FAIS regulator warns on the cost of non-compliance with fast-changing legislatio

Financial institutions need to ensure that they keep abreast of fast-changing legislative developments and are able to implement changes within the required time frames.

Speaking at a presentation in Pretoria last week, Wendy Hattingh, Head FAIS Supervision at the Financial Services Board (FSB) reminded the industry about the financial and reputational costs of non-compliance.

“It is important for financial services providers to keep abreast of changes that impact business models, processes and IT infrastructure. As the regulator we understand the challenges involved in being fully compliant, but we want to see business implementing robust processes to deal with compliance.”

Ms Hattingh noted that the Financial Advisory and Intermediary Service (FAIS) Act has been effective for almost eight years, during which time the legislation has undergone several changes.

She added: “The legislative landscape is ever evolving. From a macro viewpoint, current changes to the legislative framework include the Twin Peaks regulatory model, Treat Your Customers Fairly and micro insurance legislation. From a micro perspective, further changes to FAIS are also envisaged.”

Regarding some of the changes already made to FAIS, Ms Hattingh noted that amendments to the General Code included new conflict of interest disclosure requirements and on-going reporting to clients. There had also been changes regarding determination of “fit and proper”, regulatory examinations, the recognition of qualifications, and the continuous professional development requirements.

“In addition, section 7 (3) of the Act requires product providers to ensure that they deal with duly authorised intermediaries. Compliance with this aspect of legislation has benefits for the industry as whole and for consumers.”

On implementation of the intermediary verification process, Justus van Pletzen, Chief Executive Officer of The Financial Intermediaries Association of Southern African (FIA), said: “We’re working closely with the industry and regulators to ensure a positive outcome in terms of compliance with legislation that is in the best interests of our clients.”

Willie Snyman, Business Development Executive at Astute FSE, which organised the event, explained that Section 7 (3) of FAIS requires that financial services product providers verify whether an intermediary is licenced to sell certain products.

To facilitate the process, Astute has developed its FSP Enquiry System. “The FSPE System is an electronic solution to assist financial product providers (FPPs) to verify if an intermediary is licensed and the product categories of business that may be written,” he said.