Compliance with the Financial Advisory & Intermediary Services Act

1. Compliance with theFinancial Advisory & Intermediary Services Act Presented by FAIS Department of the Financial Services Board and Compliance Institute of South Africa

2. Compliance risk management Presented by the Compliance Institute of South Africa

3. Supervision of FSPs

4. Supervision of FSPs • FSPs will be supervised on a risk based supervision approach • Risk based supervision is: A supervision approach whereby the risk of entities on regulatory objectives are measured and managed while optimising the allocation of resources

5. Enquiries FSP Application ComplianceReports Enquiries Public Financial Statements MediaInternet Audit reports Complaints Profile changes Risk RatingImpact x Probability Onsite reviews Inspection Intensity Supervision Regular meetings Theme work Risk based supervision

6. Risks taken in consideration • External risks • Internal risk – business & control risk • Examples of type of internal risks • Financial soundness • Nature of customer, services and products • Treatment of customers • Organisation structure • Internal systems and controls • Compliance culture

7. Supervision of FSPs • Dynamic process and risk rating will change as FSPs’ internal and external risk factors changes • Risk rating will determine the level of supervision and type of interaction with FSPs • Risk based approached is being rolled out and FSPs will be informed of the progress • Ratings and information on it will be only communicated to FSPs and treated as confidential

8. Obligations on FSPs

9. Comply with the Act • Sect 19 – Submission of financial statements & audit reports • Sect 11 – Lapsing of licence • Sect 17 – Appointment of CO • Sect 8 – Disclose authorised FSP • Sect 8 - Display licence certificate • Sect 13 – Representatives • Sect 14 – Debarment of representatives • Sect 17 – Submission of reports • Sect 18 – Recordkeeping

10. Comply with the Act • Submission of financial statements & audit reports • Annual financial statements – all FSPs • Category I receive premiums and client funds and Category II and III • Audited financial statements • Prepared in terms of general accepted accounting practice • Section 19(3) report if receive client funds in a separate account (refer section 10 of General Code of Conduct)

11. Comply with the Act • Submission of financial statements & audit reports • Within 6 months after year-end • Penalties late submission • Receive acknowledgement of receipt • Contact FSP only if there is a problem • Method submission: E-mail in .pdf format, post or deliver – do not fax • Address to FAIS Financial Statements • E-mail address: faisfins@fsb.co.za

12. Comply with the Act • Lapsing of licence – section 11 • Natural person – died • Partnership – dissolve • Close corporation or company –Liquidated • Trust –dissolved • Voluntary request for lapsing licence • Address letter to Registrar and mark it FAIS Profile Changes provide reasons for request • Post or fax it

13. Comply with the Act • Appointment and resignation of compliance officer – section 17 • Duty of compliance officer to inform Registrar of resignation • FSP must immediately appoint a new compliance officer (FSP6 form) • Address letter for attention FAIS Profile changesE-mail address: faispfc@fsb.co.za

14. Comply with Codes of Conduct • Recordkeeping • Disclosure requirements • Suitable advice • Complaints • Advertising • Compliance function • Client funds

15. Comply with licensing conditions • Licensing conditions Annexure to licence • Submit changes to application detail (‘Profile changes’) • Submit changes to representative register(Electronically or FSP5 forms) • E-mail correspondence faispfc@fsb.co.za • Posted addressed to FAIS Profile Changes • Receive acknowledgement of receipt • Final letter will be sent takes between 6 to 10 weeks – working on the backlog • Questions 1 & 2 of the compliance report

16. Comply with other legislation • Financial Services Board Act • Payment of levies • Financial Intelligence Centre Act & other anti money laundering legislation • Financial Institutions (Protection of Funds) Act • Insurance Act • Collective Investment Schemes Act • Securities Services Act • All other legislation applicable

17. Compliance report2005

18. Compliance report 2005 • Usage of the report • Format of the report • Specific questions • Reporting period • Submitting the report • Electronic submission • Hardcopy submission

19. Usage of the report • Supervisory tool in RBS • Identify areas in which FSPs are not complying • Commit FSPs to identify developmental areas and to work on it • FSPs can use it as a minimum “checklist” compliance function • Source of information for onsite visits

20. Format of the report • Easy for keeping information • Lead the person completing it • YES/NO Questions • Not applicable - Validation • Sampling – Question 16 16. Provide a short description of the sampling or other methodology used in the monitoring procedures (testing) mentioned in this report in a separate schedule and list the number of the attachment in column 5

21. Format of the report • Development areas Any control, process or compliance issue that has been identified during the monitoring of compliance as an area in respect of which the need for improvement of such control, process or compliance issues has been identified, and plans are in place to effect such improvements within a reasonable time • AttachmentsLimit the attachments to what is required in the report we do not want detail on all questions • Signing of the reportPerson completing report andKey individual must acknowledge report was sent

22. Specific Questions Highlighted

23. Question 1.3 1.3 Financial Products in respect of which FSP renders financial services Condition 5 imposed by the Registrar in terms of section 8(4) of the Act 1.3.1 Does the FSP have internal controls and procedures in place to ensure that any financial product in respect of which the provider intends to render a financial service, qualifies as a financial product contemplated in the Act? 1.3.2 Did the FSP render financial services relating to financial products that do not qualify as financial products as contemplated in the Act?

24. Question 1.4 • 1.4 Financial Products in respect of which FSP renders financial services • Authorisation in terms of the licence of the FSP 1.4.1 Does the FSP have internal controls and procedures in place to ensure that any financial product in respect of which the provider intends to render a financial service, qualifies as a financial product contemplated in the Act? 1.4.2 Did you (compliance officer) perform monitoring procedures (testing) on a sample basis during the monitoring process to ensure that the financial services rendered are in terms of limitations on the category and subcategory for which the licence is issued?

25. Question 3 & 4 3.3 Is a reference to the fact that a licence is held contained in all business documentation and advertisements? 4.2.1 Does the FSP have procedures in place to ensure that representatives and key individuals of representatives of the FSP are competent to render financial services to clients taking in account the requirements stipulated in the Determination of Fit and Proper Requirements of Financial Services Providers relating to 4.2.1.1 personal character qualities of honesty and integrity; and 4.2.1.2 competence and operational ability

26. Question 4 4.5 Debarment of representatives Section 14 of the Act 4.5.1 Did the FSP during the reporting period debar any representatives in terms of section 14(1) of the Act? 4.5.2 Did the FSP remove the names of the representatives and its key individuals from the register? 4.5.3 Did the FSP inform the Registrar accordingly in terms of section 14(3) of the Act?

27. Question 5 5. Insurance cover Sections 5(e) and 13 of the General Code of Conduct 5.1 Does the FSP have professional indemnity cover? Provide the extent of the cover in column 5 5.2 Does the FSP have fidelity insurance cover? Provide the extent of the cover in column 5 5.3 Does the FSP have guarantees in place as contemplated in section 13 of the General Code? Provide the extent of the guarantees in column 5 5.4 Does the FSP disclose to clients in terms of section 5(e) of the General Code whether it holds guarantees or professional indemnity of fidelity insurance cover?

28. Question 6 & 7 6.1 Is the compliance function established as part of the risk management framework of the business of the FSP? 6.4 Do you (compliance officer) have any comments to make on the procedures contemplated in section 17(3) of the Act which the FSP has established as regards their maintenance and efficacy?

29. Question 8 8.1.1 Did the FSP or its representatives during the reporting period receive non-cash incentives and / or other indirect considerations for the rendering of financial services from another provider, product supplier or other person? 8.2.2 Did you (compliance officer) perform monitoring procedures on a sample basis to ensure that the FSP disclosed relevant information in terms of sections 4, 5 and 7 of the General Code of Conduct to its clients where applicable?

30. Question 9.1.2 8.3.2.2 Does the FSP use a standardised computer programme to do the analysis? 8.7.1 Does the FSP act as a direct marketer? 9.1.2 Did the FSP during the period contemplated in the exemption comply with paragraph 4 of the exemption?

31. Year-end January 2005 February 2005 March 2005 April 2005 May 2005 June to Dec 2005 Reporting period AU - July 2005 AU – August 2005 AU – September 2005 AU – October 2005 AU – November 2005 AU – December 2005 Reporting period AU – Authorisation date

32. All year-ends 28 February FSP licensed 15 July 2004 Authorisation date = 30 September 2004 Reporting period = 30 Sept 04 – 31 Aug 05 Submission of report = before 31 Oct 05 FSP licensed 15 March 2005 Authorisation date = 15 March 2005 Reporting period = 15 March 05 – 31 Aug 05 Submission of report = before 31 Oct 05 FSP licensed 1 September 2005 No report will be submitted for 2005 Reporting period

33. All year-ends 31 December FSP licensed 15 July 2004 Authorisation date = 30 September 2004 Reporting period = 30 Sept 04 – 31 Dec 05 Submission of report = before 28 Feb 06 FSP licensed 15 Sept 2005 Authorisation date = 15 Sept 2005 Reporting period = 15 Sept 05 – 31 Dec 05 Submission of report = before 28 Feb 06 Reporting period

34. Submitting the report • Preferred method - Electronically with special programme: • Sign last page and scan in • Do not have scanner – submit per post • Attachments in Microsoft can be electronically attached when submitting the report • Compliance officer can use programme for multiple FSPs • Hard copy – only be accepted per post or hand delivered

35. Electronic submission Step 1 – Register online www.fsb.co.za /FAIS/Compliance report Step 2 - Receive an e-mail with instructions Step 3 - Install programme according the instructions on PC automatically Step 4 - Complete Compliance officer’s / FSP’s (if no CO required) details

36. Electronic submission Step 5 - Request FSPs details on website and upload it or capture manually (only have a few) Can do as may times as necessary It will only be the FSPs linked to compliance officer Step 6 - Complete the compliance report Step 7 - Attach the documents

37. Electronic submission Step 8 - Validate the report Step 9 - Export the report and sent to FSB via e-mail (it will be done automatically) Step 10 - Receive confirmation when successful upload and case no Step 11 – We will contact you if necessary for additional information

38. Hardcopy submission Step 1 - Obtain the form FSB website .pdf format or Government Printers Forms will not be e-mailed or posted to FSPs Step 2 - Complete the form and mark attachments

39. Hardcopy submission Step 3 - Ensure that the form correctly completed Do not fill in anything on greyareas If the form is incorrectly completed it will be returned and penalties will be charged for late submission

40. Hardcopy submission Step 4 - Post the form Noacknowledgement will be given to hand delivered forms – it will be treated as a posted form Step 5 - Receive acknowledgement Without letter acknowledgement the report will be regarded as not submitted

41. Late submissions • Penalties of up to a R1 000 per day will be charged for late submissions • If wedid not acknowledgethe receipt of the report wedid not receivethe report and the FSP will be penalised • Take 2 weeks acknowledgement of hardcopy after we received it – trace the progress on the website

42. Thank you