The buck stops with the FSP

S-References are a relic of the past, and not all brokers have met the 31 December 2009 “Fit & Proper” deadline. FAnews asked the FSB to clarify who will now shoulder the responsibility when it comes to debarments, suspensions and withdrawals.

In respect of debarments, the financial service provider (FSPs) is responsible to debar its representatives. The Registrar of Financial Services Providers (the Registrar) is responsible for suspensions and withdrawals of licences.

The Financial Services Board (FSB) handles FAIS-related complaints from the consumers, brokers, financial institutions and any whistle blowers and conducts investigations to establish if the person reported is fit and proper to be a FSP.

The FSPs’ responsibilities

In terms of the Financial Advisory and Intermediary Services Act, 2002 (the FAIS Act) it is the responsibility of a FSP to ensure (and to be satisfied) that its representatives at all times comply with the fit and proper requirements prescribed by section 8(1)(a) and (b) of the FAIS Act and as detailed in Board Notice 106 of 2008.

Since the responsibility to oversee the activities of representatives rests with the provider, section 14 of the FAIS Act requires all providers to debar representatives that no longer comply with the fit and proper requirements or who has contravened or failed to comply with any provision of the FAIS Act in a material manner.

The FSPs must ensure that only fit and proper representatives are appointed and that such representatives render financial services with due skill, care and diligence. The FSP must further take reasonable steps to ensure that representatives comply with any applicable code of conduct as well as with other applicable laws on conduct of business.

A representative may only render financial services to clients if such representative is able to provider confirmation, certified by the FSP, that a service contract or other mandate to represent the FSP exists and that the FSP accepts responsibility for the activities of the representatives as detailed in the service contract or mandate.

The FSP must further maintain a register of representatives, and key individuals of such representatives, which must be regularly updated. The register must contain every representative’s or key individual’s name and business address, his/her status as employee or as mandatory; and the categories in which such representatives are competent to render financial services.

Debarment of reps

A FSP must ensure that any representative who no longer complies with the relevant requirements is prohibited from rendering any new financial service by withdrawing any authority to act on behalf of the FSP. The FSP must further immediately take steps to ensure that the debarment does not prejudice the interest of clients of the representative, and that any unconcluded business of the representative is properly concluded.

The effect of a debarment is that the representative will be removed from the FSP’s register and would not be able to render financial services as a representative of such FSP or any other FSP until such person is reappointed as a representative in terms of the requirements detailed in the Determination of Requirements for Reappointment of Debarred Representatives, 2003. The FSP must report to the Registrar, within 15 days, the debarment of a representative, along with the reasons for the debarment.

The Registrar will list the debarred representative on the list of debarred representatives and will remove his/her name from the central register which is published on the Financial Services Board’s website.

If a debarred representative is appointed as a representative of another FSP, such FSP would be notified of the debarment.

Registrar’s responsibilities

The Registrar may at any time suspend or withdraw a licence of a FSP if such FSP-
(a) no longer complies with the fit and proper requirements;
(b) has failed to comply with a provision of the FAIS Act;
(c) did not, when applying for a licence, make full disclosure of all relevant information, or furnished false or misleading information;
(d) had failed to pay its levies, penalties or an administrative sanction.

A person’s whose licence has been suspended or withdrawn is prohibited from rendering financial services to clients. Such person must further inform all stakeholders of the suspension or withdrawal and must, in the best interest of clients, transfer its business, and any outstanding business, to another authorised FSP.

In addition to the above, the Registrar, from 1 November 2008, may debar any person, including a representative, from rendering financial services for a specified period if such person no longer complies with the honesty and integrity requirements or has contravened or failed to comply with any provision of the FAIS Act.