New criteria for approval of compliance officers

New, more stringent requirements for compliance officers dealing with FAIS (Financial Advisory and Intermediary Services Act 2002) have been gazetted.

FAIS impacts on all financial institutions that are financial services providers and their representatives. In terms of FAIS such financial services providers need to appoint a compliance officer, who must be approved by the Financial Services Board (FSB).

Since the Act came into force, there have been increasing concerns about the level of skills, knowledge and experience of some FAIS compliance officers, prompting the FSB to develop enhanced regulations to address the issue. These regulations, issued in terms of the FAIS Act, set out the qualification and experience criteria for approval as a compliance officer by the FSB.

The new amendments to Section 17 of FAIS, specifically Annexure 1, set out the qualifications, experience and criteria for approval as a compliance officer by the FSB. The requirements endorse the Generally Accepted Compliance Practice (GACP) framework released last year by the Compliance Institute of South Africa.

“Effectively many of our standards have been incorporated into the regulations and compliance officers will need to be able to demonstrate knowledge of the applicable principles set out in GACP framework,” says Julie Methven, CEO of the Compliance Institute.

She says the role of the compliance officer in South Africa has grown into one of significant importance, as financial service providers are increasingly relying on their compliance officers to guide them through their regulatory responsibilities.

The GACP framework provides a set of standards and norms that act as a benchmark of compliance best practice, and is the first of its kind in the world. It consists, firstly, of a set of principles considered critical for establishing and maintaining an effective compliance risk management framework. A set of standards expand upon these principles and cover matters such as minimum requirements, provisions and criteria for effectiveness. The GACP framework also includes practical guidelines on how such best practice can be incorporated into business practice. The framework deals with issues such as governance structures, the responsibility of management in respect of compliance, independence, and the role of the compliance function.

The framework further provides a code of ethics and professional conduct for compliance officers that provides a benchmark of behaviour and conduct and is ultimately aimed at promoting confidence in the compliance profession.