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Financial Advisory and Intermediary Services Bill, 2001 (“FAIS Bill”)

FINANCIAL SERVICES BOARD. Financial Advisory and Intermediary Services Bill, 2001 (“FAIS Bill”). Project of Policy Board for Financial Services and Regulation. Regulatory gap : financial intermediaries FSB participation drafting consultative process promotion Consumer protection.

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Financial Advisory and Intermediary Services Bill, 2001 (“FAIS Bill”)

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  1. FINANCIAL SERVICES BOARD Financial Advisory and Intermediary Services Bill, 2001 (“FAIS Bill”)

  2. Project of Policy Board for Financial Services and Regulation Regulatory gap : financial intermediaries FSB participation • drafting • consultative process • promotion Consumer protection

  3. Financial Services Provider (Cl 1) • Furnishes “advice” • Renders “intermediary service” • On “financial product” • As part of a regular business • To a “client”

  4. Who is an fsp? Whoever renders “financial services” • Product suppliers • Intermediaries • Investment managers • Financial advisers Needs licence

  5. Specific exclusions from advice (cl 1(3)) • Mere factual advice • on procedures • on description of financial product • routine administrative queries • objective info re financial product • display promotional material

  6. Specific exclusions from advice (cont.) (cl 1(3)) • Analysis or report on financial product without advice • Advice by trustees of pension fund / medical scheme • Exemption by registrar

  7. Specific exclusions from intermediary services • Bank acting merely as conduit (debit orders) • Services rendered by product supplier • regulated as a financial institution • services regulated by law • Exemptions by registrar

  8. Who is a “representative”?(cl 1) Renders “financial services” • Employee • Mandatory • Exclusions • admin / clerical staff • no judgment • does not lead to transaction

  9. Criteria for licensing of fsp(cl 8) • Honesty and integrity • Competency and operational ability • Financial soundness • Categories

  10. Licences (cl 8) • Not renewable • May be suspended (cl 9) / withdrawn (cl 10) • Open/restrictions

  11. Representatives (cl 13) • Acts on behalf of fsp • Not licensed • Qualifications • honesty / integrity • competent • Responsibility of fsp • Register

  12. Methods of regulation • Entry requirements (cl 8) • Standards of market conduct (codes) (cl 16) • Compliance (cl 17) • Record-keeping (cl 18) • Accounting (cl 19)

  13. Flexibility • Various categories of fsp’s (cl 8(1)) • Differentiation in entry requirements • Open/limited licence (cl 8(4)) • Differentiation in codes (cl 15(2)) • Differentiation in compliance (cl 17(2)) • Record-keeping (cl 18) • Accounting (cl 19) • Registrar’s discretion (Adv Com)

  14. Proposed amendments to overcome controversies • Banks • Specific code if advice on deposits do not exceed a term of one year • Health brokers • Brought under FAIS but accreditation remains with Medical Schemes Council • PPR • New provision to provide for exclusion of fsp’s from PPR

  15. Costs and benefits weighing up • Recurring costs of R352 million per annum • Estimated recurring quantifiable benefits of R1.15 billion per annum • Quantifiable benefits are 3X larger than quantifiable costs • Emerging brokers

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