Countering risks identified in terms of FAIS

The risks identified in terms of FAIS are manageable and policies and procedures can be adopted in order to minimise these risks. 

To begin with, it is necessary to appreciate that there are external risks (over which we have little control) and internal risks (for which we are fully responsible). 

External risks include industry developments such as a commission restructuring, legislative changes and economic factors such as market volatility, interest rates and exchange rates.

Practice responsibilities
Internal risks that should be monitored and controlled by the practice relate to:
* The financial soundness and management of the business entity.
* The type of clients serviced and the products and services offered.
* The processes, internal systems and controls that determine services and service levels being delivered.
* The organisational structure and how it supports the delivery of services.
* The culture and attitude towards compliance within the practice.
These risks can be managed by simple policies and procedures, as discussed below.

Key individual and representatives
Prior to appointment, establish the representative's honesty and integrity. Verify information by means of a criminal record search, civil judgment search, and enquiries through industry bodies. Conduct reference checks with previous employers and obtain certified copies of each representatives highest relevant qualification.

Check that the representative's experience and qualifications are relevant in terms of the FAIS licence categories. The qualifications matrix provided by INSETA may assist in determining whether the representatives qualification meets the FSB requirements.

Ensure that key individual and representatives remain within their respective mandates and the limitations of the FAIS licence categories.

Operational factors
As a first step, establish and maintain the necessary infrastructure to conduct business properly, including an appropriate place of business, record-keeping systems, compliance processes, staff training programmes and money laundering control processes.

Create an effective process to ensure that the FSP, key individual and representatives meet the operational requirements at all times.

Only permit the distribution of FSB approved products in your practice and inform the FSB of any changes to your business, licence categories or representatives within the requisite time frame. Always keep your financial information up to date and submit annual financial statements to the FSB within 6 months after your financial year end.

Implement and maintain sound administrative processes that include a new business register, recording of all client interactions and follow-up procedures for outstanding requirements. Make sure that appropriate information storage and retrieval facilities exist and implement a secure and effective back-up system.

Establish and maintain an effective and efficient advice process as described in the General Code of Conduct and ensure that reference to your licence is made on all business documentation and billboards. Prominently display a copy of the licence on your premises.

Client matters
The client has rights and your practice should never allow the clients rights and/or benefits to be waived. Clients confidentiality should be respected and clients should never be allowed to sign an incomplete or blank form.

Hold Professional Indemnity cover for the protection of the business and your clients, and implement a business continuity plan that addresses the ongoing needs of the client base.

Your practice will go a long way in eliminating many of the FAIS identified risks, if these policies and procedures are incorporated into your every day operations.

Anina Scholtz
Head of Compliance
Celestis