Moonstone: Penalties for alleged non-submissions

The telephone lines at the FSB, FIA and anyone who cared to listen was clogged last week in response to demands for proof of submission of compulsory returns going back to 2005, or payment of hefty penalties as reported in last Thursday's Moonstone Monitor. Our compliance division was similarly inundated with calls for assistance and advice.

We believe that roughly half of the registered FSPs have been approached, which means that there are more who can expect an unpleasant surprise in the next few days. The law makes provision for fines up to R1 000 per day for late submissions, although the FSB have used R10 in their calculations.

What is of grave concern is the claim by many that they were never reminded of outstanding returns, either in writing or telephonically, by the FSB. There are a couple of harsh realities that we will have to face, though - the onus for providing proof of submission lies with the FSP.

Even if half of those implicated can hopefully prove the FSB wrong, there still remains a substantial number of FSPs who cannot claim ignorance as a valid reason for not submitting the financial returns or compliance reports required by FAIS.

Please understand that we are not unsympathetic - there has been a huge demand on the time and resources of financial advisors since 30 September 2004 when FAIS first came into effect, and many have gamely tried to comply with all that was required of them.

In our opinion it is virtually impossible to attend to all these requirements on your own, especially if you are a sole proprietor who also have to attend to your business. By way of example I must mention the latest amendments to the Fit and Proper requirements which took experts weeks to try and unravel.

The Act says that a one-person FSP is not obliged to have a compliance officer; it does not say he is not allowed to have one. That are various options available in the market, depending on one's needs. As we all know, ignorance of the law is no excuse for transgressing it.

What has unfortunately become very clear after this crisis is that the cost of non-compliance can be significantly higher than the cost of a trusted compliance service.

We will discuss some ideas with the regulator to try and find a more acceptable way around this issue, the outcome of which (if any) will be conveyed once finalised. Until then, please ask for an extension while you attend to the matter urgently.

If you know that your returns are outstanding and need advice on how to approach the matter, please phone us at 021 883 8000 and ask to speak to Grethe.

And a last friendly word of advice: tackle this issue in a calm and restrained manner. Anger will only make things worse.