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Industry regulator processes ‘truck loads’ of license applications

17 May 2010 Gareth Stokes

Gareth Stokes, FAnews Online Editor

On 11 May 2010 the Financial Services Board (FSB) announced it had finalised 19 839 applications for financial services providers (FSPs) licenses. The FSB is the statutory body responsible for supervising the South African financial services industry, including the issuing of licenses and authorisations for companies and individuals to render financial services. The organisation’s regulatory objectives include fairness, efficiency and transparency, as well as ensuring the stability of the country’s financial systems and protection of consumers.

Gerry Anderson, Deputy Executive Officer for Market Conduct and Consumer Education, confirmed that 1 830 of applications received thus far had been declined. The FSB publishes regular updates so that the industry can keep up to speed with declined applications and suspended financial services providers (FSPs).

Impressive compliance, but...

The latest correspondence includes details of 17 newly declined license applications and an alarming 428 suspensions. Regulators have sweeping powers to grant and suspend licenses, and suspended 11 FSPs for failure to submit compliance reports and 417 for non-payment of levies. “FSPs whose applications had been unsuccessful, withdrawn or suspended are entitled to appeal to the FSB Appeal Board, an independent tribunal, if the applicant is dissatisfied with the decision taken by the registrar,” notes Anderson.

We were quite perturbed by the number of suspensions for non-payment of levies, and wondered why companies would bother to submit compliance reports but fail to pay their dues. Could it be that the ‘confusion’ over invoicing and administration (experienced during 2009) have had an impact. We’ll leave such questions for a future newsletter.

In the interim you should take care when dealing with FSPs. Both individuals and financial advisers should make sure the product and service providers (and their representatives) are licensed, prior to dealing with them. And it makes sense to check up from time to time that your regular contacts are still in good standing with the regulator. You can reach the FSB on their toll-free number 0800-110-443, or on their website http://www.fsb.co.za/. The website includes a comprehensive list of licensed FSPs and you can check whether or not each institution or person you conduct business with is authorised to render financial services, or whether the institution or person is appointed as a representative of an authorised FSP.

The next chapter in regulation

South Africa’s financial services landscape is continually evolving. The latest initiative is an FSB discussion paper titled Treating Customers Fairly. The FSB has issued a 78-page report in which it sets out a new framework for market conduct regulation. They’ve invited industry stakeholders to comment on the framework by 9 June 2010.

The document provides numerous examples of ‘conduct unbecoming’ in a South African context. Examples of ‘conduct unbecoming’ are provided for product design, product promotion, advice, point of sale, after sales, and complaints and claims handling. Clearly the FSB is leaving no aspect of the domestic financial services environment to chance.

A separate chapter in the Treating Customers Fairly framework addresses how the regulator will ensure compliance with these provisions. This chapter provides clarity on regulatory expectations and the pro-active and intensive supervision that will have to be implemented to ensure compliance. It also addresses appropriate incentives (probably overlapping the conflict of interest amendments recently gazetted), how to encourage consumer responsibility and facilitating the functioning of industry ombudsman.

Take an active interest in your universe

We suggest you take a moment from your busy schedules to read the Treating Customers Fairly document and provide feedback via an appropriate industry organisation, such as a broker body or similar. Go to http://www.fsb.co.za/ – you can follow the link from the home page – or pick the document up from ‘latest insurance developments’ on the insurance page.

Editor’s thoughts: We were surprised to see a Treating Customers Fairly white paper on our latest visit to the FSB website. Surely the concepts ensconced in this document have been extensively covered in the FAIS Act and the General Codes of Conduct... Do you think the financial services industry requires additional guidelines on treating customers, or does the existing regulation (with amendments) do the trick? Add your comment below, or send it to gareth@fanews.co.za

Comments

Added by Quinten Knox, 18 May 2010

Since we are (once again?) copying the UK Financial Services Authority initiative, to with their Treating Customers Fairly (TCF) programme, we might as well look at is carefully: This is what the FSA says about its own TCF programme: "We see real benefits for consumers in tipping the balance of our regulation more towards principles and away from prescription. We believe that a more principles-based approach will help to align good business practice in firms and markets with our own statutory objectives." "As part of the move towards a more principles-based approach we are keen to avoid introducing new detailed rules. And we are working to remove such rules where possible, for example by simplifying the Conduct of Business Sourcebook for investment business. So we do not envisage introducing new rules as part of the TCF initiative; instead we want firms and their senior management to focus on the principles and the outcomes for consumers that we are looking to achieve." Away from prescription? Keen to avoid introducing new detailed rules? No introduction of new rules? I like it! Now let's copy the whole damn FSA initiative regarding TCF! That woukld be real progress.
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