Page 97 - Profile's Unit Trusts and Collective Investments 2021 issue 2

Legislation and Guidelines

Are you an “Accountable Institution”?
FICA lists 19 “accountable institutions”. The 12th is “A person who carries on the business of
rendering investment advice or investment broking services, including a public accountant as
defined in the Public Accountants and Auditors Act 80 of 1991, who carries on such a business.”

complaints relating to the design of a product or financial service, including around fees,
premiums or other charges
complaints relating to information provided to (or not provided to) clients
complaints relating to advice given
FSPs are also required to maintain summary data about complaints, including:
number of complaints received
number of complaints upheld
number of rejected complaints and reasons for the rejection
number of complaints referred to an ombud and their outcome
RDR (Retail Distribution Review)
The FSB (now the FSCA) first published its Retail Distribution Review (RDR) in November
2014. The RDR is an ongoing project.
The RDR proposes several regulatory reforms related to the giving of financial advice and the
distribution of financial products. Amongst other things, the RDR seeks to incorporate the
principles contained in the FSCA’s Treating Customers Fairly (TCF) code.
In its June 2018 update, the FSCA stated that it would “continue to implement the RDR
proposals in a phased manner, aligning the development of regulatory instruments to broader
legislative and regulatory developments giving effect to the Twin Peaks model of financial sector
regulation.” This means the RDR proposals will be implemented using a combination of
instruments available under existing financial sector laws (such as the Financial Sector Regulation
Act) and the planned Conduct of Financial Institutions Act (COFI).
As mentioned, under the RDR proposals new terminology may be introduced, including
Product Supplier Agent (PSA) for tied broker and Registered Financial Adviser (RFA) in place of
IFA. The proposed RDR changes could require PSAs to state that they do not offer independent
advice but merely represent the products of their employer.
There proposals are still subject to industry feedback.
Consumer research conducted by the FSCA found that terms like “broker,” “agent” and “tied
advisor” were not well understood by retail investors. The term “financial advisor” was reasonably
well understood by urban respondents. However, in its December 2019 update the FSCA stated
that, “Notwithstanding the finding that some terms are reasonably well understood by some
consumer groupings, there do not seem to be any already understood terms that could readily be
used to clearly distinguish between the PSA and RFA advisor categories. Instead, it is clear that
whatever designations are finally adopted will require a wide-ranging consumer awareness and
education campaign.”
The FSCA latest proposals are that a PSA (including a juristic PSA) should be limited to
providing both advice and non-advice intermediary services in respect of its “home financial
group’s products only.”
The FSCA’s December 2019 update also clarified its position on attempts to more clearly
delineate intermediation activities, outsourced services and advice. The FSCA is considering
several possible legislative proposals, including:
rules to facilitate the charging of advice fees separate from commissions in order to achieve a
clear demarcation of advice and “services as intermediary”;
an approval process to replace the current outsourcing notification process, plus further
reporting requirements in respect of outsourcing.

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