Moonstone: FSP Losses - The Facts
There appears to be little information available on what is happening to the number of FSPs in the industry. As a provider of support services to independent financial advisors, this information is of course critical for our future planning.
I downloaded the following information from the FSB website:
FSP Numbers 9 December 2010 to 14 October 2011 FSB update on: Suspended Suspension Licences Licences 10/11/2011 826 56 10 22 23/09/2011 27 122 15 22 15/08/2011 258 57 21 25 22/07/2011 57 50 15 33 19/05/2011 26 106 502 22 31/05/2011 67 158 5 19 16/05/2011 909 114 23 20 15/03/2011 29 10 8 17 18/02/2011 5 46 1485 2 Total 2204 719 2084 182
lifted
withdrawn
reinstated
What is alarming is that by far the majority of these suspensions and withdrawals stem from non-submission of compliance reports or financial statements, or both. In other words, these “injuries” are self-inflicted.
The nett loss is 3 387 FSPs. That of course means a lot more actual people, as the FSP does not always consist of one person only. It also does not reflect the number of support staff involved.
These people are not lost to the industry forever, but in view of section 7 (3) of the FAIS Act, “An authorised financial service 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 authorizes the rendering of those financial services…”
It affects their right to conduct business, and by implication, their right to earn an income.
While there is not absolute clarity or consistency in the industry regarding the application of this requirement, the FSB views it as a serious matter. There is not only an obligation on the FSP to stop doing business while the licence has been suspended or withdrawn – an equal obligation lies with the product provider.
We have seen some serious fines imposed by the FSB’s Enforcement Committee, and one can expect more stemming from the above, unless product providers have a system of monitoring their contracted FSPs.
