Page 95 - Profile's Unit Trusts and Collective Investments 2021 issue 2

Legislation and Guidelines

Have personal characteristics of honesty
and integrity 2020 Amendments to
Have a thorough knowledge of FAIS General Code of Conduct
legislation (GN706)
Ensure proper compliance monitoring The FSCA published amendments to the
Enjoy the support of senior management General Code of Conduct (GCOC) on 26 June 2020,
some of which came into immediate effect. The
Be equipped with the necessary resources to amendments, which are fairly extensive, add to,
ensure compliance
clarify and tighten up the GCOC. A few key points
In order to be approved by the Registrar, a are highlighted below. The amendments include:
compliance officer must meet the following criteria: • A broadening of the definitions of “advertisement” and
A legal or accounting degree plus at least three “publish” so that they include “any medium and in any
years’ experience in financial services; or form” (and therefore include social media posts)
The compliance officer must have passed an • Widening of the definition of “direct marketing” to
industry-specific course recognised by the include “digital application platforms”
FSCA (plus at least three years’ experience • Addition of definitions of “replacement” and “varia-
tion” as part of eliminating unwarranted product sub-
in financial services); or stitutions
The compliance officer must already be ap- • A clarification of the Section 3 requirement that an
pointed as a compliance officer according to FSP may not misrepresent the extent of FSCA licens-
the provisions of any Act other than the ing where unregulated products are concerned
FAIS Act; or • Clarification on the use of the term “independent”
The compliance officer must be an accredited (which may not be used where there are any potential
conflicts of interest)
member of the Compliance Institute of South
Africa, with at least three years’ experience. • New stricter requirements when it comes to product
comparisons (including that the advertising require-
These qualifications and experience requirements ments in new section 14(10) also apply to Section 4)
do not apply if the person to be appointed as • A new section 7A that requires, inter alia, that state-
compliance officer is a director or member of an FSP. ments about past performance are appropriate and
product-relevant
Code of Conduct • Additions to Section 8 such that it extends the obliga-
A key feature of FAIS is that it requires all FSPs tions of FSPs when it comes to needs analysis, risk
profiling and the financial situation of the client.
and representatives (and all “key individuals”) to act
in accordance with a rigorous code of conduct.
Essentially, the code tries to ensure the highest possible levels of professional conduct, integrity and
transparency in the financial services industry.
The entire code is available on the FSCA website (www.fsca.co.za), and given the importance
of the code, it should be read and re-read by all FSPs, FSPRs and key individuals. It should be noted
that the conduct of financial advisors is also regulated by many other regulations and pieces of
legislation, depending on the area of speciality – the Code of Conduct does not encompass
everything with which an advisor must comply.
Some of the more important elements of the code are as follows:
Financial advisors must act honestly and fairly at all times, exercising skill, care and diligence.
They must act in the interests of clients
at all times, and must advise clients if
they have any personal interest in the
investment product or service. (see
GCOC box on page 93)
They must act prudently (ie, be careful
not to give reckless advice), and must
avoid conflicts of interests with clients.
They must make sure that any
information provided to clients is
accurate and easy to understand. (note
new section 7A under GCOC
amendments GN706).

93
Profile’s Unit Trusts & Collective Investments — Understanding Unit Trusts