Moonstone: Are you correctly licensed?

One would have thought that by now, all product houses would have taken the necessary steps to ensure that all FSPs who market their products are licensed for the correct product sub-categories.

We heard this week of several instances where this was not so, and the product providers involved were not the smallest in the industry either.

What does the FAIS Act say?

Section 7(3) An authorised financial services provider or representative may only conduct financial services related business with a person rendering financial services if that person has, where lawfully required, been issued with a licence for the rendering of such financial services and the conditions and restrictions of that licence authorises the rendering of those financial services, or is a representative as contemplated in this Act.

This change became effective during 2008.

What is interesting is that the annual compliance report requires that the FSP should confirm every year whether it only rendered financial services on the license sub-categories for which it was licensed.

This means that both the advisor and the product provider are obliged to ensure that they adhere to this requirement.

What happens in practice though is that there is often confusion, as happened with the requirements regarding retail pension benefits for instance, or when long-term Category B was divided into two separate sub-categories. In these instances, allowances will be made, but unless there are very special circumstances, one could end up in a fair amount of trouble if you market products for which you are not licensed.

Certain niche products such as gap cover and credit life could actually feature in more than one license sub-category, depending on whether the product provider is a short- or long-term provider. If you market these products, even occasionally, then you need to ensure that you are correctly licensed.