On the FSB – the FIA – and Super 14 Rugby
We’re sure the thousands of you who clicked through to today’s newsletter will be wondering how FAnews Online managed to link a regulatory body, an intermediary organisation and the southern hemisphere’s most popular rugby tournament. You can stop wondering now – because the only reason for the rugby reference is that we’ve got 10 double tickets to an upcoming Super 14 match to give away – courtesy of Auto & General. To win a set of tickets please send name, addresses and contact numbers to editor@fanews.co.za along with the answer to the following: “Who is the official sponsor of the Super 14 Lions?” We’ll allocate the prizes to the first ten correct entries received.
With the rugby out of the way we can get to yesterday’s Financial Intermediaries Association (FIA) press release on the rather ‘heated’ topic of Financial Services Board (FSB) penalty letters. For the handful of you who don’t know, the FSB recently sent aggressive penalty letters to financial services intermediaries who they believed hadn’t submitted financial statements or compliance reports going back to 2005. Penalties were levied at a rate of R10 per day with many brokers receiving demands running into thousands of rand. So what’s the problem?
Better ways to do things
While we agree that they’re entitled to levy penalties against financial service providers who fail to comply with administrative requirements as stipulated in the legislation, FAnews Online is of the view the FSB slipped up in a number of areas. The first snag is what we’ll call a double-timing error. It’s not prudent to neglect your oversight role for four years and then suddenly try to claw back penalties in one shot. The FSB should have applied the penalty in a sensible manner – sending the first penalty letter perhaps three months after the final 2005 submission date for example. Part two of the timing error is that you don’t send your penalty letter without allowing the recipient a reasonable window of time to respond to your demands. The FSB demanded response within a couple of days of sending the letters!
The second snag relates to administrative process. It appears the FSB made limited attempts to ensure that all recipients of these penalty letters were indeed in contravention of the legislative requirements. It seems a blanket letter was sent with the view that those intermediaries who had submitted the reports should resubmit proof of their compliance – you’re guilty until you prove your innocence! According to the FIA, “many intermediaries were surprised to receive the penalty letters as they had in fact submitted their documentation on time – and had proof of such submission!” And they should have been. In the same statement the FIA concludes that “many of the 1000-plus penalty letters disseminated by the FSB to intermediaries were sent as a result of human error and historic IT problems.”
“This is unacceptable, particularly to those intermediaries who submitted the necessary documents on time or responded promptly to the FSB’s requests for outstanding requirements,” says FIA president, Arnold van der Linde. He believes licensed financial services providers and intermediaries who pay their annual FAIS levies should receive professional conduct from the FSB and its employees!
The FIA takes the ‘fight’ to the authorities
According to the FIA they “met with representatives of the FSB to resolve the consternation regarding the FAIS penalty letters that were erroneously sent to many financial services intermediaries in March.” The FIA’s Arnold van der Linde and Justus van Pletzen (chief operating officer) met with the FSB’s Gerry Anderson (deputy executive officer of market conduct) and Wendy Hattingh (head of FAIS supervision) on 26 March 2009 to discuss the penalty letters. What did they accomplish?
We trawled the media release to find out how their intervention would assist brokers going forward. But although the FIA contends many of the letters were sent by the FSB in error there is no such acknowledgement of this fact from the FSB. The FSB hasn’t apologised for the error, nor have they issued a statement in which they undertake to work with the FIA to prevent repeats of these mistakes going forward. And the remedy proposed by the FIA is an exact replica of the FSB’s initial stance: “The FIA has called on members who submitted their documents and have proof to forward the proof of submission to the FSB or the FIA’s national office!” So we’re exactly where we were when the letter was initially distributed!
Editor’s thoughts:
Nothing is certain but death and taxes… But we can think of another certainty. When you cross a government appointed authority you usually come off second best. So when you receive your demand letter from the FSB our suggestion is that you take it up with them and resolve the matter as soon as possible. You don’t need the added risk of a go-between! We’d love to hear from any intermediaries out there who’ve been unable to resolve the penalty issue despite corresponding with the FSB. Add your comments below, or send them to gareth@fanews.co.za
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