FIT AND PROPER HANDOUT 2ND DOCUMENT

NB: Every individual is to ensure that their OWN competence register is updated and that

proof is kept and available on request

There is currently no central system or database that will keep record

If you move from one FSP to another to provide your own proof of will not be able to

confirm that you meet fit and proper requirements!

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PART 5: CLASS OF BUSINESS TRAINING (COB)

Class of Business Training must be provided by accredited provider or education institution

Key Individual and Representative registered as such on 1 April 2018 is DEEMED TO HAVE

COMPLETED this training

Current Representatives under Supervision have 12 (twelve) months from 1 August to comply

with this requirement

Cut-off is 31 July 2019

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PART 5: CLASS OF BUSINESS TRAINING (COB)

Person can be appointed as Representative and can work under supervision whilst

completing COB

New appointments after 1 April 2018

Waiting for confirmation of supervision requirements

Key Individual is to inform Registrar within 6 (six) months from 1 April of the classes of

business it currently manages and oversees for all FSPs

By 30 October 2018

Waiting for confirmation by Registrar on prescribed manner and format

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CLASS OF BUSINESS AND NEW KEY INDIVIDUALS

FSCA FAIS Notice 42 of 2018 published on 20 July 2018

For new Key Individuals applying for approval before 1 August 2018

Exempted from the class of business training requirements until 1 August 2019

Application to be submitted to the FSCA

Previously was to be approved before 1 August 2018 to rely on exemption

Still have to complete class of business training

For new Key Individuals applying for approval after 1 August 2018

To have COMPLETED the class of business training for financial product categories applicable

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S52(11) Transitional provisions

A key individual approved prior to commencement of this Notice (1 April 2018) must –

(a) Within six months after commencement of this Notice (before 1 October 2018) inform the

Registrar of the class of business it currently manages and oversees in respect of all FSPs

for which it is approved; and

(b) Submit the information in the manner and format prescribed by the Registrar

Still more things to do!

Again waiting for confirmation of format and how to be submitted!

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DETERMINATION OF CLASSES OF BUSINESS

Refer to your FSP profile

COMPARISON OF FINANCIAL PRODUCT LICENCE CATEGORIES VS CORRESPONDING

CLASSES OF BUSINESS

FIT AND PROPER HANDOUT 3RD DOCUMENT

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RECORDKEEPING REQUIREMENTS

FSP MUST within 15 (fifteen) days after the training has occurred, record in Competence

Register the PST or COB training

Retain all information and documentation for period not less than 5 (five) years

Provide confirmation to product supplier or new Key Individual within reasonable time from

when such information is requested

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RECORDKEEPING REQUIREMENTS

COMPETENCE REGISTER 2018

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“Promise me you’ll always remember: You’re braver

than you believe, and stronger than you seem, and

smarter than you think.”

– Christopher Robin to Winnie the Pooh

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CHAPTER 4: CONTINUOUS PROFESSIONAL DEVELOPMENT (CPD)

Applies to all FSPs, Key Individuals and Representatives

Representatives under Supervision?

CPD cycle is a period of 12 months commencing on 1 June of every year and ending 31 May

of the following year

Key Individuals and Representatives must submit evident of CPD activities to the FSP within

15 (fifteen) days after expiry of CPD cycle

FSP must within 30 (thirty) days after the expiry of CPD cycles record in the Competence

Register

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CHAPTER 4: CONTINUOUS PROFESSIONAL DEVELOPMENT (CPD)

MINIMUM CPD HOURS

(AGAIN REFER TO FSP PROFILE AND DETERMINATION OF CLASSES OF BUSINESS)

An FSP, Key Individual and Representative authorised, approved or appointed to render or manage or

oversee the rendering of financial services in respect of -

(a) a single subclass of business within a single class of business must complete a minimum of 6 hours

of CPD activities per CPD cycle;

(b) more than one subclass of business within a single class of business must complete a minimum of

12 hours of CPD activities per CPD cycle; or

(c) more than one class of business must complete a minimum of 18 hours of CPD activities per CPD

cycle.

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CHAPTER 4: CONTINUOUS PROFESSIONAL DEVELOPMENT (CPD)

There is NO requirement that Key Individuals and Representatives must be a member of a Professional Body

They must merely ensure that the CPD activities that they undertake is accredited and tracked by a Professional Body

Registrar intends to extend supervision to include exemption from CPD requirement until such time as Representative under Supervision has obtained required experience and/or has completed qualification

REQUIREMENTS OF CPD EVENT AND CERTIFICATE

FPI\FPI18070027 Infinitus Risk Management (Pty) Ltd Infinitus FAISSuperheroes Conference 24 - 27 July 2018.pdf

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5 MIN LEG STRETCH

INTEGRITY ACADEMYJOHANN CLOETE

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PREFERRED TRAINING PROVIDER / EDUCATION INSTITUTION

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“We do not have to become heroes overnight. Just a

step at a time, meeting each thing that comes

up…discovering we have the strength to stare it

down.”

– Eleanor Roosevelt

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TEA TIME 11:30 – 11:5050

“I believe there’s a hero in all of us, that keeps us

honest, gives us strength, makes us noble and finally

allows us to die with pride. Even though sometimes

we have to be steady and give up the thing we want

most. Even our dreams.”

– Aunt May (Spider Man)

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CHAPTER 5: OPERATIONAL ABILITY

General requirements

Governance requirements

Development:

Business Plan (template ready for circulation)

Simplified Risk Management Plan

Risk Register

Accounting Policy

Remuneration Policy

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KEY INDIVIDUALS

Key Individual must have operational ability to effectively manage and oversee financial

services related activities

Key Individual appointed as Key Individual of more than one FSP

Or appointed as Key Individual and as Representative with another FSP

Must be able to demonstrate to the Registrar that he/she has the required operational ability

to effectively and adequately manage or oversee financial services related activities

Representative must also have operational ability to effectively function as Representative

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CHAPTER 6: FINANCIAL SOUNDNESS

FSP must at all times maintain financial resources that are adequate both as to amount and

quality to carry out their activities and to ensure that liabilities are me as they fall due

No person may continue as FSP if -

Declared insolvent or provisionally insolvent

Placed under liquidation or provisional liquidation

Subject to any pending proceedings that may lead to the above

Seriously and persistently failing to manage any of its financial obligations

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FINANCIAL SOUNDNESS

Category I

That does not hold, control or has access to client assets and does not collect, hold or receive

premiums or other monies iro financial product

The assets of a Category I FSP must at all times exceed the liabilities of that FSP

Category II

Assets must at all times exceed liabilities AND must at all times comply with the additional

asset, working capital and liquidity requirements

ANNEXURE A

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FINANCIAL SOUNDNESS

Purpose of financial soundness requirement is to ensure that FSPs remain solvent

Being financially sound reduces risk of FSP becoming unable to meet its liabilities during

periods of FSP specific or industry wide liquidity stress

Liquidity is a critical element for ongoing viability of any FSP

Liquidity requirements are imposed to ensure that an FSP is able to meet unforeseen liquidity

needs and to accomplish orderly resolution of the business of an FSP without prejudicing the

interests of clients

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NEW CONDUCT OF BUSINESS REPORT

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CONDUCT OF BUSINESS REPORT

Draft Conduct of Business Report 25 May 2018.pdf

Published for comment

Replaces current FSB/FSCA Compliance Report

To be submitted for 2018/19 reporting year

Total rework of existing compliance report, more personalised with intrusive questions and

request for submission of proof

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FOCUS AREA 1 - BUSINESS STRUCTURE, GOVERNANCE AND

CONTROL FUNCTIONS

LEGAL STRUCTURE

Refer to new FSP and Business Profile document already in use

FSP AND BUSINESS PROFILE

SECTION A3 COMPLIANCE FILE

Specific focus on key responsibilities of key individual

Also if acting as KI for other FSPs

RISK MANAGEMENT

Development of simplified RISK MANAGEMENT PLAN

New RISK REGISTER

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BUSINESS CONTINUITY

Succession Plan

NOMINATION DOCUMENT

To submit a copy with the report

SECTION A6 COMPLIANCE FILE

Discussion

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CONFLICTS OF INTEREST

SECTION A9 COMPLIANCE FILE

COMPLIANCE FUNCTION

INSURANCE COVER

Describe how the FSP ensures that the insurance cover is adequate and

suitable for all the business activities which the FSP carries on or for which it is responsible

SECTION A12 COMPLIANCE FILE

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FOCUS AREA 2 -VALUE PROPOSITION

PRODUCT SUPPLIERS

Explain the process the FSP uses to select specific products on which it provides services

Provide a list of product suppliers and % of the business the FSP has placed

SECTION A17 COMPLIANCE FILE

SERVICES

Again describe the due diligence process for products and product suppliers

Segment client base: Natural persons / Institutions / Group schemes

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ADVICE

Describe analysis process

Cancellation / terminations / lapse: penalties or fees; mitigation of risk

Replacement

Number of instances of replacements

SECTIONS B21 – B36 CLIENT PROCESSES

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FOCUS AREA 3 - ADVERTISING AND MARKETING

Advertisements and marketing

E-mail signatures: FSP number OR “Authorised Financial Services Provider”

“Representative under Supervision”

Sign-off process

Record of advertisements

SECTION A10 COMPLIANCE FILE

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FOCUS AREA 4 - CLIENT TAKE-ON PROCESS

Describe the FSPs client take-on process

6 step Financial Planning Process

Including provision for new FIC Customer Due Diligence requirements

SECTIONS B21 – B36 CLIENT PROCESSES

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FOCUS AREA 5 – REMUNERATION MODEL

FINANCIAL REWARDS AND INCENTIVE SCHEMES

Describe remuneration structures

Lead generation / referral fee

o How determined?

o Once off or ongoing?

TO DEVELOP: Remuneration Policy

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FOCUS AREA 6 – RECRUITMENT, TRAINING AND PERFORMANCE

MANAGEMENT

Process for appointing representatives

Appointment of representative under supervision

REQUIREMENTS

FOCUS AREA COMPLIANCE ASSESSMENT

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FOCUS AREA 7 - COMPLAINTS

Analyse the underlying cause of complaints

In line with TCF

NEW DEVELOPMENT

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FIC AMENDMENT ACT 1 OF 2017

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TIME FRAME FOR IMPLEMENTATION

2 APRIL 2019

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STEPS IN IMPLEMENTATION PROCESS PROPOSED DATE ADDRESSED

STEP 1: Review current legislation and draft new proposed Risk Management and Compliance Programme (RMCP)

January –February 2018

YES

STEP 2: Ensure that FSPs are identified as Accountable Institutions: Appoint S43 FIC Compliance and Money

Laundering Reporting Officer Register AI on new FIC website

June 2018 YESOngoing

STEP 3: Introduce AI’s to new legislation and RMCP June – August 2018

NOW

STEP 4: Provide annual training and assessment to AI and employees: Focus on new risk assessment matrix and

checklist

To be completed ASAP

NOW

STEP 5: Implement and personalise RMCP August 2018 –January 2019

STEP 6: Conduct training to FSPs as and when required Ongoing

STEP 7: Monitor implementation and understanding of new processes

January – 31 March 2019

STEP 8: Complete implementation 1 April 2019

BACKGROUND

Came into operation on 13 June 2017

Purpose of Act is bring SA in line with international standard

Risk-based approach

Each accountable institution is to design and implement appropriate RMCP

Own discretion

Determine risks according to client base

Enhanced due diligence

No longer merely collecting documents

Risk rating levels of risks into categories

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ANNUAL FIC GENERAL AWARENESS TEST 2018

Introduction to new concepts

INTRODUCTION TO THE NEW FIC LEGISLATION AND THE RISK BASED APPROACH -

PART 1 2018

New FICA RISK MANAGEMENT COMPLIANCE PROGRAMME

FIC RMCP FOR FSPs 2018

To replace new checklists and documents

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New checklists for

Natural Persons

Legal Persons

Partnerships

Trusts

Domestic Prominent Influential Persons (PIPs)

Foreign Prominent Public Officials (PPOs)

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NEW CHECKLISTS FOR IMPLEMENTATION

Risk Classification Natural Person Sole Proprietor 2018

Country Risk Classification

Risk Assessment Form

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Beneficial ownership

Recordkeeping requirements

Governance and training

Please complete your FICA tests and provide me with the completed test as confirmation

Complete your FSP Training Register to that effect

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RECORDKEEPING

SECTION A11 COMPLIANCE FILE

SECTION B28

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BEFORE YOU LEAVE

PLEASE ENSURE THAT YOU SIGN OUT

THE ATTENDANCE REGISTER WITH

THE TIME AND YOUR SIGNATURE

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BEFORE YOU LEAVE

WE WILL SEND OUT INSTRUCTION TO

REGISTER ON THE FINDED ONLINE

SYSTEM TO CREATE YOUR PROFILE

AND ACCESS YOUR CPD CERTIFICATE

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THANK YOU FOR YOUR TIME – PLEASE DRIVE SAFELY

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