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 WHY
COMPLY?
TO COMPLY OR DIE?
The Financial Advisory and
Intermediary Services Act (FAIS), which regulates the financial services
industry, was enacted to protect the consumer. As a consequence of the
foregoing enabling legislation, a financial services provider (FSP) has
to undertake certain functions of which the most manifest (and the
golden thread throughout the legislation) is that s/he must put the
consumer in a position to make an informed decision. The FSP can only
deliver on this fundamental if s/he has implemented, and thereafter
maintained, an appropriate compliance function in his/her office.
The heart of such a compliance function is material evidence that
the consumer, or client, has been placed in a position to make an
informed decision IRO a proposed financial product and/ or financial
advice. To be merely licensed by the FSB and to submit the required FAIS
annual report will not suffice, as would defending a complaint by a
client at the FAIS Ombud’s office, without tangible evidence (which
could include recorded telephonic communications, but decidedly written
documentary evidence) that clearly and unequivocally demonstrates that
appropriate advice had been given; failure to produce the foregoing
could result in the FAIS Ombud issuing an adverse determination against
a FSP, which may include a fine or suspension of his/her FSP license.
Those FSP’s that require a compliance officer (in terms of the
legislation) are not absolved from personal responsibility, as they will
still be held personally accountable, by the FSB, for running a
compliant practice. The onus is therefore on such a FSP to ensure that
the compliance practice model s/he chooses will not only ensure
compliance with FAIS, but more importantly, that the model will
withstand the scrutiny of the FAIS Ombud. It is also clear from the FAIS
Ombud’s some 17 determinations to date that his office places a high
premium on accurate record keeping and sound financial advice.
Does your current compliance service provider provide you with the
compliance tools to meet the objectives of the FAIS Regulator as well as
the FAIS Ombud? If not, you could find yourself in seriously deep murky
water and how long can you tread water?
Correspondingly, those FSP’s who do not require a compliance officer in
terms of FAIS are not off the hook either! This category of FSP may not
require a compliance officer, but that in no way implies that they do
not require a compliance practice model.
Clearly this latter class of FSP, being in the high-risk monitoring
category, will receive more FSB attention than those FSP’s who
statutorily require a compliance officer and all the more reason that
serious consideration must be given to implementing a compliance
practice model that will deliver on the consumer protectionism
expectations of FAIS. |
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