Purpose of the Act
The Act creates a formal system of regulating financial advisors and intermediaries.
Aggrieved consumers will be able to seek redress when they have been misled or misrepresented to by a representative or financial services provider.
The FAIS Act was introduced to regulate the business of all Financial Service Providers who give advice or provide intermediary services to clients, regarding a wide range of financial products.
In terms of the Act, such Financial Services Providers need to be licensed, and professional conduct is controlled through Codes of Conduct and enforcement measures.
Definition of advice
Advice means any recommendation, guidance or proposal of a financial nature furnished, by any means or medium, to any client or group of clients:
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In respect of the purchase of any financial product; or
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In respect of the investment in any financial product; or
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On the conclusion of any other transaction, including a loan or cession, aimed at the incurring of any liability or the acquisition of any right or benefit in respect of any financial product; or
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On the variation of any term or condition applying to a financial product, on the replacement of any such product, or on the termination of any purchase of or investment in any such product, and irrespective of whether or not such advice:
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is furnished in the course of or incidental to financial planning in connection with the affairs of the client; or
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results in any such purchase, investment, transaction, variation, replacement or termination, as the case may be, being affected.
For the purposes of FAIS, advice does NOT include factual advice given:
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On the procedure for entering into any transaction relating to a financial product;
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In relation to the description of a financial product;
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In response to a routine administrative query;
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In the form of objective information about a specific financial product;
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By the display or distribution of promotional material.
In terms of FAIS, advice also excludes:
An analysis or report on a financial product without any express or implied recommendation as to its suitability for a client.
Advice given by a board member or management, of a pension fund organisation or friendly society, or trustees, or board member of a medical scheme to its members, on the benefits enjoyed or to be enjoyed by such members.
Intermediary services
An intermediary service occurs when a person performs any act, other than giving advice, for or on behalf of a client or product supplier. For example:
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Doing something other than giving advice as a result of which the client will enter into a financial product with a product supplier;
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Keeping a financial product in safe custody;
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Processing the claims of a client against a product supplier;
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Collecting or accounting for premium payments.
In practice intermediary service means the facilitation of a financial transaction, where the service is not a recommendation, guidance or proposal regarding financial products.
The difference between intermediary services and advisory services may be described simply as follows:
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Intermediary services may facilitate the administration of the product;
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Advisory services facilitate the client’s decision in relation to a financial product.
A person may not act or offer to act as a financial services provider unless such person has been issued with a license.
Application for authorisation
An application for an authorisation, must be submitted to the registrar, and be accompanied by information to satisfy the registrar that the applicant complies with the requirements for fit and proper financial services providers or categories of providers, in respect of:
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Personal character qualities of honesty and integrity;
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The competence and operational ability; and
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The applicant's financial soundness.
Where an application is granted, the registrar must issue a license authorising the applicant to act as a financial services provider.
A licensee must:
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Display a certified copy of the license in a prominent and durable manner within every business premises of the licensee;
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Ensure that a reference to the fact that such a license is held is contained in all business documentation, advertisements and other promotional material;
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Ensure that the license is available immediately and at all times, or within a reasonable time available for production to any person requesting proof of license.
Lapsing of licence
A license lapses:
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Where the licensee, being a natural person:
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becomes permanently incapable of carrying on any business due to physical or mental disease or serious injury;
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is finally sequestrated; or
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dies;
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where the licensee, being any other person, is finally liquidated or dissolved;
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where the business of the licensee has become dormant; and
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in any other case, where the licensee voluntarily and finally surrenders the license to the registrar.
Qualifications of representatives and duties of authorised financial services providers
An authorised financial services provider must at all times be satisfied that the provider's representatives, and key individuals of such representatives, are, when rendering a financial service on behalf of the provider, competent to act.
The authorised financial services provider must maintain a register of representatives, and key individuals of such representatives, which must be regularly updated and be available to the registrar for reference or inspection purposes.
Such register must:
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Contain every representative's or key individual's name and business address, and state whether the representative acts for the provider as employee or as mandatory; and
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Specify the categories in which such representatives are competent to render financial services.
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