FAIS General Code of Conduct Amendments in perspective

Thursday, 29 October 2020

The FAIS General Code of Conduct Amendments came into effect 26 June 2020 with a delayed effective date of either 6 or 12 months depending on the provision. The changes impact Financial Services Providers (FSPs) and the below is a summary of the notable amendments. The amendments were effective on 26 June 2020 unless otherwise indicated below:

 

  1. Definition

 

1.1   “Advertisement” The definition has been broadened to incorporate any communication  intended to create public interest in the business, financial services, financial products or related services of a provider, or to persuade the public (or a part thereof) to transact in respect of a financial product, financial service or related service of the provider in an manner. FSPs will have to ensure that reference to the fact that an FSP license is held is displayed on all advertisements.

 

1.2   “Direct marketing” has been expanded to include rendering of financial services by way of “digital application platform.

 

1.3   Alignment to definitions and wording from Policyholder Protection Rules for example endorsements, comparative, loyalty benefit, no claim bonus, plain language, puffery etc

 

  1. Section 3: Specific duties of provider

 

2.1   A provider may not indicate or imply that it is authorised, regulated or otherwise supervised by the FSCA if it’s not and must not use reference to the FSCA for products or services that are not authorised or supervised by the FSCA.

 

2.2   A provider may not describe itself or the financial services it renders as being “Independent” if a certain relationship exists between the provider and any product supplier for example the provider or its associate is a significant owner of the product supplier, or vice versa, or receives or is eligible for any financial interest from a product supplier.

 

  1. Section 3A: Financial Interest and Conflict of Interest

 

3.1   This section sets out principles to be applied when providing financial interest to a representative of a provider and when a provider or representative receives or offers financial interest have been added.

 

              The effective date of the amendments is 26 December 2020.

 

  1. Section 7A: Forecasts, illustrations, hypothetical data or projected benefits and past performance data

 

4.1    This section provides advertising requirements contained in the new section 14(15), relating to the use of forecasts, illustrations, hypothetical data or projected benefits and past performance data in advertisements, also apply to the use of such data or projections in the rendering of a financial service.

 

The section came into effect 26 June 2020 but is dependent on s14(5) which becomes effective 26 December 2020.

 

 

  1. Section 8: Suitability

 

5.1   This section has been expanded placing additional requirements on providers when gathering information from client’s for a needs analysis and what to take into account when establishing a suitable product for the client.

 

  1. Section 14: Advertising

 

6.1   A section has been added on the principles to be followed when advertising.

 

The section becomes effective 26 December 2020.

 

  1. Section 15: Direct Marketer

 

7.1   A direct marketer is no longer exempted from providing a record of advice to a client set out in section 9.

 

The section becomes effective 26 December 2020.

 

  1. Section 17 - 19: Complaints Management, engagement with ombud and reporting

 

8.1   A section on Complaints Management has been added with various requirements that are to be complied to either on 26 December 2020 or 26 June 2021 depending on the section.

 

The second draft of Conduct of Financial Institutions bill (COFI) has been issued for comments. The bill currently contains provisions which are in the FAIS GCOC for example remuneration and compensation practices and management of conflicts of interest, advertising and disclosure. COFI proposes to repeal the Financial Advisory and Intermediary Services Act, No. 37 of 2002 (FAIS Act) (except for part I of Chapter VI providing for the Ombud for financial services providers, and definitions in section 1(1)) but conduct standards will be introduced to cater for the provisions in the GCOC.


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