Treating customers fairly must extend to the regulator
A great deal has been written about the pending Treating Customers Fairly (TCF) legislation. The new regulation, which will be based on the mostly successful rollout of pro-financial consumer legislation in the United Kingdom, hinges on six “fair treatmen
The Financial Services Board (FSB) has come in for a great deal of criticism for its performance at various stages of the regulatory examinations (RE) process, despite the majority of industry participants agreeing there is a need to improve professional standards in the financial advice space. Over the past couple of years the regulator has shrugged off comments and suggestions from its consumers to push its own agenda. The FSB resisted when they were told that the RE question sets were ambiguous and not up to scratch. They kicked back when sectors of the advisor force pushed for the examinations to be offered in Afrikaans as well as English… They waited until the 11th hour to extend the initial RE deadline from 31 December 2011 to 30 June 2012. And – in their latest “last minute” decision – they announced the exemption of certain “simple” policy salespersons from the current RE just two weeks prior to deadline.
Crossed lines – using the media as the mouthpiece
Based on numerous emails from concerned FAnews readers there seems to be a groundswell of dissatisfaction over how the FSB interacts with its “bread and butter” clients. One of the complaints is the latest penchant to distribute important information via the media instead of directly to levy-paying licensees. What do we mean? Well – on 26 January 2012 the FSB issued a media release on their settlement with the breakaway broker body NAIFA. In this release they promised: “Information regarding RE will be announced via the FSB communication circulars to the industry, and posted on our website, and not through the public media.” Six months later the media remains first in line when it comes to important (and in some cases actionable) FSB communications directed at FSPs.
The regulator’s most recent media release landed in my inbox at 3pm, Friday 29 June. Its opening paragraph reads: “Saturday 30 June 2012 marks the final date for Financial Service Providers (FSPs) and their representatives to write their regulatory examinations in terms of the Financial Advisory and Intermediary Services (FAIS) Act of 2002. The Financial Services Board (FSB) is pleased to note that the majority of FSPs, sole proprietors, key individuals and representatives have heeded the call, and have written and completed the regulatory examinations.” (Statistics will apparently be released in due course). There is nothing wrong with the communication except that the media release includes specific “calls to action” for FSPs.
The FSB urges FSPs, key individuals or representatives who have not yet requested – but might qualify for – an exemption from RE (as set out in BN 102) to make their representation before 15 July. “Those that have neither attempted to write, nor applied for the exemption have until the 15th of July 2012 to come forward and state their case to the registrar who will review each case and take a decision on the matter,” they say. The media release includes a request to the affected individuals to “contact the FSB at: [email protected]”.
One-to-one communication with your paying customers
A concerned reader observed that, with less than two weeks remaining to a crucial “exemption” deadline, the media was an inappropriate channel for such communication. He suggested that the regulator communicate this information directly to the affected levy-paying stakeholders. “How will those affected by this exemption deadline be aware of it if the information is not published or circulated by way of an FSB circular?” he asked. We checked – and by 3pm, Monday 2 July, this communication had not yet appeared on the FSB website...
Another reader pointed to growing uncertainty around the debarring process. The FSB expects FSPs, sole proprietors and key individuals to take the appropriate action by notifying the regulator the minute they or any of their staff are no longer “fit and proper” in terms of the legislation. Failure to attempt the RE by 30 June would render a key individual or representative in breach!
According to Joe Kotzé, National Manager: Compliance at the Financial Intermediaries Association of Southern Africa (FIA), representatives who had not attempted the representative exam before the end of June 2012 had to be debarred by their providers on 1 July 2012 – or have their contracts of employment or mandates terminated prior to the end of June. “In both instances their names must be removed from the representative register and the registrar must be informed within 15 days of the respective events. FSPs must also inform product suppliers and clients of the fact that the representatives have been removed from the register and that they may not give advice or render intermediary services anymore,” he said.
There could be just cause to delay the debarment process
We wondered, given that the FSB deadline for exemptions for “simple” policy salespersons runs to 15 July 2012, whether an FSP could fairly initiate the debarment process prior to all exemption requests being finalised. And what would happen if an advisor sat and passed the exam while the cumbersome debarment process was underway? In their Guidance on Section 14(A) Debarment Process, published 3 March 2011, the FSB observes that they will acknowledge receipt of a debarment request (from an FSP) within 14 days.
The process allows the regulator to request additional information and only requires that it serve a notice of intention to debar within 30 days of receiving this information. The respondent (person being debarred) then has 14 days to make representation to the regulator. It could therefore take two to three months (until mid November for a process beginning mid-July) to be finalised.
Editor’s thoughts: The sanction for not complying with the regulatory examination requirement is debarment. An FSP that retains the services of a “debarred” or “mandate terminated” representative must ensure that the affected individual understands that no advice may be given nor intermediary services rendered. Have you initiated any Section 14(A) debarments against staff for failure to comply with the FAIS Fit & Proper requirements by not completing RE? Add your comment below, or send it to [email protected]
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