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Moonstone Monitor - 9 November 2017 |
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Paul Kruger
Author/Editor |
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Never let your sense of morals get in the way of doing what's right
– Isaac Asimov |
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Distributed to 49,285 subscribers.
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From the Crow's Nest |
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Proposed Amendments to General Code of Conduct |
The Registrar published proposed amendments to the General Code of
Conduct for Authorised Financial Services Providers and Representatives, 2003
and proposed amendments to the Specific Code of Conduct for Authorised Financial
Services Providers and Representatives conducting Short-term Deposits Business,
2004 (the Short-term Deposit Code).
The closing date for comments is 28 February 2018.
The 27 page document provides clarity on a number of interesting aspects of the
Code, some of which are discussed below.
RDR related proposals
Enhanced requirements regarding intermediary remuneration
The Registrar proposes enhanced disclosure requirements regarding intermediary
remuneration to ensure clients fully understand and agree to fees payable and
the services they can expect in exchange for those fees. The current requirement
that certain financial interests must be reasonably commensurate with the
service being rendered has been expanded to clarify what "reasonably
commensurate" entails and to align with both RDR intermediary remuneration
principles and proposed amendments to the Regulations to the Long-term and
Short-term Insurance Acts in relation to certain types of intermediary
remuneration.
Financial interests offered by a provider to its representatives
The General Code currently provides that a provider may not offer financial
interests to its representatives for giving preference to the quantity of
business secured for the provider "to the exclusion of" the quality of service
rendered to clients. Supervisory experience has shown that this requirement is
inconsistently interpreted and that many providers are not able to demonstrate
what particle measures they have in place to achieve and monitor compliance with
the requirement. Amendments are therefore proposed to clarify the Registrar's
expectations in this regard, including the adoption of measurable indicators of
the quality of client treatment and compliance with the FAIS Act. This
requirement also seeks to support RDR proposal RR, in terms of which the playing
fields between incentives for tied and non-tied advice in the insurance sector
are to be made more level by strengthening the principle of "Equivalence of
Reward".
Suitability of advice in case of legal or contractual limitations
The General Code (section 8(1)(c)) currently requires identification of a
suitable financial product or products "subject to the limitations imposed on
the provider under the Act or any contractual arrangement". Supervisory
experience has however shown that, in cases where a provider is legally or
contractually limited in relation to the range of products or product suppliers
it can offer, the risk of the provider seeking to recommend a potentially
unsuitable product in order to "make a sale" is increased. Although such a
recommendation would already constitute a contravention of the General Code, an
amendment is proposed to avoid any doubt as to the Registrar's expectations in
such situations, by clarifying that where the provider is not able to identify a
suitable product, the provider must not recommend a product and must advise the
client accordingly.
Clarification that suitability analysis may be tailored to specific
circumstances of the client interaction
The Registrar proposes amendments to provide further clarity on the extent to
which the depth of information required to be taken into account when performing
a suitability analysis before providing advice, may vary depending on the extent
of the client's specific needs and objectives — either as explicitly agreed with
the client or as may be reasonably ascertained from surrounding circumstances.
This amendment should be seen in the context of RDR Proposal B. Proposal B
initially proposed that a framework should be developed for so-called "low
advice" distribution models, being models where advice is provided but a full
suitability analysis is not required. Based on very mixed comment received, the
FSB subsequently advised that two options are being considered: (i) that no
formal recognition of a "low advice" model is required and that the FSB should
instead clarify that the existing FAIS suitability analysis requirements are
sufficiently flexible and scalable to apply in such models; or (ii) to proceed
with the development of "simplified advice" standards to apply in specific
situations. After further deliberation, the FSB has decided that option (i)
above is the preferred approach. The amendments to section 8 of the General Code
are proposed in light of this decision. The Registrar will also provide
supporting guidance in this regard in due course.
Other interesting proposed amendments to the GCoC
Definition for 'replacement'
The proposed definition clarifies which types of transactions (including
variations) in respect of financial products constitute a replacement. The term
`variation' is also defined for purposes of the aforementioned definition to
clarify which types of variations constitute a replacement.
Format of record of advice
An amendment is proposed to enable the Registrar, where appropriate, to
prescribe the format and the matters to be addressed in the record of advice.
The Registrar is of the view that a prescribed format, in certain circumstances,
will improve the quality of the record of advice, will improve compliance and
may reduce costs for FSPs.
Full details are available in the
FSB discussion document. |
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Your Practice Made Perfect |
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ASISA Comments on Twin Peaks |
Rosemary Lightbody, Senior Policy Advisor at the Association for Savings
and Investment South Africa (ASISA), recently provided insight into
ASISA’s views on a number of important aspects concerning Twin Peaks.
In an article in the latest FSB Bulletin she comments, amongst others,
on the following:
Exclusion of the NCR from Market Conduct Regulation
We value the consultative process that has been followed in the
developments of the FSR Act, which is the enabling piece of legislation
for the implementation of the Twin Peaks model. Our members are largely
comfortable with the final version of the Act and the amendments to it
that are proposed by the National Council of Provinces.
However, we are disappointed that the NCR has not been brought within
the ambit of the Twin Peaks structure, under the Market Conduct
Regulator. ASISA’s life office members, to the extent that they provide
life policies to cover the debt in the event of the death of the debtor,
are regulated by the NCR. The inclusion of the NCR would have enhanced
coherent regulation and consistency of application. We note that the
Financial Stability Board, in its Peer Review of South Africa Report
dated 5 February 2013, expressed a similar view.
Effective co-ordination
Effective coordination between the Prudential Regulator and the Market
Conduct Regulator will be vital – both proactive coordination, before
regulatory changes are finalised or implemented, as well as reactive. We
look forward to more detail on how synchronisation between the
regulators with dual responsibilities for the same organisations and in
some cases the same functions will be achieved.
Frameworks and process rules will need to be clearly defined and
available to regulated entities to ensure that overlapping
responsibilities and accountability do not lead to serious
inefficiencies and, potentially, unnecessary delays. This will provide
institutions with the certainty that they need, in respect of their
day-to-day operational interactions with the two regulators, as well as
when particular issues need to be discussed by a financial institution
with the regulator.
The Financial System Council of Regulators is established under the FSR
Act, with the aim of facilitating cooperation, collaboration and
consistency between the Twin Peaks regulators and the Department of
Trade and Industry, the Department of Health, the NCR, the Council for
Medical Schemes, the FIC, the National Consumer Commission, the
Competition Commission, and the Deputy Governor of the Reserve Bank
responsible for financial stability matters. Effective synchronisation
between all of these regulatory agencies will also be very important.
Never mind that man - Give me a Bells – editor.
Please click here to read the full article
Twin Peaks – strengthening
the financial sector through more efficient regulation. |
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Information for Nova debenture holders
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Moneyweb’s editor, Ryk van Niekerk, published an article of interest to
those who invested in Sharemax, and hold debentures in Nova.
There is currently a proposal for a Section 155 Scheme of Arrangement,
which would see the current debentures converted into shares in a
company which, as Van Niekerk points out, may never list on the JSE.
He lists four major problems, which are briefly summarised below.
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Debenture holders will see a significant dilution of the value of
their investments, while losing the preferential rights they currently
have via their debentures. The dilution varies for the classes of
debentures. Debentures and their dilution are linked to the original
Sharemax properties the investors invested in. The biggest losers will
be those who have invested into the Villa and Zambezi, who would only
receive 15% and 20% of their original investments. An investment of R1 000 000 in the Villa would be reduced to around R145 000.
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The Nova board hails the listing as a silver bullet for former
Sharemax investors to receive shares in a JSE- listed company, as they
would be able to trade these shares and realise at least a portion of
their initial Sharemax investments. The reality is that it is not clear
whether the JSE will allow Nova to list in its current form.
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There is no commitment from the founding shareholders to transfer
properties. Nova went to great lengths to explain the conversion process
for debenture holders, but doesn’t say a word in the scheme documents of
how the scheme will affect the directors’ shareholding in the company
that actually owns the properties.
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There is no independent fair and reasonable assessment to inform
debenture holders that the proposal serves their best interest, in the
view of Van Niekerk. Moneyweb believes that the proposed Section 155
Scheme of Arrangement is brought under the wrong section of the
Companies Act, and that it should have been brought under Section 114.
The major difference is that under Section 155, it is not necessary to
commission a fair and reasonable assessment, while it is compulsory
under Section 114.
If you, or your clients, are affected, it makes good sense to read the
full article prior to the debenture meeting on Friday at 10h00 at the CSIR conference centre in Pretoria. There are also links to other
articles of great importance to those affected. |
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New Fit & Proper and the REs
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Market indications are that the final Fit and Proper Regulations are due
for publication any day now.
These regulations form an important part of the knowledge tested in the
Regulatory exams. Changes to the legislation will result in changes to
the study material and the questions in all the exams.
Normally, those responsible for maintaining the question data bank are
given a time limit of six weeks to two months within which to amend all
affected questions. During this time, the study material also has to be
amended.
Given the vast number of changes to the Fit & Proper requirements, this
will be no easy task.
Those who are of the opinion that they are nearly ready to write the
regulatory exams should seriously consider writing before the new
regulations affect the exams and study material.
The final date for writing in 2017 is 11 December, with registration
closing on 23 November, two weeks from today. |
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Technologically Speaking
Moonstone Information Refinery
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Elevating the Client Experience |
We commented earlier on this white paper, published in the USA in
September.
Whilst it expands on “Leveraging Technology to Drive Profitability,
Scale, and Growth”, there is certainly another aspect of great
interest to those who are concerned about making a successful
transition from commission to fees.
The single most important aspect of converting successfully is that
the client should know what he or she gets in exchange for paying
you a fee. Unless there is absolute clarity, you have very little
chance of getting clients to part with their money.
In a September 2013 Harvard Business Review article, “The Truth
about Customer Experience,” researchers reported that: “Most
customers weren’t fed up with any one phone call, visit, or other
interaction— in fact,they didn’t much care about those singular
touch points. What reduced satisfaction was something few companies
manage—cumulative experiences across multiple touch points and in
multiple channels over time.” If advisors are knowledgeable and
their clients trust them, they can build relationships. But
relationships may change over time if an advisor offers only
quarterly statements by mail and quarterly meetings in person. When
clients have busy schedules or have questions about what’s happening
today, the advisor may not be able to answer them or give them what
they need anymore. “Let me get back to you on that…” is no longer a
widely acceptable answer in an information age.
Please note that, in order to download the 10-page white paper, you
will be required to provide your email address, but have an option
not be included in future mailings.
Please click on this link to download
Elevating the Client Experience.
Suitebox Media contact
Neil Summers, Sales Manager, Moonstone Business Services
Mobile: +27729088994
Email:
neil@suitebox.com
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Regulatory Examinations
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Frequently Asked Regulatory Exam
Questions |
| 1. |
What exam must I write?
Both the RE 5 and RE are Level One exams. RE 5 is for Representatives and
RE1 for Key Individuals. The RE 3 exam is for licence category II
candidates.
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How much does it cost?
The FSB determines the fee. Currently it costs R1163 per exam, also in
the case of a re-write.
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What preparation material is available?
Fully updated resources are available for those requiring access to the
legislation applicable to the regulatory examinations:
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Please make sure that you first read the
FSB’s Preparation Guide to
make sure you follow the right process in preparing. Page seven includes
a recent amendment to guide candidates in studying in the correct
manner. |
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Click on the following highlighted sections to download the relevant
updated Inseta learning material for key individuals,
RE 1, and
representatives,
RE 5. |
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LexisNexis provides a “Legislation Handbook” together with a
“Preparation Guide” containing the qualifying criteria, with a link to
the relevant legislation. |
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The
Juta FAIS Pocket Statutes also contains a CD with a comprehensive
list of updated supplementary legislative material for reference
purposes. Please click here to order this from our online shop. |
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The FSB’s telematics broadcast on the RE 1 and RE 5
provides a good introduction and overview, and can also be ordered
online in: |
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DVD format or on a
USB memory stick
MP4 direct download - 2 Gb |
| 4. |
Where can I write?
Go to:
http://www.faisexam.co.za/show_venues |
| 5. |
What dates are available?
Go to:
http://www.faisexam.co.za/view_schedule |
| 6. |
What training is available?
As an Exam body we are not allowed to recommend companies that offer
face-to-face Regulatory exam classes. You can try Google for someone in
your area.
Bear in mind that this exam tests your knowledge about the laws
applicable to the provision of financial advice and intermediary
services. The questions are based on very specific qualifying criteria
set out in the FSB preparation guide. Any training that does not have
this as a basis will not prepare you properly for the exam. Do your own
research and don’t just accept what others say. |
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Where can I buy old question papers?
There are no genuine “old question papers” available. Be very careful
when buying such preparation aids as some of those on offer are not in
line with the high standard prevailing in the actual exams and often
lead to a false sense of knowledge which is sadly exposed when
confronted by the actual exam. Follow the guidelines provided in the FSB
Preparation Guide and you are far more likely to achieve success. |
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Careers Platform
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Are you hiring? Advertise your position on Moonstone’s Career Platform
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The Moonstone website -
www.moonstone.co.za
- enjoys an average of 15 000 visits and approximately 39 000 page views per month. |
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Moonstone boasts an exclusive newsletter mailing list of over 49000
dedicated financial decision makers who receive 2 newsletters per week. |
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Our audience is relevant and industry specific: individual and corporate advisors and brokers in the following financial sectors:
Investment, Risk, Healthcare, Banking, Retirement, and Insurance. |
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Featured Positions |
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Junior Short Term
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JFA Short term Brokers, Milnerton, Cape Town - Are you bilingual,
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Counsellor:
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In Lighter Wyn |
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Ancient Hebrew Drawings Deciphered |
Recent excavations revealed a fascinating new find. Written across the
wall of the cave were the following symbols:
It was considered a unique find and the writings were said to be at
least 3000 years old.
The piece of stone was removed, brought to the museum, and
archaeologists from around the world came to study the ancient
symbols. They held a huge meeting after months of conferences to
discuss the meaning of the markings.
The President of the society pointed to first drawing and said:
"This is a woman. We can see these people held women in high esteem.
You can also tell they were intelligent, as the next symbol is a
donkey, so they were smart enough to have animals help them till the
soil. The next drawing is a shovel, which means they had tools to
help them."
Even further proof of their high intelligence is the fish which
means that if a famine hit the earth and food didn't grow, they seek
food from the sea.
The last symbol appears to be the Star of David which means they
were evidently Hebrews.
The audience applauded enthusiastically.
Then a little old Jewish man stood up in the back of the room and
said:
"Idiots! Hebrew is read from right to left. It says:
'Holy Mackerel, Dig the A$S on that Chick!
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Tel: +27 21 883 8000 | Fax: +27 21 883 8005
info@moonstoneinfo.com
www.moonstone.co.za
P.O. Box 12662, Die Boord, Stellenbosch, 7613, Republic of South Africa
Disclaimer:
Services and products advertised by external product suppliers in
this newsletter are paid for by the respective suppliers. Moonstone
does not endorse any opinions, conclusions, data, products, services
or other information contained in this e-mail which is unrelated to
the official business of Moonstone and furthermore accepts no
liability in respect of the unauthorised use of its e-mail facility
or the sending of e-mail communications for other than strictly
business purposes.
The complete disclaimer can be accessed
here.
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©2015 Moonstone. All rights reserved. |
