Bessie from Biesiesvlei wants to know why dealers need to comply while paying the FSP to take the risk, and wants clarity on what they need to comply with.

SuperSpark answers:

Dear Bessie,

Our industry is ruled by various government-imposed Acts, such as the FAIS Act (that goes hand-in-hand with the FICA), the NCA, the CPA, the Second-Hand Goods Act, the Labour Relations Act, the Road Traffic Act, PAIA, Poppy Act, STIA and a few others.
The FAIS Act is monitored by appointed Compliance Officers, as prescribed by law.

The outcome of their reports is sent to the FSP which then, in turn, addresses the issues of non-compliance with the respective appointed representatives (Juristic and Natural) for remedial action.

IDA Risk Management proudly acknowledges that we are not only doing FAIS compliance, but overall compliance.

Representatives are being notified of issues of non-compliance per letter, sharing:

1. The subject with an indication of the Act. (i.e. Disclosure: FAIS Act, KYC, FICA)
2. The issue of non-compliance.
3. Indication of customer file.
4. Remedial action to impose.

This is sent once again - complying with the Act - and confirmation of receipt and rectification is expected.

The FSP gets paid for managing the risk and we refer to the FSP name: IDA Risk Management.

The FAIS Act All fit and proper Representatives are appointed under the FSP by means of signing a Mandatory Agreement - setting out the terms and conditions of operating under the licence. The licence, together with the Section 13 certificate which identifies the appointed representative, should be displayed prominently in a durable manner on the premises and be visible to the public. Any change in detail, applicable to that of the Natural Representative (Bessie) or The Juristic Representative (Biesiesvlei Motor Sales), should as stated in the Mandatory Agreement, be reported to the FSP for necessary alterations. This includes representative changes and cancellations as well. Any person rendering a financial service for or on behalf of a Financial Services Provider, must have terms of conditions of employment or any other mandatory agreement on record. A person who renders clerical, technical or administrative work is excluded from this.

In terms of our Mandatory Agreement you are obliged to keep and maintain a FSP/FAIS Correspondence file to keep your records organised and together in one file such as the FAIS Complaint Resolution procedure document, which must be issued to a customer raising a FAIS complaint in order to follow the correct procedure and whereby the Compliance Officer and the FSP are notified of such a complaint.

 This will enable timeous investigation for preparation to defend or resolve a complaint. This also leads to the disclosure document which is the most important document on record which discloses that no advice was given but only factual information was transferred in order for the client to make an informed decision.

The Disclosure is in fact the axle of the wheel of delivering financial services. In order to investigate any FAIS complaint all Financial Institution documents should be on file. All the documents including – but not limited to - the Invoice, FICA documents, Offer to purchase, Copy of registration and other relevant documents must be placed in a deal file specially designed for this purpose. This file needs to be kept for a period of five years in safe keeping or may be kept electronically, but must be reducible to a printable form within five working days.

The FIC Act
The Financial Intelligence Centre (FIC) Act requires proof of a Bar Coded Identity Document and a residential address. Proof of ID and proof of residential address (utility or retail bill not older than 3 months) must be kept on the relevant deal file and is named KYC (Know your Customer). In terms of seller’s verification, Section 21 of the Financial Intelligence Centre Act, the Representative needs to establish and verify the identity of the client and proof of this document must be kept on file. FICA also requires a dealer to be registered as a reporting institution and must report suspicious and/or unusual transactions. Each Dealer must have an Internal Reporting Procedure document. This procedure will differ from dealership to dealership and must be kept on the IDA/FAIS Correspondence File.

The National Credit Act
Section 163 (2) of the National Credit Act stipulates that an agent must show an identification card in the prescribed manner and form to any person with whom the agent interacts in the solicitation completion and conclusion of a credit agreement. This forms part of the responsibility of the Juristic Representative to enforce qualification of such persons.

The Consumer Protection Act
The offer to Purchase is the Sales Agreement that needs to be signed by both parties. This document will stipulate the Terms and Conditions of the sale. In terms of the Consumer Protection Act, we advise this document to be used in order to protect you when a complaint is lodged. This is the third general “issue” of non-compliance.

The Second-Hand Goods Act
We recommend that a Deal File be kept for every transaction. Stock sheets may be kept in hard copy or electronically. If it is kept electronically, printouts must be made after any updates or changes to the stock sheet. It is advisable that stock numbers reflect on each deal file for transparent audit trails.

The Short Term Insurance Act
Please note that a dealer may not receive premiums on Short Term Insurance Products other than in the name of the FSP. Section 45 of the Short Term Insurance Act requires the FSP to have IGF Cover or Bank Guarantees in place. Advisedly the intermediary should make use of a split premium facility such as Debella.

A clear compliance report is evident if you stick to this.

Hope this helps to answer your question.

Gotta fly!

SuperSpark