Page 96 - Profile's Unit Trusts and Collective Investments 2021 issue 2

CHAPTER 5

FSPs must have systems in place to record written communications relating to financial services
rendered to a client, to store and retrieve such documentation and to keep documentation safe
from destruction.
Financial advisors need to give clients certain prescribed particulars about the selected
product supplier and the business once a financial service has been rendered.
They must tell clients about all material terms of any contracts or transactions so that clients
can make informed decisions. This includes information about commissions and incentives.
Financial advisors must ascertain how well informed clients are, investigate each client’s
financial situation and explore each client’s objectives before giving advice. This is to
ensure that advice is appropriate to each client’s particular circumstances. (note additions
to section 8 of GCOC).
They need to keep records of all advice given to clients.
Where an FSP receives or holds financial products or funds on behalf of a client, these
assets must be properly and promptly accounted for and must be kept separate from any
assets of the FSP.
Financial advisors must also try to eliminate, as far as possible, the risks of loss to clients
through theft, fraud or negligence. This means that FSPs must have good internal controls
to ensure that the business is run in an orderly and efficient manner, and that information
provided to all parties is accurate and reliable.
FSPs must maintain suitable guarantees, professional indemnities and/or fidelity insurance
cover.
Marketing material, brochures and advertising must comply with certain provisions of the
code designed to ensure that promotional material does not contain any statements,
promises or forecasts that are fraudulent or misleading.
FSPs must establish complaints resolution processes, ie, clear procedures for resolving
customer grievances. In the interests of transparency, clients must be given access to the
complaints procedure itself.
In terms of FAIS, FSPs can be held liable for the actions of their representatives. This makes it
imperative for FSPs to ensure that staff are properly trained and meet the Fit and Proper
Requirements.
The Act gives the Registrar certain powers regarding FSPs. For example, if an FSP publishes a
misleading advert, the Registrar may direct the FSP to change the advert or to stop using it. The
Registrar must of course provide reasons and give the FSP an opportunity to be heard.
As noted earlier, the conduct of financial advisors is currently governed by several separate
pieces of legislation and overlapping regulations (such as FAIS, the GCOC, Fit and Proper,
policyholder protection rules, and so on).
The COFI bill aims to consolidate and streamline a host of requirements which financial
institutions have to meet. When the bill becomes law it will replace legislation repealed by the Act,
such as the Long Term Insurance Act, the Short Term Insurance Act, the FAIS Act, the Financial
Institutions (Protection of Funds) Act, and major amendments to the Financial Sector Regulation
Act (20 pages) itself, as well as the Pension Funds Act (24 pages) and other laws.
In relation to the code of conduct, financial advisors should take note that COFI, once law, will
control the conduct of advisors and regulate intermediary businesses for many years into the future.
Complaints Procedures
As noted above, Section 17 of the General Code of Conduct requires the establishment of a
complaints management framework. The provisions of Section 17 became effective in stages, but
all provisions had to be implemented by the end of June 2021.
Under Section 17, FSPs are required to appoint responsible persons to handle complaints and there
has to be a clearly defined internal escalation and review process. This has to be documented.
Each FSP must keep a record of complaints and monitor complaints received in order to
identify possible ongoing and recurring issues, to improve risk management and improve
outcomes for clients. Complaints must be categorised into defined categories. These include:

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