Moonstone Monitor 13 March 2008

FSB Site Visits - Part II

We undertook last week to provide more information on the two remaining aspects highlighted by the FSB during their visits to FSP practices:

Disbarment of Representatives

"Only 5% of the FSPs reviewed knew how and when to debar a representative. It is important that FSPs familiarise themselves with the procedure to debar a representative and also change their human resource policies to make provision for the debarment of representatives."

This procedure is slightly more serious than keeping your representatives out of the pub.

In instances of misdemeanour serious enough to warrant dismissal after a proper disciplinary hearing, you need to advise the FSB by means of the amended reps register of the debarment. The Act stipulates that at least a year has to pass before such a rep can apply for reinstatement.

This, however, is not the only instance - should your rep fail to obtain the required qualifications credits by the due date laid down by the FSB, you will also need to debar such a rep, as he or she is no longer fit and proper, and can no longer rely on the exemption. In this instance though, the debarment will not be subject to the 12 month period, and as soon as the rep qualifies you can apply for reinstatement.

Services under Supervision:

The current exemption in terms of services under supervision only addresses representatives who do not have the required experience regarding a specific financial product, and is also limited to Category I financial services providers. It is currenly envisaged that services under supervision will be included in the Fit and Proper requirements, and that it will apply to all representatives, regardless of the category of financial services rendered.

If a financial services provider appoints a representative, who only meets the minimum qualifications requirements, the representative will in future function under supervision until he/she meets the experience and qualifying criteria requirements.

1. It is important to remember that such representatives must also appear on the representative register. The FSB reports that there was a lack of formal performance review processes, which is in contravention of Section 3(e)(i), (ii) and (iii) of the Exemption Of Authorised Financial Service Providers as Regards Representatives (BN 15 of 2008)which requires that a supervisor:

(i.) Must conduct performance appraisals and progress assessments of financial services rendered by the representative, in order to assist the representative to acquire and apply the necessary skills to render financial services;

(ii.) Must, where the representative is rendering discretionary financial services, review and approve in writing the rendering of such services prior to the conclusion or execution of any transaction; and

(iii.) Must review and assess the financial service rendered by the representative on an ongoing basis.”

In practice many supervisors use this loophole to kill time and obtain production from reps until they qualify in terms if the service requirement. Apart form being against the spirit of the Act, it is also a criminal offence, and unless you can prove that you adhered to the above requirements, you may find yourself in a bar with the debarred reps.

Tax deductibility of Travel Expenses

Moneyweb's website contains a section on very useful tax tips. With the prospect of our annual tax returns just around the corner, we thought that the following article may of use to our readers, the majority of whom earn commission.

Dear MoneywebTax

I heard that the South African Revenue Service (Sars) does not allow one to deduct travel expenses using the deemed value of vehicle method if you earn purely commission, but only actual incurred expenses.

Is that correct? Where the commission earner has not kept full records of travel expenses, can the straight line wear and tear depreciation method be used against value of the motor vehicle instead?

Would appreciate your advice.

Answer:

Sars would be correct in this case. If your remuneration consists mainly of commission (ie, in excess of 50% of your total income), you can claim certain expenses incurred "in the production of the income" under Section 11(a) of the Income Tax Act. Sections 11(e) and 12C also permit a deduction of wear and tear, which is claimable on a straight-line basis (according to current legislation).

Using the deemed tables is only available to employees who are in receipt of a travel allowance disclosed under IRP5 code 3701. All other taxpayers must use actual costs, which would include wear and tear (over five years in the case of motor vehicles), interest on financing, insurance, fuel, licensing, maintenance, tyres, parking, and tolls. Note that if the vehicle is leased, you are entitled to claim the full installment (i.e. not just the interest portion), but then you will not be able to claim wear and tear as well in respect of the same vehicle.

You will however need to apportion your claim between business and private travel, since only the business portion is claimable.

Having just had a visit from two inspectors from SARS myself, I can attest to the necessity of accurate record keeping, although I must say that my ability to act the innocent ignoramus helped a lot too. It was really nice for them to see how much they had managed to teach me in such a short while.

Quote of the Week
We immediately become more effective when we decide to change ourselves rather than asking things to change for us. Stephen Covey

Paul se Perspektief/ Paul's Perspective

From time to time we get feedback from readers that we enjoy sharing, like the one below from Kathy Petherbridge.

Dear Paul
I write this email to thank you for the article regarding the Ombud and the lady who purchased items from a furniture store, only to find that her repayments were inflated due to Insurance etc.

It so happened that as the Moonstone Newsletter beeped in my Inbox my client phoned having the same problem, i.e. she purchased a Plasma TV, and we insured it under her business policy. She checked her HP agreement later to find that she had been charged an astronomical amount for Life Insurance & Product Insurance. I requested a copy of this after reading your informative article.

I contacted the Furniture Shop's Insurance Representative indicating that my client already had insurance, and also enquiring whether the Sales Rep was fit & proper. It turns out according to the Insurance Rep that the Sales Rep does not "give advice", but that he phones an Insurance Advice call centre, who talks the client through the policy. My client however, has no knowledge of this phone call - strange isn't it?

So, after a sincere threat and quote from your Article - they agreed to cancel both the life & product insurance - if I could prove to them that the client had policies in place. Dare I say I have one very happy client?

It just amazes me how these stores are getting away with this type of exploitation. The lucky few who have Brokers who are willing to fight their cause will get their justice, but the innocent man on the street will just have to pay.

Anyway, thanks a mil for a wonderful & informative newsletter.
Keep up the good work.

Kathy Petherbridge (for Gary Leech Insurance Brokers )

Now, would our good friends, the direct insurers, have been able to help their clients? Some people deserve what they get.

De kube yiveki ezayo/Till next time/Tot volgende keer

Mooi loop.

Paul Kruger