Moonstone: Codes of Conduct Overview – FAIS Newsletter Number 8
This week saw the publication of three FAIS Newsletters by the FSB, all of which aim to enhance understanding of the FAIS and related acts. We look here at the first of these.
One of the major obstacles that many FSPs have to overcome in trying to be compliant is to master the art of understanding how the different rules and regulations are made up and applies to them. For this reason these newsletters from the Regulator should be regarded as compulsory reading for all FSPs. In addition, it provides enhanced insight while preparing for the regulatory examinations. Below is a summary aimed at assisting understanding of the bigger picture. Of particular importance is the list of Board Notices appearing in the newsletter, and how to access it. Please keep this FAIS Newsletter Number 8 in a safe place for future reference.
The FAIS Act was enacted to create uniformity within the non-banking financial services industry and to provide a regulatory framework within which the rendering of financial services will take place. This is achieved by means of creating standards to be adhered to by the holders of the FAIS license.
The publication of the FAIS subordinate legislation (published as Board Notices) does not aim to substitute or replace the existing Act but to supplement it.
These codes of conduct are mechanisms created in line with section 15 of the FAIS Act in order to regulate the market conduct of the financial services providers (“FSPs”) and their representatives in the rendering of financial services. The codes of conduct must ensure, amongst other obligations that the FSPs and their representatives make the necessary and relevant disclosures to clients in order to enable the clients to make informed decisions on the financial services rendered.
The codes of conduct can be categorised into two types:
- the specific codes of conduct and
- the general code of conduct.
The General Code of Conduct on the other hand is applicable to all FSPs except to the extent to which some are exempted by the Registrar.
The codes of conduct may from time to time be amended or replaced where such amendment or replacement is deemed necessary in order to keep abreast of changes in practice in the industry or the code of conduct has become obsolete.
The principles of the codes of conduct determine that they must be drafted in such a manner that they are easily understood in order to guard against and avoid poor rendering of financial services to clients. The codes of conduct must furthermore be drafted to ensure that clients are ultimately led to make informed decisions and that their reasonable financial needs in respect of financial products will be appropriately and suitably satisfied.
