Page 92 - Profiles's Unit Trusts & Collective Investments - September 2024

CHAPTER 5

They must make sure that any information provided to clients is accurate and easy to
understand. Statements about past performance must be appropriate and product-relevant.
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 needs and objectives before giving advice. This is to
ensure that advice is appropriate to each client’s particular circumstances. Where an advisor is
unable to identify a suitable product, the advisor must point this out to the client and decline to
recommend a product.
If a client chooses not to follow the recommendation, the advisor must point out the risk of
doing so.
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 General Code
of Conduct, 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.

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