WELCOMEINFINITUS FAIS SUPERHEROES CONFERENCE
UNMASKING FIT AND PROPER AND
OTHER REQUIREMENTS FOR 2018INFINITUS FAIS CONFERENCE 2018
INFINITUS RISK MANAGEMENT SERVICE 2
INFINITUS RISK MANAGEMENT SERVICE 3
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
INFINITUS RISK MANAGEMENT SERVICE 4
PURPOSEUNDERSTANDING THE PRACTICAL IMPLICATIONS OF NEW LEGISLATION
INFINITUS RISK MANAGEMENT SERVICE 5
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
INFINITUS RISK MANAGEMENT SERVICE 6
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.
INFINITUS RISK MANAGEMENT SERVICE8
REGISTER ON INFINITUS WEBSITE
Compliance support to independant financial advisers | Infinitus
Click on REGISTER
INFINITUS RISK MANAGEMENT SERVICE 12
BOARD NOTICE 194 OF 2017DETERMINATION OF FIT AND PROPER REQUIREMENTS FOR FINANCIAL SERVICES PROVIDERS
INFINITUS RISK MANAGEMENT SERVICE 13
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
INFINITUS RISK MANAGEMENT SERVICE 14
1 APRIL 2018
INFINITUS RISK MANAGEMENT SERVICE 15
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
INFINITUS RISK MANAGEMENT SERVICE 16
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
INFINITUS RISK MANAGEMENT SERVICE 17
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?
INFINITUS RISK MANAGEMENT SERVICE 19
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?
INFINITUS RISK MANAGEMENT SERVICE 21
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
INFINITUS RISK MANAGEMENT SERVICE 22
We now move on from the general requirements to
the specifics required
INFINITUS RISK MANAGEMENT SERVICE 23
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
INFINITUS RISK MANAGEMENT SERVICE 25
COMPETENCE REQUIREMENTS
1. Experience
2. Qualification
3. Regulatory Examinations (RE)
4. Product Specific Training (PST)
5. Class of Business Training (COB)
INFINITUS RISK MANAGEMENT SERVICE 26
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
INFINITUS RISK MANAGEMENT SERVICE 28
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)
INFINITUS RISK MANAGEMENT SERVICE 29
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
INFINITUS RISK MANAGEMENT SERVICE 30
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
INFINITUS RISK MANAGEMENT SERVICE 32
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
INFINITUS RISK MANAGEMENT SERVICE 33
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!
INFINITUS RISK MANAGEMENT SERVICE 34
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
INFINITUS RISK MANAGEMENT SERVICE 35
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
INFINITUS RISK MANAGEMENT SERVICE 36
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
INFINITUS RISK MANAGEMENT SERVICE 37
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!
INFINITUS RISK MANAGEMENT SERVICE 38
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
INFINITUS RISK MANAGEMENT SERVICE 39
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
INFINITUS RISK MANAGEMENT SERVICE 40
RECORDKEEPING REQUIREMENTS
COMPETENCE REGISTER 2018
INFINITUS RISK MANAGEMENT SERVICE 41
“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
INFINITUS RISK MANAGEMENT SERVICE 42
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
INFINITUS RISK MANAGEMENT SERVICE 43
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.
INFINITUS RISK MANAGEMENT SERVICE 44
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
INFINITUS RISK MANAGEMENT SERVICE 45
5 MIN LEG STRETCH
INTEGRITY ACADEMYJOHANN CLOETE
INFINITUS RISK MANAGEMENT SERVICE 47
PREFERRED TRAINING PROVIDER / EDUCATION INSTITUTION
INFINITUS RISK MANAGEMENT SERVICE 48
“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
INFINITUS RISK MANAGEMENT SERVICE 49
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)
INFINITUS RISK MANAGEMENT SERVICE 51
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
INFINITUS RISK MANAGEMENT SERVICE 52
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
INFINITUS RISK MANAGEMENT SERVICE 53
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
INFINITUS RISK MANAGEMENT SERVICE 54
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
INFINITUS RISK MANAGEMENT SERVICE 55
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
INFINITUS RISK MANAGEMENT SERVICE 56
NEW CONDUCT OF BUSINESS REPORT
INFINITUS RISK MANAGEMENT SERVICE 58
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
INFINITUS RISK MANAGEMENT SERVICE 59
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
INFINITUS RISK MANAGEMENT SERVICE 60
BUSINESS CONTINUITY
Succession Plan
NOMINATION DOCUMENT
To submit a copy with the report
SECTION A6 COMPLIANCE FILE
Discussion
INFINITUS RISK MANAGEMENT SERVICE 61
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
INFINITUS RISK MANAGEMENT SERVICE 62
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
INFINITUS RISK MANAGEMENT SERVICE 63
ADVICE
Describe analysis process
Cancellation / terminations / lapse: penalties or fees; mitigation of risk
Replacement
Number of instances of replacements
SECTIONS B21 – B36 CLIENT PROCESSES
INFINITUS RISK MANAGEMENT SERVICE 64
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
INFINITUS RISK MANAGEMENT SERVICE 65
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
INFINITUS RISK MANAGEMENT SERVICE 66
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
INFINITUS RISK MANAGEMENT SERVICE 67
FOCUS AREA 6 – RECRUITMENT, TRAINING AND PERFORMANCE
MANAGEMENT
Process for appointing representatives
Appointment of representative under supervision
REQUIREMENTS
FOCUS AREA COMPLIANCE ASSESSMENT
INFINITUS RISK MANAGEMENT SERVICE 68
FOCUS AREA 7 - COMPLAINTS
Analyse the underlying cause of complaints
In line with TCF
NEW DEVELOPMENT
INFINITUS RISK MANAGEMENT SERVICE 69
FIC AMENDMENT ACT 1 OF 2017
INFINITUS RISK MANAGEMENT SERVICE 71
TIME FRAME FOR IMPLEMENTATION
2 APRIL 2019
INFINITUS RISK MANAGEMENT SERVICE 72
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
INFINITUS RISK MANAGEMENT SERVICE 73
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
INFINITUS RISK MANAGEMENT SERVICE 74
New checklists for
Natural Persons
Legal Persons
Partnerships
Trusts
Domestic Prominent Influential Persons (PIPs)
Foreign Prominent Public Officials (PPOs)
INFINITUS RISK MANAGEMENT SERVICE 75
NEW CHECKLISTS FOR IMPLEMENTATION
Risk Classification Natural Person Sole Proprietor 2018
Country Risk Classification
Risk Assessment Form
INFINITUS RISK MANAGEMENT SERVICE 76
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
INFINITUS RISK MANAGEMENT SERVICE 77
RECORDKEEPING
SECTION A11 COMPLIANCE FILE
SECTION B28
INFINITUS RISK MANAGEMENT SERVICE 78
BEFORE YOU LEAVE
PLEASE ENSURE THAT YOU SIGN OUT
THE ATTENDANCE REGISTER WITH
THE TIME AND YOUR SIGNATURE
INFINITUS RISK MANAGEMENT SERVICE 80
BEFORE YOU LEAVE
WE WILL SEND OUT INSTRUCTION TO
REGISTER ON THE FINDED ONLINE
SYSTEM TO CREATE YOUR PROFILE
AND ACCESS YOUR CPD CERTIFICATE
INFINITUS RISK MANAGEMENT SERVICE 81
THANK YOU FOR YOUR TIME – PLEASE DRIVE SAFELY
INFINITUS RISK MANAGEMENT SERVICE 82