Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002)Board NoticesExemption in respect of Services under Supervision in terms of Requirements and Conditions, 20084. Requirements and conditions |
| (1) | A financial services provider that provides representatives with the opportunity to render financial services under supervision, must satisfy the Registrar, that it— |
| (a) | has the operational ability to provide such services under supervision; and |
| (b) | can itself, or through a key individual that meets the same requirements as provided for in subparagraph (3) below or another competent representative act as supervisor, and meets the relevant requirements for the specific subcategory of financial services wherein the supervisor will oversee the representative(s) that render services under supervision. |
| (2) | A financial services provider that intends to provide representatives with the opportunity to render financial services under supervision must— |
| (a) | indicate on the representative register whether the representative is acting under supervision, and |
| (b) | differentiate on the representative register between representatives that are acting under supervision and those that meet all the requirements and are not acting under supervision. |
| (3) | A supervisor must have completed and meet the relevant requirements regarding experience and qualification and at least the first level regulatory examination in relation to the specific Categories or subcategories before the supervisor is allowed to act as a supervisor for a specific Category or subcategory. |
| (4) | A representative may only work for a period not exceeding six (6) years after date of appointment under supervision, whilst obtaining the required experience, qualification and regulatory examination(s) as they apply. |
| (5) | Supervisees are expected to obtain experience across the subcategories in respect of which they are appointed as a representative, but should this prove to be problematic during the minimum period under supervision due to business reasons, the financial services provider should make arrangements to either- |
| (a) | place the supervisee in a position where he or she can gain experience in the specific Subcategory; or |
| (b) | extend the period under supervision to ensure that the supervisee receives sufficient exposure to the specific subcategory, provided that the maximum period under supervision of six (6) years is not exceeded. |
| (6) | The following will apply to the period a representative acts under supervision: |
| (a) | The supervision period is linked to the Category or subcategory; |
| (b) | the maximum period any representative can act under supervision in any Category or subcategory, is six (6) years from date of appointment; |
| (c) | representatives who give advice and/or render intermediary services in respect of multiple Categories or subcategories can gain the experience at the same time, and will remain under supervision until the experience requirements for the most onerous Category or subcategory is met; |
| (d) | the relevant minimum and maximum periods commence on the date the representative is appointed to render services in relation to the specific Category or subcategory: and |
| (e) | the representative must— |
| (i) | successfully complete the relevant first level regulatory examination by 30 June after the expiry of 24 months from the date of first appointment as a representative; |
| (ii) | successfully complete the relevant second level regulatory examination(s) by 30 June after the expiry of 72 months from the date of first appointment as a representative; and |
| (iii) | obtain the relevant qualification by 30 June after the expiry of 72 months from the date of first appointment as a representative. |
[Paragraph 4(6)(e) substituted by section 3(a)(ii) of Board Notice 260 of 2013, dated 19 December 2013]
(7) Supervision may include one or more of the following activities:
| (a) | Sign-off by a supervisor on the advice given to a client; |
| (b) | pre-transaction sign-off by a supervisor where intermediary services are rendered; |
| (c) | attending meetings with supervisee and clients where the purpose of the meeting is the rendering of financial services; |
| (d) | appropriate post-transaction sampling; |
| (e) | follow-up calls to clients after the rendering of financial services by the supervisee to confirm certain aspects of the interaction with the client; or |
| (f) | any other activity that enables the supervisor to scrutinise the activities of the supervisee in respect of rendering of financial services: |
Provided that in the case of Category I financial services providers the intensity of supervision is aligned to the phase of supervision (direct or ongoing supervision), referred to in Table A below, which applies.
| (8) | In the case of Categories II and IIA financial services providers, the following will also be recognised for supervision purposes: |
| (a) | Minutes of the "investment team meetings", will be accepted as signoff; or |
| (b) | sign-off on transactions regarding intermediary services will require that the supervisor checks that the representative carries out instructions accurately and in line with the relevant mandate and/or consensus decision. |
| (9) | Supervision arrangements must be arranged in accordance with the following specific requirements: |
(a) Selection of the supervisor:
The financial services provider must ensure that the normal working relationship between the supervisee and supervisor allows the supervisor oversight of the activities performed by the supervisee as per agreement, and that there is regular contact that enables the transfer of skills, which may include face-to-face and/or contact via electronic means, between the supervisee and supervisor in the execution of their duties.
(b) Supervision agreement:
There must be a written agreement, which mayor may not form part of the employer's performance management processes, that details the procedures regarding the rendering of services under supervision.
| (c) | Supervisor responsibilities: |
| (i) | The financial services provider is required to ensure that supervisees are supervised at all times when executing their duties in terms of the supervisory arrangement; |
| (ii) | the supervisor must ensure that the supervisee has a good understanding of and exposure to the Categories and/or subcategories he or she is providing financial service in; |
| (iii) | the supervisor must observe selected meetings between the supervisee and customers, the frequency of which may vary according to the complexity of the service that is provided; and/or the complexity of the products offered; and/or the experience of the supervisee; and/or the qualifications of the supervisee; |
| (iv) | the financial services provider must ensure that the supervisor is able to provide evidence of the supervision actions undertaken and such evidence must be available for scrutiny by the Registrar; |
| (v) | the supervisor must assess the advice given by the supervisee for appropriateness based on a review of the analysis conducted and the record of the advice as provided for in terms of the General Code of Conduct, and ensure that the FSP takes the necessary action to protect the client where it is found that the supervisee's actions may not have been in the interest of the client; and |
| (vi) | the supervisor and supervisee must have properly documented evidence of the supervision, the method followed and frequency thereof that took place during the period under supervision. |
(d) The supervisee must—
| (i) | adhere to the requirements of the supervision contract; |
| (ii) | provide the supervisor upon request, where applicable, with any records and or documents regarding the advice given and/or intermediary services rendered; |
| (iii) | disclose to clients that he or she is acting under supervision; |
| (iv) | actively pursue the completion of the required qualifying criteria within the prescribed time limits; (v) undertake the relevant product training; and |
| (v) | request guidance from the supervisor if in doubt when performing any duties in relation to the supervision contract. |
| (e) | Supervision applicable to representatives of Categories I and IV financial services providers: |
Table A below sets out the level of supervision required in respect of representatives acting under supervision of Categories I and IV financial service providers:
TABLE A: CATEGORIES I AND IV: LEVEL OF SUPERVISION REQUIRED |
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COLUMN ONE: SUBCATEGORY |
COLUMN TWO: DIRECT SUPERVISION |
COLUMN THREE: ONGOING LEVEL OF SUPERVISION |
1.1 |
Long-term Insurance subcategory A |
The first 2 months of the period under supervision |
After 2 months for the rest of the period under supervision |
1.2 |
Short-term Insurance Personal Lines |
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1.3 1.3.1 1.3.2 |
Long-term Insurance: subcategory B1 |
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subcategory B2 |
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1.4 |
Long-term Insurance subcategory C |
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1.5 |
Retail Pension Benefits |
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1.6 |
Short-term Insurance Commercial Lines |
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1.7 |
Pension Fund Benefits (excluding Retail Pension Benefits) |
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1.8 |
Securities and instruments: Shares |
The first 4 months of the period under supervision |
After 4 months for the rest of the period under supervision |
1.9 |
Securities and Instruments: Money Market Instruments |
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1.10 |
Securities and Instruments: |
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1.11 |
Securities and Instruments: Warrants, certificates and other instruments acknowledging debt |
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1.12 |
Securities and Instruments: Bonds |
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1.13 |
Securities and Instruments: Derivative Instruments |
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1.14 |
Participatory Interests in one or more Collective Investment Schemes |
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1.15 |
Forex Investment Business |
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1.16 |
Health Service Benefits |
The first 2 months of the period under supervision |
After 2 months for the rest of the period under supervision |
1.17 |
Long-term Deposits |
The first 6 weeks of the period under supervision |
After 6 weeks for the rest of the period under supervision |
1.18 |
Short-term Deposits |
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1.19 |
Friendly Society Benefits |
The first 2 weeks of the period under supervision |
After 2 weeks for the rest of the period under supervision |
Category IV |
Assistance Business FSP |
The first 6 weeks of the period under supervision |
After 6 weeks for the rest of the period under supervision |
| (f) | Supervision applicable to representatives of Categories II, IIA and III financial services providers: |
| (i) | The supervisor must, where the representative is rendering discretionary financial services (Categories II and IIA), review and approve in writing the rendering of such services prior to conclusion or execution of any transaction; |
| (ii) | the supervisor must, where the representative is rendering discretionary financial services (Categories II and IIA), approve a transaction before it is finalised in respect of all representatives acting under supervision of Category III providers or, if the transaction is of such a nature where prior approval is not feasible, within a reasonable period thereafter; |
| (iii) | in respect of Categories II and IIA providers, the supervisor is required to ensure that all actions taken by the representative adheres to the mandate and/or morning meeting decisions; |
| (iv) | the supervisor must conduct sample checks on a weekly basis to ensure that the supervisee did not deviate from the relevant mandate and/or investment team meetings; |
| (v) | the supervision requirements may not be lessened in intensity during the duration of the period under supervision. |