The Fia Code of Conduct & Facing the FAIS Ombud Presented by Anton Swanepoel

The FIA Code of Conduct 09:00Welcome and introduction 09:05The Fia Code of Conduct 09:15Documentation required in terms of FAIS 09:30The contractual relationship between FSPs and their clients 09:45Vital information to be recorded to prevent client complaints 10:00Recording process and documentation (templates) in respect of Short-term insurance products – New clients 10:30Recording process and documentation (templates) in respect of Short-term insurance products – Renewals 10:45Tea Break 11:00Recording process and documentation (templates) in respect of Health care products 11:30Recording process and documentation (templates) in respect of Long-term insurance products 12:00Comfort break 12:10Recording process and documentation (templates) in respect of Investment products 13:00Close

Introduction 1.Presentation content and templates on 2.Launch date 7 August Access requires registration 4.No charge to independent providers and Fia members 5.Copyright conditions 6.Disclaimer 7.Website not a free compliance consulting business 8.Website will be updated regularly 9.The service is free for now, but may become subscription based in future 10.Website goes live on Wednesday morning 7 August 2013

Introduction 1.How many clients does it take to build a sustainable business? 2.How many clients does it take to ruin a business? 3.Can you face the FAIS Ombud if any of your clients should complain? 4.Why do you say so? 5.What will you offer in your defense? 6.Do you have a specific strategy to reduce your advice risk?

Years Beginners Great Below average Good Average Managing your advice risk

The Fia Code of Conduct – Helping you to set new standards 1.The Fia Code of Conduct is aligned with your business process 2.The Fia Code of Conduct is aligned with the General Code 3.The Fia Code of Conduct was presented to the FSB FAIS Supervision Department 4.The Fia Code of Conduct was presented to National Treasury 5.The Fia Code of Conduct Manual was presented to the FSB FAIS Supervision Department 6.The Fia Code of Conduct and the Fia Code of Conduct Manual has never been critisised or attacked 7.The Fia Code of Conduct was built on a sound foundation – good quality record-keeping and the law of contract

The FAIS Ombud Rules Cases are won or lost based on facts. If we have the right evidence, chances are slim for us to find against the financial services provider. Poor record-keeping is at the center of our determinations. Charles Pillai 30 March 2006 (Institute for International Research Seminar - Rosebank)

Hope for the best – plan for the worst 1.How does one determine the facts in any client complaint? Look at the evidence 2.What is the right evidence? Don’t tell me – show me? 3.What constitutes poor record-keeping and what constitutes good quality record-keeping? 4.Does the General Code state that transactions must be accurately accounted for? 5.If so, what is needed to comply? 6.What are you counting on to succeed against the Ombud? 7.If you do not use contracts when concluding transactions your business is built on a weak foundation

Section 20(3) of the FAIS Act The objective of the Ombud is to consider and dispose of complaints in a procedurally fair, informal, economical and expeditious manner and by reference to what is equitable (reasonable, impartial, just, even-handed, justifiable, fair) in all the circumstances (conditions, situations, environments), with due (owed) regard (respect, favour, honour, concern) to – (a)The contractual arrangement or other legal relationship between the complainant and any other party to the complaint; and (b)The provisions of this Act.

General Code of conduct

Section 3(1) of the General Code of conduct (d)the service must be rendered in accordance with the contractual relationship and reasonable requests or instructions of the client, which must be executed as soon as reasonably possible and with due regard to the interests of the client which must be accorded appropriate priority over any interests of the provider; (e)transactions of a client must be accurately accounted for

Transactions 1.How do estate agents account accurately for a transaction? 2.How does a bank account for a transaction when they grant a loan? 3.How do you account accurately for a transaction when you buy a car? 4.How do you account for a transaction when you sell your shares in your business? 5.How would you accurately account for buying somebody else’s business? 6.How does an insurer keep an accurate account of the transaction between the insurance company and the client?

Section 8(1) of the General code of conduct A provider other than a direct marketer, must, prior to providing a client with advice – (a)take reasonable steps to seek from the client appropriate and available information regarding the client’s financial situation, financial product experience and objectives to enable the provider to provide the client with appropriate advice; (b)conduct an analysis, for purposes of the advice, based on the information obtained; (c)identify the financial product or products that will be appropriate to the client’s risk profile and financial needs, subject to the limitations imposed on the provider under the Act or any contractual arrangement;

Section 7(1) of the General code of conduct A provider … must- (a)provide a reasonable and appropriate general explanation of the nature and material terms of the relevant contract or transaction to a client, and generally make full and frank disclosure of any information that would reasonably be expected to enable the client to make an informed decision; (b)whenever reasonable and appropriate, provide to the client any material contractual information and any material illustrations, projections or forecasts in the possession of the provider;

Section 9 of the General Code of Conduct (1)A provider must, subject to and in addition to the duties imposed by section 18 of the Act and section 3(2) of this Code, maintain a record of the advice furnished to a client as contemplated in section 8, which record must reflect the basis on which the advice was given, and in particular- section 18 (a)a brief summary of the information and material on which the advice was based (client’s needs); (b)the financial product which were considered; (c)the financial product or products recommended with an explanation of why the product or products selected, is or are likely to satisfy the client’s identified needs and objectives; and Provided that such record of advice is only required to be maintained where, to the knowledge of the provider, a transaction or contract in respect of a financial product is concluded by or on behalf of the client as a result of the advice furnished to the client in accordance with section 8.

The law of contract 1.Dr Franso van Zyl – Author of the FAIS Manual I agree fully…that the law of contract fundamentally underlies all final rendering of financial services under FAIS, and constitutes the final ‘accountability’ factor. 2.Prof Robert Vivien – Prof of insurance at Wits 3.RH Christie – Author of The law of contract 4.The late Charles Pillai – See the Birkin Case

Dr Birken FOC 2629/05/GP(1) 8 December 2006 An Investment Advice Agreement was entered into on the 29 th of October The agreement defines the contractual relationship. [Par 4] It is clear from section 20(3) of the FAIS Act that due regard will be paid to the contractual arrangement or other legal relationship between the complainant and any other party to the complaint. [Par 25] Consideration must be given to the provisions of the agreement. Charles Pillai

Documentation required in terms of FAIS 1.Disclosure document 2.Client information, Needs analysis & risk profile questionnaire 3.Service agreement, client request or instruction [Section 3(1)(d)] 4.Written proposal and quotation(s) 5.Present the proposal 6.Product advice-, service- and risk agreement [Section 3(1)(d), 7(1) and 8(c)] 7.Application form 8.Record of advice as a closing letter [Section 9] 9.Minutes of meetings… 10.Client service requests / instructions

The contractual relationship between providers and clients 1.A contractual relationship between two parties are based on offer and acceptance 2.Offer (proposal) and acceptance = Agreement 3.Agreement = Contract 4.Provider offers to render a specific service – on acceptance by the client = Contract 5.Provider offers a policy or an investment proposal to a client – on acceptance by the client = Contract 6.There are various contracts that are concluded between the parties when a transaction is concluded

The Fia Code of Conduct 1.A professional introduction 2.Gathering information 3.Service agreement 4.Conducting an analysis and preparing a report and recommendations 5.Presenting the client report and recommendations 6.Advice and intermediary service agreement 7.Implementation 8.Ongoing advice and services

Vital information to be recorded 1.The needs of the client 2.The risks the client is willing to accept 3.The specific service that was required / Specific service request 4.Demonstrate the suitability of the product 5.Disclosure of the relevant material terms, conditions, exclusions and fees 6.Record the agreement with regards to the product that was recommended and accepted by the client 7.Send a confirmation letter / Record of advice

SHORT-TERM INSURANCE – NEW CLIENTS 1.The Fia Code of Conduct 2.Compliance documentation 3.Contracts 4.Facing the FAIS Ombud

The Fia Code of Conduct 1.A professional introduction 2.Gathering information 3.Service agreement 4.Conducting an analysis and preparing a report and recommendations 5.Presenting the client report and recommendations 6.Advice and intermediary service agreement 7.Implementation 8.Ongoing advice and services

Documentation required in terms of FAIS 1.Disclosure document 2.Client information, Needs analysis & risk profile questionnaire 3.Service agreement, client request or instruction [Section 3(1)(d)] 4.Written proposal and quotation(s) 5.Present the proposal 6.Product advice-, service- and risk agreement [Section 3(1)(d), 7(1) and 8(c)] 7.Application form 8.Record of advice as a closing letter [Section 9] 9.Minutes of meetings… 10.Client service requests / instructions

Needs and risk profile – New clients 1.Assets or risks to be insured 2.The sum for which the assets or risks should be insured 3.The events that must be insured 4.The term of insurance 5.The price / premium of the insurance 6.Which risks are the client prepared to fund himself

The Suitability Test – New clients 1.Assets or risks to be insured defined in quotation / proposal 2.The sum for which the assets or risks should be insured defined in the quotation / proposal 3.The events that must be insured defined in the quotation / proposal 4.The term of insurance defined in the quotation / proposal 5.The price / premium of the insurance defined in the quotation / proposal 6.Disclosure of relevant terms, conditions, exclusions and fees 7.Written acceptance

Advice agreement - New clients 1.Written offer and acceptance of product benefits - Cover 2.Assets and risks covered 3.The level of cover / extent of cover 4.The events that must be insured defined in the quotation / proposal 5.The term of insurance defined in the quotation / proposal 6.The price / premium of the insurance defined in the quotation / proposal 7.Disclosure of relevant terms, conditions, exclusions and fees 8.Written acceptance – Hard copy contract / Electronic

Electronic contracting 1.Send electronic confirmation of discussion 2.Send electronic policy schedule 3.Ask for confirmation of correctness within three days 4.Use a standard clause to demonstrate care and diligence 5.Follow up three days later with standard clause to demonstrate care, skill, diligence and professionalism 6.If there is no response, send final closing letter / record of advice with standard clause to eliminate advice risk

Electronic contracting – Standard clause (first ) Attached is confirmation of our discussion and agreement of the relevant policy cover, applicable terms, conditions, exclusions and fees. Please review the content and confirm its correctness within 3 (three days) as from today. If there are any aspects that have not been addressed, please notify us as a matter of urgency so that we can include the cover. Please note that, if we do not receive a response within this period, we will accept that our confirmation is correct and accepted by you. Please also note that if we receive no response from you, the policy will pay out in accordance with our confirmation to you and the policy terms as it stands now in the event of a claim.

Electronic contracting – Standard clause (second ) We refer to our previous correspondence dated ________________ (three days ago). This / letter serves as a friendly, but urgent reminder to confirm the correctness of our attached confirmation of our discussion and agreement of the relevant policy cover, applicable terms, conditions, exclusions and fees. Please review the content and confirm its correctness as a matter of urgency. It is very important to understand that, should we do not receive a response, we will have to accept that you are in full agreement with the policy terms and you accept that, should there be a claim, the policy will pay out in accordance with our confirmation to you and the policy terms as it was recorded.

Electronic contracting – Standard clause (third ) We refer to our previous correspondence dated ________________ and ________________ (three days ago). We hereby confirm that the policy will pay out in accordance with our confirmation to you and the policy terms as it was recorded in the attachment. We take pleasure in attaching our record of advice for your records. Please contact us if you have any questions in this regard.

Electronic contracting – Record of advice 1.Executive summary of the client’s needs 2.Which products were considered 3.Which product was recommended 4.The reason for selecting the specific policy Appropriate in view of the client’s needs Terms and conditions were acceptable Competitive premium Other

SHORT-TERM INSURANCE – RENEWALS 1.The Fia Code of Conduct 2.Compliance documentation 3.Contracts 4.Facing the FAIS Ombud

The Fia Code of Conduct 1.Gathering information 2.Service agreement – annual renewal 3.Conducting an analysis and preparing a report and recommendations if new assets / risks have to be insured 4.Presenting the client report and recommendations 5.Advice and intermediary service agreement 6.Implementation 7.Ongoing advice and services

Documentation required in terms of FAIS 1.Disclosure document – none required unless there are changes on your business profile 2.Client information, Needs analysis & risk profile questionnaire 3.Service agreement, client request or instruction [Section 3(1)(d)] 4.Written proposal and quotation(s) 5.Present the proposal 6.Product advice-, service- and risk agreement [Section 3(1)(d), 7(1) and 8(c)] 7.Application form – written instruction to renew with changes 8.Record of advice as a closing letter [Section 9]

Needs and risk profile – Existing clients 1.Assets or risks to be insured 2.The sum for which the assets or risks should be insured 3.The events that must be insured 4.The term of insurance 5.The price / premium of the insurance 6.Which risks are the client prepared to fund himself

The Suitability Test – Existing clients 1.Assets or risks to be insured defined in quotation / proposal 2.The sum for which the assets or risks should be insured defined in the quotation / proposal 3.The events that must be insured defined in the quotation / proposal 4.The term of insurance defined in the quotation / proposal 5.The price / premium of the insurance defined in the quotation / proposal 6.Disclosure of relevant terms, conditions, exclusions and fees 7.Written acceptance

Advice agreement - Existing clients 1.Written offer and acceptance of product benefits - Cover 2.Assets and risks covered 3.The level of cover / extent of cover 4.The events that must be insured defined in the quotation / proposal 5.The term of insurance defined in the quotation / proposal 6.The price / premium of the insurance defined in the quotation / proposal 7.Disclosure of relevant terms, conditions, exclusions and fees 8.Written acceptance – Hard copy contract / Electronic

Electronic contracting 1.Send electronic confirmation of discussion 2.Send electronic policy schedule 3.Ask for confirmation of correctness within three days 4.Use a standard clause to demonstrate care and diligence 5.Follow up three days later with standard clause to demonstrate care, skill, diligence and professionalism 6.If there is no response, send final closing letter / record of advice with standard clause to eliminate advice risk

Electronic contracting – Standard clause (first ) Attached is confirmation of our discussion and agreement of the relevant policy cover, applicable terms, conditions, exclusions and fees. Please review the content and confirm its correctness within 3 (three days) as from today. If there are any aspects that have not been addressed, please notify us as a matter of urgency so that we can include the cover. Please note that, if we do not receive a response within this period, we will accept that our confirmation is correct and accepted by you. Please also note that if we receive no response from you, the policy will pay out in accordance with our confirmation to you and the policy terms as it stands now in the event of a claim.

Electronic contracting – Standard clause (second ) We refer to our previous correspondence dated ________________ (three days ago). This / letter serves as a friendly, but urgent reminder to confirm the correctness of our attached confirmation of our discussion and agreement of the relevant policy cover, applicable terms, conditions, exclusions and fees. Please review the content and confirm its correctness as a matter of urgency. It is very important to understand that, should we do not receive a response, we will have to accept that you are in full agreement with the policy terms and you accept that, should there be a claim, the policy will pay out in accordance with our confirmation to you and the policy terms as it was recorded.

Electronic contracting – Standard clause (third ) We refer to our previous correspondence dated ________________ and ________________ (three days ago). We hereby confirm that the policy will pay out in accordance with our confirmation to you and the policy terms as it is recorded in the attachment. We take pleasure in attaching our record of advice for your records. Please contact us if you have any questions in this regard.

Electronic contracting – Record of advice 1.Executive summary of the client’s needs 2.Which products were considered 3.Which product was recommended 4.The reason for selecting the specific policy Appropriate in view of the client’s needs Terms and conditions were acceptable Competitive premium Other

LONG-TERM INSURANCE 1.The Fia Code of Conduct 2.Compliance documentation 3.Contracts 4.Facing the FAIS Ombud

The Fia Code of Conduct 1.A professional introduction 2.Gathering information 3.Service agreement 4.Conducting an analysis and preparing a report and recommendations 5.Presenting the client report and recommendations 6.Advice and intermediary service agreement 7.Implementation 8.Ongoing advice and services

Documentation required in terms of FAIS 1.Disclosure document 2.Client information, Needs analysis & risk profile questionnaire 3.Service agreement, client request or instruction [Section 3(1)(d)] 4.Written proposal and quotation(s) 5.Present the proposal 6.Product advice-, service- and risk agreement [Section 3(1)(d), 7(1) and 8(c)] 7.Application form 8.Record of advice as a closing letter [Section 9] 9.Minutes of meetings… 10.Client service requests / instructions

MEDICAL SCHEMES 1.The Fia Code of Conduct 2.Compliance documentation 3.Contracts 4.Facing the FAIS Ombud

The Fia Code of Conduct 1.A professional introduction 2.Gathering information 3.Service agreement 4.Conducting an analysis and preparing a report and recommendations 5.Presenting the client report and recommendations 6.Advice and intermediary service agreement 7.Implementation 8.Ongoing advice and services

Documentation required in terms of FAIS 1.Disclosure document 2.Client information, Needs analysis & risk profile questionnaire 3.Service agreement, client request or instruction [Section 3(1)(d)] 4.Written proposal and quotation(s) 5.Present the proposal 6.Product advice-, service- and risk agreement [Section 3(1)(d), 7(1) and 8(c)] 7.Application form 8.Record of advice as a closing letter [Section 9] 9.Minutes of meetings… 10.Client service requests / instructions

INVESTMENTS 1.The Fia Code of Conduct 2.Compliance documentation 3.Contracts 4.Facing the FAIS Ombud

The Fia Code of Conduct 1.A professional introduction 2.Gathering information 3.Service agreement 4.Conducting an analysis and preparing a report and recommendations 5.Presenting the client report and recommendations 6.Advice and intermediary service agreement 7.Implementation 8.Ongoing advice and services

Documentation required in terms of FAIS 1.Disclosure document 2.Client information, Needs analysis & risk profile questionnaire 3.Service agreement, client request or instruction [Section 3(1)(d)] 4.Written proposal and quotation(s) 5.Present the proposal 6.Product advice-, service- and risk agreement [Section 3(1)(d), 7(1) and 8(c)] 7.Application form 8.Record of advice as a closing letter [Section 9] 9.Minutes of meetings… 10.Client service requests / instructions