Pay the piper and play the tune
We all know of the famous legend of the Pied Piper of Hamlin and how he exacted revenge on a town when its mayor refused to pay him. This legend gave birth to the proverb: He who pays the piper plays the tune. While this proverb may be open to interpretation, a popular way of looking at it is that if you pay homage to the piper you will be left in peace to go about your business. This is more applicable today than ever before.
The modern day Piper
In this case the modern day Pied Piper is the Financial Services Board (FSB). While there is resistance to the FSB, the intention of the regulator are noble in that it has the best interests of the industry at heart.
The journey that the FSB has taken in implementing its regulatory reform has been a long one, but it all comes to a head this year when the regulatory responsibilities of the industry are due to be split between the South African Reserve Bank (who will become the Prudential Authority), and the FSB (who will become the Financial Sector Conduct Authority [FSCA]) when the Twin Peaks legislation is passed.
We are all aware of the laws that are being presented. We also know what the consequences will be if we do not follow these laws. But if you pay homage to the Piper and follow the laws that the FSB is implementing, it will allow you to play your tune and conduct business in the way you like – within legal parameters.
But how easy will this be? Alan Holton, Compliance Officer at Compliance Monitoring Systems, says that before we can consider the ease of regulatory compliance, we need to remember one thing: where there are peaks there are mountains. And with Twin Peaks there will be mountains of regulation that will follow in its wake.
Consolidation of powers
If modern history has taught us anything, it’s that if you want to flex your authoritative muscles, the best way to do it would be to consolidate powers.
We are seeing a similar consolidation of powers in the industry with the FSB increasing its powers through the Financial Sector Regulation Bill. This is primarily being achieved by widening the definitions of certain aspects of the Bill.
One of the definitions is that of a financial institution and a financial service. Holton reports that this will include any company in the financial services sector as well as those affiliated to the Financial Credit Act. This will give the FSB wide powers and will allow them to regulate the industry widely.
The definition of a financial service is also not what we know it is at the moment and may be extended to include debt collection services that are provided to an institution through an outsourced agreement. This would mean that any person or entity collecting premiums for an insurer will have to be licenced with the FSCA and will be regulated by the Financial Advisory and Intermediary Services Act.
Flexing muscle
Once the FSCA has increased its powers, it won’t be scared to use them. Holton points out that the powers of the FSCA will most likely be far reaching.
Information gathering is one of the areas where the FSCA will have increased powers. According to Holton, the FSCA will be able to ask for any information from relevant people on specific subjects. Given that the FSCA has increased the definition of a key person and that directors can no longer avoid scrutiny when it comes to corruption cases, insurers and advisers will need to toe the line when it comes to assisting the FSCA in their information gathering.
Often, information gathering will progress to investigations where the FSCA can appoint a relevant representative of the authority to investigate any person the FSCA believes is currently or is likely to break the law in the future. This is a clear indication of a possible Big Brother approach where the FSCA will be constantly analysing your business to look for specific watch points. The fact that the FSCA could, in future, intervene in the running of your company whereby they will give directive on how it should be run affirms this.
Editor’s Thoughts:
Increasing your powers is never a bad thing, provided that you conduct yourself in the correct manner. With great power comes great responsibility, and the FSB (which will become the FSCA) will want to implement a Bill that benefits the industry and does not create any unintended consequences. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
Comments
FSB has always been interdependent and biased to financial services bodies than representing its broader mandate. Report Abuse
The forthcoming FSCA will just be another way of funding a line of controll ,simply for the benefit of self. Report Abuse