1. FIA Regional Conferences 2012: Regulatory Update

2. Agenda Recent Exemptions: BN 193 of 2011 DOFA Qualifications CPD
PI cover, IGF, Fidelity guarantees
Binder agreements
Bulk transfers of clients, transfer of book

3. BN 193 of 2011
Exemption of FSPS from audited financial statement requirements
“FSP” means an authorised Category I FSP who does not receive premiums (contemplated in the Short-term Insurance Act, 1998, and the Long-term Insurance Act, 1998) or otherwise receive or hold clients’ money or assets;

4. BN 193 of 2011
“FSP limited by product” means an authorised Category I FSP who renders financial services limited to financial products belonging to Long-term Insurance subcategory A or friendly society benefits provided by a friendly society contemplated in paragraph (d) (ii) of the definition of “financial product” in section 1 (1) of the Act and who receives or holds clients’ money;

5. Extent of exemption
(1)  An FSP is exempted from section 19 (2) (a) and (3) to (6) of the Act unless—
(a) it is obliged by law to cause financial statements to be audited and reported on; or
(b) it is otherwise obliged by law to cause financial statements to be independently reviewed by an independent reviewer or otherwise prepared, in which case section 19 (2) (a) and (3) to (6) applies with the necessary changes.
(2)  An FSP limited by product, unless obliged by law to cause financial statement to be audited and reported on, is exempted from section 19 (2) (a) and (3) to (6) of the Act to the extent that reference is made to an auditor, audit or statement or report by an auditor subject to the conditions that it—
(a) must appoint an accounting officer approved by the Registrar;
(b) the accounting officer must certify and report on the financial statements referred to in section 19 (1) of the Act in conformity with the practices of the accounting officer’s profession; and
(c) section 19 (2) to (6) applies with the necessary changes to the accounting officer, any certification and report by the officer and termination of appointment.
(2)  The exemption does not apply where an FSP limited by product is otherwise obliged by law to cause financial statements to be independently reviewed by an independent reviewer, in which case section 19 (2) (a) and (3) to (6) of the Act applies with the necessary changes.

6. Using the exemption:
(3)  An FSP and FSP limited by product who wish to benefit from this Notice must within six months after publication of the Notice or upon application for authorisation in case of an unauthorised FSP—
(a) register the exemption with the Registrar within the prescribed format and manner; and
(b) must inform the Registrar in writing within 15 days after the change has taken place, of any change in respect of the information that was submitted for purposes of registering the exemption.

7. DOFA DOFA = date of first appointment
This is the date a person is appointed for the first time as:
A representative in respect of specific financial categories or subcategories of financial products
A KI for specific categories or subcategories
A sole proprietor (FSP)

8. What is the implication of DOFA?
2/2/2005 Minimum qualification at entry
Experience
Prescribed period
Qualification
31/12/2009:
Skills programme or qualification
RE 5
30/6/2012
30/9/2012

9. However… DOFA 2005 - Rep DOFA KI 2012 RE 5 – 30/6/2012
Level 2 RE’s
DOFA KI 2012
KI RE1 before application
Meet requirements at application stage

10. Qualifications Rules: BN 105 of 2008 Recognise qualifications as:
G – Generic
S or SP – specific recognition:
S applies to people in industry between 2004 and 2009, as per appointment in this period
SP – applies to people entering industry from 2010 onwards, or people who amend their licensing conditions from 2010 onwards

11. Qualifications List National Diploma In Financial Markets
This means the qualification is recognised as specific for people appointed between 2004 and 2009 for this subcategory
Qualifications List
List 1: Qualifications recognised for Category I FSPs
Qualification No
Qualification title
Institution No
Institution
SAQA ID
Level
Credits
Category 1 [Sub Categories Below] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 KI
National Diploma In Financial Markets 52
SGB All Institutions
23653
240 G S
Further Education And Training Certificate: Retail Insurance
49835
140 SP -
This means the qualification is not recognised for this subcategory
This qualifications is recognised as specific for all appointments from 2004 onwards

12. Qualifications list, cont
List 2: Specified subject(s)/ module(s)/ unit standard(s) based qualifications recognised for category I
Qualification No
Qualification title
Institution No
Institution
SAQA ID
Level
Credits
Subcategories of financial products in category I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 KI
Please note: The SAQA ID for qualification 20185, Further Education and Training Certificate: Banking is the same as for the National Certificate: Banking (20185) NQF Level 4. We thus recognise both qualifications in the same manner.
139
Further Education and Training Certificate: Banking 73
Cornerstone Performance Solutions
20185
120 G
This qualification is recognised if it contains the following unit standards: , , , ,242815, , , , , 13379, , , , , 7223, 14963, 12456, , ,
To be recognised for short-term insurance the following electives will apply: , , , , ,
To be recognised for long-term insurance the following electives will apply: , , 11713, ,
To be recognised for short-term and long-term deposits the following electives will apply: 7223, 7231, 7236, ,

13. CPD - continuous professional development
means a process of learning and development with the aim of enabling a financial services provider, key individual, representative or compliance officer to maintain the competency to comply with this Act;

14. Key aspects of cpd Minimum hours per year
Can be done through a CPD provider or other institution
Professional bodies, employers etc. can become CPD providers
Can do a CPD programme through a CPD provider or CPD activities
Will recognise CPD programmes offered by professional bodies, avoid duplicate requirements
Record on representative register for bulk uploads or individual recording on website

15. CPD activities Attend Workshops, conferences, seminars Formal studies
Author – articles, books
Deliver presentations, workshops etc.

16. CPD provider
means an organisation that is approved by the Registrar to provide CPD programmes and/or activities, including but not limited to:
regulators,
industry associations,
professional bodies,
financial advisor networks,
compliance practices,
training providers,
institutions of Higher Education,
employers and product suppliers who offer annual CPD programmes to members, employees and other participants

17. Subject fields for cpd
Ethics, corporate governance, compliance, fraud and risk.
Any relevant legislative/ regulatory aspect that influences the advice, intermediary service, products, or business aspects, or similar aspects.
Business skills, including Financial skills, Business writing, Systems and processes and Policies and procedures.
Any topic relevant to the improvement of services offered.
Customer service skills, techniques to improve how the financial service is rendered and any other topic relevant to the improvement/ development of business skills.
Management skills.
Financial planning.
Practice management.

18. PROFESSIONAL INDEMNITY COVER AND FIDELITY GUARANTEES
A professional indemnity cover (required in terms of BN 123 of 2009) was added as a requirement in terms of the FAIS Act to protect the businesses of providers.
In most cases, even with controls implemented to ensure compliance we do not have control of certain risks which are inherent in professional advice giving businesses.
The risk of false/ incorrect professional advice resulting in lawsuits is inherent in most businesses, hence the requirement for a PI cover as one of the control measures to assist in the mitigation of these risks.

19. Fidelity Cover, PI Cover, Guarantees BN 123 of 2009
Existing FSPs:
authorised before publication:
In force from 21 September 2010
Newly authorised FSPs:
Within 6 weeks of authorisation
Existing FSP, add Cat II, IIA, III or IV:
Must meet the requirements for these categories

20. FSPs that do not receive premiums or hold assets on behalf of clients
Category
Choose one of the requirements below:
Suitable guarantees
PI Cover
I, II or IV
Minimum of R1 million
IIA
Minimum of R5 million

21. FSPs that receive premiums or hold assets on behalf of clients
Category
Choose one of the requirements below:
Suitable guarantees
PI Cover and Fidelity Insurance Cover. This can be a combined policy, but each type of cover must be at least:
I or IV
Minimum of R1 million
II, IIA or III
Minimum of R5 million
Minimum of R5 million each

22. Suitable guarantees
A guaranty can be described as a promise by which one person assumes responsibility for paying another's debts or fulfilling another's responsibilities.
Suitable guarantees refer to guarantees obtained through another entity, which is not provided in the form of insurance. Typically such guarantees are issued by a registered Bank.
In the case of a Bank such guarantees can be issued after they have satisfied themselves that all the requirements have been met.

23. Group level?
Where an FSP forms part of a group of companies, the guarantees or PI cover may be obtained at group level, provided that:
each FSP that is covered by the group policy is clearly identified in the guarantee/policy documentation, and
the value of the guarantee or amount of cover is sufficient to cover the amounts required for each individual FSP’s situation, and
each FSP has a certified copy of the guarantee/ PI cover available for scrutiny by the Registrar should it be required.

24. BINDER AGREEMENTS
Binder functions are collective term for functions that a binder holder performs as the agent of the insurer
Binder holder acts on behalf of insurer, as if the insurer
Binder functions identified in Act are –
enter into, vary or renew a policy
determine the wording of a policy
determine premiums under a policy
determine the value of policy benefits under a policy
settle claims under a policy
Only a non-mandated intermediary can be a binder holder.

25. Status & transitional measures
Promulgated with effect from 1 January 2012
All agreements concluded before or on the date on which the regs commenced must be aligned within one year
All agreements concluded after the date on which the regs commenced must immediately comply

26. Where does binder functions fit?
SERVICES TO POLICY- HOLDER
[not covered by commission]
INTERMEDIARY
SERVICES
[covered by commission]
BINDER SERVICES
[covered by binder fee]
SERVICES TO INSURER
[not covered by binder fee or commission]
SERVICES TO INSURER
SERVICES TO POLICYHOLDER

27. Who may be a binder holder?
Underwriting manager
Non-mandated intermediary
Administrative FSP as defined in FAIS Act (ONLY LT)
Person that renders a service to an insurer only
Representative or independent intermediary
As defined in FAIS Code of Conduct for authorised FSPs & Representatives
May “render services as an intermediary” other than marketing or selling
May not hold written mandate from policyholder to terminate policy or perform act that binds policyholder. Prior approval necessary (no “moving book”)
May hold a written mandate from policyholder to change the underlying investment portfolio of a policy
May be a binder holder for another insurer in respect of same class if all insurers agree in writing
May not also be mandated intermediary
ST exemptions: hold covered
Does not apply in termination period

28. Who may be a binder holder (cont.)?
Underwriting manager
Non-mandated intermediary
Administrative FSP as defined in FAIS Act (ONLY LT)
May not conduct business with a mandated or non-mandated intermediary or their representatives that are associates
May not conduct business with an Admin FSP that is its associate
May not conduct business with a mandated intermediary that is its associate
Exemption: insurer that is holding company

29. What may a binder holder do and not do?
May perform binder functions
May not further delegate binder functions

30. BULK TRANSFER OF CLIENTS/ TRANSFER OF THE BOOK
In terms of section 20 of the General Code of Conduct
Providers who cease to operate must immediately notify all affected clients accordingly and take reasonable steps to ensure that any outstanding business is completed promptly or transferred to another provider
It is important to note that it is the responsibility of the outgoing provider to inform clients.
Product suppliers should also be notified.