Do I register or not?

In our latest newsletter dated 3 May 2004 we spoke to Russell Michaels at the FSB about registrations, FSPs, and licences. Here is part two of the story. Tomorrow we will carry the third part of the story, as a newsletter.

To view the first part of this series in the newsletter click here

The FAIS Act regulates the advisory and intermediary services component of the financial services industry.

Note: Amongst other things the Act requires that all persons performing the advisory or intermediary services function to be licensed as financial services providers (FSPs) or they must be representatives of a licensed FSP.

Disclaimer: This guide will focus on the licensing process and is not intended to be a legal interpretation of the Act.

All of the documents mentioned in this guide can be downloaded from the FSB website at www.fsb.co.za

In order to obtain a licence, an applicant is required to meet certain fit and proper requirements. These requirements are divided into three aspects, honesty and integrity, competence and operational ability, and financial soundness.

These requirements are documented in a document entitled "Determination of Fit and Proper Requirements" ("fit and proper").

Step 1 - Determine if you are required to register as an FSP

All persons giving advice or performing intermediary services as defined in the Act, in relation to the financial products defined in the Act are required to register as an FSP.

It is therefore imperative that you read the Act and familiarise yourself with these definitions and the types of financial products which are covered by the Act.

The definition of key individual and representative are also very important. All definitions can be found in section 1 of the Act.

Step 2 - Determine the categories of licence for which you require authorisation

The fit and proper has three categories of licence, each of these categories in turn has sub-categories of licence, the sub-categories relate to the financial products regulated by the FAIS Act.

Category I is the category into which the majority of FSPs will fall and contains nineteen sub-categories. Category II is for discretionary FSPs, previously known as investment managers.

Category III relates to administrative FSPs, or linked investment service providers. Please note that short-term insurance administrators fall into category I and not category III.

Each of the selected licence categories must have at least one key individual, which meets the fit and proper requirements for that category.

This can be the same person for all categories, assuming that person meets all the fit and proper requirements. It is also important for you to determine which categories your representatives (if you have representatives) fall into.

The definition of these categories can be found in the first part of the fit and proper requirements.

Tomorrow we conclude the series or articles on the issue.