More progress on financial service provider licenses

There’s not a single financial adviser who is not familiar with the Financial Advisory and Intermediary Services (FAIS) Act 37 of 2002. The Act came into being to “regulate the rendering of certain financial advisory and intermediary services to clients; to repeal or amend certain laws; and to provide for matters incidental thereto…” The Financial Services Board (FSB) ensures compliance with legislation contained in the Act.

One of the FSB’s many functions is the authorisation of financial services providers. Chapter II of the FAIS Act clearly sets out the various areas the Registrar has to deal with in this regard. These include the authorisation of financial services providers, the process financial service providers must adhere to in their license applications and the suspension, withdrawal and lapsing of licences. A special section also mentions service providers that are exempt from the licensing requirements.

Processing the application backlog

Immediately after the new law came into effect the FSB received thousands of applications for licenses. And since then they have issued regular updates to the industry regards the processing of said applications. FSB deputy executive officer for Market Conduct and Consumer Education, Gerry Anderson issued the most recent update on 13 May 2008. To date the FSB has finalised 17 447 applications from various institutions seeking authorisation to act as financial services providers. Of these, a total of 1 490 applications have been declined.

This update includes the results of authorisation applications completed in April and May of this year. A total of 246 applications were finalised in this period. Over the two months: 20 FSP authorisations were withdrawn, three FSP authorisations provisionally suspended, 2 FSP authorisations suspended and 53 FSP authorisation applications declined. Anderson noted that “FSP’s whose applications have been unsuccessful, withdrawn or suspended are entitled to appeal to the FSB Appeal Board (an independent tribunal) if the applicant is dissatisfied with the decision taken by the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.”

Appeal process described

We thought it would be interesting to take a quick look at how the appeal process plays out. The FSB website notes that their Board of Appeal is “established in terms of section 26 of the Financial Services Board Act, No 97 of 1990.” Three persons (each with an alternate) are appointed by the Minister of Finance. The Board includes a Chairperson and two others. “The Chairperson of the Board of Appeal must be a person with wide experience and expert knowledge in law…” The two other members require extensive knowledge of the financial services environment and the accounting and auditing professions. The Board of Appeal will hear appeals that result from FSB decisions…

Any individual who is aggrieved by a decision taken by any executive officer of the FSB can appeal. Such officers include those at the “collective of the different Registrars established by various statutory enactments contained in legislation dealing with the regulation and supervision of financial institutions (other than banks).” The Board of Appeal is the final ‘internal’ resolutions process for the Registrar (in relation to FSP authorisations) and the FAIS Ombud (in the case of specific complaint resolutions).

The appeal process is fairly simple. Notice of appeal must be lodged with the Secretary of the Board of Appeal within twenty business days of the initial decision. Such notice can only be lodged once permission is obtained from the relevant Ombudsman. Should the Ombudsman deny right to appeal (and this has been the case in many recent requests to the FAIS Ombud) the aggrieved party can  still approach the Chairperson of the Board of Appeals for such permission. The Board of Appeal hears a ‘fresh’ case and may hear information that wasn’t considered in the initial case… Legal representation is not required; but parties usually prefer to include them.

FSP’s who are unhappy with a decision handed down by the Board of Appeal have recourse to the High Court.

Editor’s thoughts:
Every month or two the FSB sends out a press release with an update on the issuing of FSP licenses. They tell us how many (total) applications have been approved, denied, suspended and withdrawn. What other information would you like to hear from the FSB where the granting of licenses is concerned? Add your comment below, or send them to gareth@fanews.co.za