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Licenced

27 June 2004 Angelo Coppola

Mutual & Federal is now licenced to practice as a “financial services provider.”

“The Act is expected to become operational by 30 September 2004, and any company or individual not licensed by then, will not be able to practice,” says Peter Bezuidenhout, executive general manager at Mutual & Federal.

“It has taken the insurer almost two years to comply with the new requirements, and we are very happy that the process is reaching finality,” he says.

Notes:

In terms of the Act, a Financial Service Provider (FSP) is any person or entity furnishing advice of a financial nature to clients as a regular feature of his or her business.

A representative is defined as someone who renders a financial service on behalf of a FSP, but excludes those services, which do not lead a client to a specific transaction, such as a purely administrative or clerical service.

It is the FSPs duty to ensure that these representatives comply with the legislation. If not, the representative and FSP could face penalties or even lose their licence.

The Act makes provision for certain key requirements, the most important probably being the “Fit and Proper” requirement.

This requirement is based on four pillars, namely honesty and integrity, competence, operational ability and financial soundness.

The aim of these requirements is to ensure that these entities or individuals are not disqualified in terms of the law to offer financial advice and are competent and qualified to do so.

Applicants are also required of provide ALL the facts and information that may influence their application.

Honesty and integrity takes into account the personal character of individuals and companies, says Bezuidenhout.

The competence requirement refers to the FSP, intermediary or representative’s “actual ability to do the job,” says Bezuidenhout.

"Is he or she competent to do the job – do they live up to “the job description.”

Do they have the required experience and qualifications behind them?

Operational ability refers to infrastructural requirements; making sure the FSPs have the necessary systems and procedures in place to do the job, he says.

This would include factors such as a fixed address, communication and filing facilities, an account with a recognised bank and the appropriate control systems to combat money laundering.

The fourth pillar,financial soundness, refers to the financial standing of the FSP, intermediary or representative and stipulates that these entities may not be un-rehabilitated insolvents or under provisional or final liquidation.

The assets of these entities also have to exceed the liabilities of the applicants.

For the larger FSPs the Act also requires the appointment of a compliance officer who will take responsibility for the performance of the compliance monitoring function.

The compliance officer will have to be a university graduate with a legal or accounting degree as well as a minimum three years’ experience.

An Ombud for Financial Services Providers has also been appointed in terms of the Act.

The new Ombud enjoys a wide jurisdiction and has the authority to resolve complaints and to enforce remedies against any FSP.

This determination is equivalent to a court judgement and can be executed against the FSP.

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