FIA: FSB penalty letter to intermediaries

FINANCIAL INTERMEDIARIES ASSOCIATION OF SOUTH AFRICA (FIA)

MEDIA STATEMENT

FSB PENALTY LETTER TO INTERMEDIARIES


Tuesday, 7 April 2009: Members of the Financial Intermediaries Association of Southern Africa (FIA) have met with representatives of the Financial Services Board (FSB) to resolve the consternation regarding the FAIS penalty letters that were erroneously sent to many financial services intermediaries in March.

The letters alleged that recipient intermediaries had not submitted their financial statements or compliance reports since 2005. The letters also stated that recipients needed to respond to the letters the day following receipt of the correspondence.

Many intermediaries were surprised to receive the penalty letters as they had in fact timeously submitted their documentation and have proof of such. The FIA has, and continues to be, inundated with calls from members who were surprised to receive the penalty letters as they had submitted the necessary documentation and are furious with the FSB for the error.

On 26 March, Arnold van der Linde (President of the FIA) and Justus van Pletzen (COO of the FIA) met with Gerry Anderson (Deputy Executive Officer of Market Conduct for the FSB) and Wendy Hattingh (Head of FAIS supervision FSB) to discuss these penalty letters on behalf of the Association’s members.

Van der Linde says the FIA believed that meeting with the FSB was important for a number of reasons: “Firstly, the FIA recognises that the FAIS Act is germane to the sustainability of the intermediary industry and we have actively supported FAIS since its introduction. The FIA is of the opinion that if FAIS were to fail, additional regulation would need to be introduced and this would result in further unintended consequences - not only for intermediaries, but also the consumer.”

Secondly, it is evident that the FSB and its personnel face substantial pressures and a large workload, both factors which have, under the present circumstances, contributed to the errors under discussion. “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 van der Linde. As licensed Financial Services Providers (FSPs), intermediaries who pay their annual FAIS levies expect professional conduct from the FSB and its employees says the FIA.

However, while many intermediaries appear to have received the letters in error, there are unfortunately some who have not complied with the FAIS requirements and it is the FSB’s duty to ensure they are dealt with accordingly.

To prevent a repeat scenario, the FIA has offered to assist the FSB by functioning as an additional supervisory resource that would help verify data and intelligence. For example, the FSB could check information with the FIA prior to sending generic letters to intermediaries. This would result in a reduction in errors, workload and unnecessary controversy. Furthermore, the FIA believes that the financial services industry would benefit by more regular consultation between the Association and compliance officers.

Many of the 1000-plus penalty letters that were disseminated by the FSB to intermediaries were sent as a result of human error and historic IT problems. To rectify the problem, 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. “The FSB has undertaken to reverse the erroneous penalties and we will assist our members and ensure that this takes place,” says van der Linde.