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Financial Advisory and Intermediary Services Act 2002 (Act No. 37 of 2002)

Determinations

Determination of Fit and Proper Requirements for Financial Services Providers, 2017

Chapter 1 : Interpretation, Purpose and Application of Determination

1. Definitions

 

In this Schedule a word or expression to which a meaning has been assigned in the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002), has the same meaning as in that Act, and—

 

"accredited provider"

means a person that is recognised and certified or accredited by a Quality Council as having the capacity or provisional capacity to offer a qualification or part-qualification registered on the NQF at the required standard, or a foreign person that is so recognised and certified or accredited by a foreign authority that is equivalent to a Quality Council;

 

"administration of assistance policies"

means work performed by a person relating to the offsetting of claims, processing of claims or payment of fees or commission in respect of an assistance policy;

 

"Administrative Code of Conduct"

means the code of conduct for administrative FSPs published under section 15 of the Act;

 

"administrative FSP"

means an administrative FSP as defined in the Administrative Code of Conduct;

 

"applicant"

means a person who submits an application for authorisation;

 

"assessed"

in relation to competence requirements, means the structured process of gathering reliable evidence to determine the level of a person’s competence in relation to a pre-determined standard, and the extent to which the person’s competence meet the pre-determined standard;

 

"assistance business FSP"

means a person that performs the administration of assistance policies and includes a person who is a binder holder as defined in the Regulations under the Long-term Insurance Act, where such administration is performed by that binder holder;

 

"assistance policy"

means an assistance policy as defined in section 1 of the Long-term Insurance Act;

 

"automated advice"

means the furnishing of advice through an electronic medium that uses algorithms and technology without the direct involvement of a natural person;

 

"Banks Act"

means the Banks Act, 1990 (Act No. 94 of 1990);

 

"bonds"

in relation to financial product means—

(a) bonds as contemplated in the definition of "securities" as defined in the Financial Markets Act; and
(b) bonds as contemplated in paragraph (a) that have a foreign currency denomination;

 

"category of FSP"

means a specific category of FSPs referred to in section 3;

 

"category II financial services"

means the financial services referred to in the definition of  'discretionary FSP';

 

"category IIA financial services"

means the financial services referred to in the definition of 'hedge fund FSP';

 

"category III financial services"

means the financial services referred to in the definition of 'administrative FSP';

 

"category IV financial services"

means the financial services referred to in the definition of 'assistance business FSP';

 

"cash"

means—

(a) physical currency consisting of Reserve Bank notes and coins;
(b) any balance in an account with a—
(i) bank as defined in section 1(1) of the Banks Act;
(ii) 'branch', 'branch of a bank' or a 'mutual bank' as defined in section 1(1) of the Banks Act;
(iii) bank established in a country other than the Republic and which lawfully conducts in such other country a business similar to the business of a bank, excluding a facility that extends credit;

 

"class of business"

means the respective classes of business set out in Table 1 in Annexure Four;

 

"class of business training"

means the training referred to in section 29(4) in respect of a class of business and which training is provided and assessed by an accredited provider or an education institution;

 

"collective investment scheme"

means a collective investment scheme as defined in section 1(1) of the Collective Investment Schemes Control Act, and includes a portfolio as defined in section 1(1) of that Act;

 

"Collective Investment Schemes Control Act"

means the Collective Investment Schemes Control Act, No. 45 of 2002;

 

"competence"

means having the skills, knowledge and expertise needed for the proper discharge of a person’s responsibilities in the performance of his or her functions;

 

"CPD"

means continuous professional development;

 

"CPD activity"

means an activity that is—

(a) accredited by a Professional Body;
(b) allocated a hour value or a part thereof by that Professional Body; and
(c) verifiable,

and excludes—

(i) an activity performed towards a qualification; and
(ii) product specific training;

 

"CPD cycle"

means a period of 12 months commencing on 1 June of every year and ending 31 May of the following year;

 

"debentures and securitised debt"

in relation to financial product means –

(a) debentures and securitised debt as referred to in paragraph (a)(ii) of the definition of 'financial product' in section 1 of the Act;
(b) debentures as contemplated in the definition of "securities" as defined in the Financial Markets Act; and
(c) debenture and securitised debts contemplated in paragraph (a) and (b) that have a foreign currency denomination;

 

"derivative instrument"

in relation to financial product means—

(a) a derivative instrument as defined in the Financial Markets Act; and
(b) a derivative instrument contemplated in paragraph (a) that has a foreign currency denomination,

excluding—

(i) warrants, certificates or other instruments; and
(ii) a forex investment;

 

"Discretionary Code of Conduct"

means the code of conduct for discretionary FSPs published under section 15 of the Act;

 

"discretionary FSP"

means a discretionary FSP as defined in the Discretionary Code of Conduct;

 

"education institution"

has the meaning assigned to it in section 1(1) of the NQF Act;

 

"examination body"

means a body that, in terms of section 6 of the Act, has been delegated the function of setting, administering and/or conducting regulatory examinations on behalf of the Registrar;

 

"execution of sales"

means an intermediary service performed by a person on instruction of a client to buy, sell, deal, invest or disinvest in, replace or vary one or more financial products;

 

"experience"

means continuous practical working experience that entails the active and on-going gaining of knowledge, skills and expertise relevant to a particular category of FSP, particular financial service and, where applicable, a financial product that was—

(a) in relation to an FSP and representative, gained through the rendering of a particular financial service in respect of a particular category of FSP and a particular financial product; or
(b) in relation to a key individual, gained through the management or oversight of the rendering of a particular financial service in respect of a particular category of FSP; and
(c) gained either within or outside the Republic of South Africa,

with no break in service of more than 5 years between the individual’s last working experience and the date of assessment of that individual’s experience;

 

"family member"

means a natural person who is—

(a) recognised in law or the tenets of religion as a spouse, life partner or civil union partner;
(b) a child, including a stepchild, adopted child and a child born out of wedlock;
(c) a parent or stepparent;
(d) a grandparent; or
(e) dependent on a another person who is recognised in law or appointed by a Court as the person legally responsible for managing the affairs of or meeting the daily care needs of the dependent person;

 

"Financial Markets Act"

means the Financial Markets Act, 2012 (Act No. 19 of 2012);

 

"financial product"

includes—

(a) any subcategory of a financial product; and
(b) in respect of each financial product or subcategory of a financial product, a product that is issued by a foreign product supplier that is similar in nature to such product or subcategory of product;

 

"foreign professional programme"

means a programme offered by a foreign body that is equivalent to an education institution or a professional body which sets an internationally accepted standard for a specialised profession relevant to the financial services industry;

 

"forex investment"

has the meaning assigned to it in section 1(1) of the Code of Conduct for Authorised Financial Services Providers and their Representatives involved in Forex Investment Business, 2004;

 

"friendly society benefit"

means a benefit provided by a friendly society contemplated in paragraph (d)(ii) of the definition of "financial product" in section 1(1) of the Act;

 

"FSP"

means a financial services provider as defined in section 1(1) of the Act;

 

"General Code of Conduct"

means the general code of conduct for authorised FSPs published under section 15 of the Act;

 

"fund member policy"

means a fund member policy as defined in Part 5A of the Regulations under the Long-term Insurance Act;

 

"health service benefit"

means a benefit referred to in paragraph (g) of the definition of 'financial product' in section 1(1) of the Act;

 

"CIS hedge fund"

means a hedge fund as defined in the Declaration made by the Minister under section 63 of the Collective Investment Schemes Control Act;

 

"hedge fund FSP"

means a hedge fund FSP as defined in in the Discretionary Code of Conduct;

 

"juristic"

in relation to a representative, means a representative that is not a natural person;

 

"key individual"

includes a key individual of a juristic representative of an FSP;

 

"limited underwriting"

means where the only requirements a prospective policyholder or life insured must comply with in order for a product supplier to accept risk or pay a claim are—

(a) the furnishing of a health declaration by such policy holder of life insured, structured as answers to no more than eight questions relating to specific medical conditions;
(b) a requirement that the policyholder of life assured must undergo an HIV test;
(c) the requirements imposed by the National Credit Act, No. 34 of 2005; or
(d) a combination of any of the requirements referred to in paragraphs (a), (b) and (c).

 

"long-term deposit"

means a deposit as defined in section 1(1) of the Banks Act, including a foreign currency deposit, with a term exceeding 12 months but excluding a structured deposit;

 

"Long-term Insurance Act"

means the Long-term Insurance Act, 1998 (Act No. 52 of 1998);

 

"long-term insurance subcategory A"

means an assistance policy;

 

"long-term insurance subcategory B1"

means a disability, health and life policy as defined in section 1(1) of the Long-term Insurance Act which provides only risk benefits as contemplated in the Regulations under that Act, but excludes—

(a) a fund policy as defined in section 1(1) of that Act;
(b) a fund member policy;
(c) an investment policy as defined in Part 5B of those Regulations; and
(d) a policy referred to in the definitions of long-term insurance subcategories A, B1-A, B2, B2-A and C;

 

"long-term insurance subcategory B1-A"

means those long-term insurance policies referred to in the definition of long-term insurance subcategory B1 which require no or limited underwriting;

 

"long-term insurance subcategory B2"

means a long-term policy as defined in section 1 of the Long-term Insurance Act which is—

(a) an investment policy as defined in Part 5B of the Regulations under that Act and which guarantees a minimum return of any premium paid at a specified future date or dates, and where such minimum is ascertainable in Rand terms at inception;
(b) a disability, health or life policy that provides risk benefits as contemplated in the Regulations under that Act and has a guaranteed investment value or a materially equivalent value;
(c) an annuity which guarantees a minimum annuity for the term of the policy which annuity is ascertainable in Rand terms at inception; or
(d) a policy which combines the any of the policy features referred to in paragraphs (a) to (c),

but excludes a fund policy, a fund member policy and a policy referred to in the definitions of long-term insurance categories A, B1, B1-A, B2-A and C;

 

"long-term insurance subcategory B2-A" means those long-term insurance policies referred to in the definition of long-term insurance subcategory B2 which provide for the premiums to be invested in an investment portfolio managed by the product supplier with no option by the policyholder to request a change or amendment to that portfolio;

 

"long-term insurance subcategory C"

means a long-term policy as defined in section 1(1) of the Long-term Insurance Act, but excludes–

(a) a fund policy as defined in section 1(1) of that Act;
(b) a fund member policy; and
(c) a policy referred to in the definitions of long-term insurance subcategories A, B1, B1-A, B2 and B2-A;

 

"money-market instruments"

in relation to financial product means –

(a) money-market instruments as referred to in paragraph (a)(iii) of the definition of 'financial product' in section 1 of the Act; and
(b) money-market instruments contemplated in paragraph (a) that have a foreign currency denomination;

 

"no underwriting"

means there is no requirement by a product supplier for any medical, financial, demographic or lifestyle information to be provided by a prospective policyholder or life insured in order for such product supplier to accept risk or pay a claim;

 

"NQF"

has the meaning assigned to it in the NQF Act and includes the sub-frameworks as defined in section 1 of that Act;

 

"NQF Act"

means the National Qualifications Framework Act, 2008 (Act No. 67 of 2008);

 

"offsetting of claims"

means the payment of policyholder’s claims and the offsetting of such claims against premium received from policyholders for remittal to a long-term insurer;

 

"participatory interest in a CIS hedge fund"

means a participatory interest in a collective investment scheme that is a hedge fund;

 

"participatory interest in a collective investment scheme"

means a participatory interest in one or more collective investment schemes as referred to in paragraph (b)  of the definition of ‘financial product’ in section 1(1) of the Act excluding a participatory interest in a CIS  hedge fund;

 

"particular financial product"

in relation to product specific training, means a specific product of a product supplier with its own specific characteristics, features, terms and conditions and which product is a financial product;

 

"particular financial service"

means the financial services performed by a category of FSP referred to in section 3, and in respect of a Category I FSP, advice or intermediary services;

 

"part qualification"

has the meaning assigned to it in section 1(1) of the NQF Act;

 

"pension fund benefit"

means a financial product contemplated in paragraph (d)(i) of the definition of "financial product"in section 1(1) of the Act, including a fund policy, but excluding a retail pension benefit;

 

"product specific training"

means the training referred to in section 29(5) in respect of a particular financial product and which training is assessed, including any amendments to that particular financial product;

 

"professional body"

means a body recognised by the SAQA as a professional body for purposes of the NQF Act;

 

"professional programme"

means a programme at post-graduate level offered by an education institution or a professional body for the purposes of providing specialised competence in a specific field of the financial services industry;

 

"qualification"

means a—

(a) qualification as defined in the NQF Act, excluding a part qualification as defined in that Act, that is offered by an education institution or an accredited provider;
(b) professional programme; or
(c) foreign qualification or foreign professional programme that has been evaluated by SAQA as being equivalent to a qualification or programme referred to in paragraphs (a) and (b) above;

 

"Quality Council"

has the meaning assigned to it in section 1 of the NQF Act;

 

"qualifying criteria"

in relation to a regulatory examination, means the criteria against which a regulatory examination must be set;

 

"RE 1"

means the regulatory examination developed in terms of the criteria set out in Table 1 of Annexure Five;

 

"RE 3"

means the regulatory examination developed in terms of the criteria set out in Table 2 of Annexure Five;

 

"RE 4"

means the regulatory examination developed in terms of the criteria set out in Table 3 of Annexure Five;

 

"RE 5"

means the regulatory examination developed in terms of the criteria set out in Table 4 of Annexure Five;

 

"recognised qualification"

means a qualification that is recognised by the Registrar in terms of section 24 and that is published as a recognised qualification on the official web site of the Financial Services Board;

 

"regulatory examination"

means a regulatory examination based on the qualifying criteria set out in the Tables in Annexure Five, the purpose of which is to test a person’s knowledge, understanding and application of legislation, including a financial sector law as defined in section 1(1) of the Financial Sector Regulation Act, 2017 (Act No. 9 of 2017), the Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001), and all measures promulgated in terms of those Acts, directly applicable to an FSP, representative or key individual;

 

"related parties"

means related parties as defined in International Accounting Standard (IAS 24);

 

"regulatory authority"

includes—

(a) any organ of state as defined in section 239 of the Constitution of the Republic of South Africa, 1996, responsible for the supervision or enforcement of legislation, or a similar body designated in the laws of a country other than the Republic to supervise or enforce legislation of that country;
(b) a market infrastructure that is responsible for the supervision of persons authorised by such infrastructure under the Financial Markets Act, 2012 (Act No. 19 of 2012); and
(c) an Ombud established under Financial Services Board legislation or a recognised Scheme under the Financial Services Ombud Schemes Act, 2004 (Act No. 37 of 2004);

 

"retail pension benefit"

means a benefit provided by a retirement annuity fund, preservation pension fund or preservation provident fund, as defined by the Income Tax Act, 1962 (Act No. 58 of 1962), and includes a benefit provided by a fund member policy, as defined in the Regulations to the Long-term Insurance Act, but excludes a pension fund benefit;

 
"securities and instruments"

means—

(a) securities and instruments that are not defined in this Determination as separate product categories; and
(b) securities and instruments contemplated in paragraph (a) that have a foreign currency denomination,

 

"shares"

in relation to financial product means –

(a) shares referred to in paragraph (a)(i) of the definition of ‘financial product’ in section 1 of the Act; and
(b) shares that have a foreign currency denomination;

 

"short-term deposit"

means a deposit as defined in section 1(1) of the Banks Act, including a foreign currency deposit, with a term not exceeding 12 months but excluding a structured deposit;

 

"Short-term Insurance Act"

means the Short-term Insurance Act, 1998 (Act No. 53 of 1998);

 

"short-term insurance commercial lines"

means short-term insurance policies referred to in the Short-term  Insurance Act purchased by juristic persons and natural persons acting in a business capacity;

 

"short-term insurance personal lines"

means short-term insurance policies referred to in the Short-term Insurance Act purchased by natural persons acting otherwise than in a business capacity, but excludes a policy referred to in the definition of short-term insurance personal lines A1;

 

"short-term insurance personal lines A1"

means the short-term insurance policies referred to in the definition of 'short-term insurance personal lines', excluding—

(a) marine policies; and
(b) engineering policies and guarantee policies as defined in section 1 of the Short-term Insurance Act, and which policies–
(i) require no or limited underwriting;
(ii) define policy benefits as a sum insured, provide for the replacement of the insured asset or provide for the settlement of outstanding balances due and payable to credit providers;
(iii) have contract terms of 24 months or less;
(iv) are not subject to the principle of average; and
(v) do not provide for any exclusions or conditions from liability of the insurer other than—
(aa) exclusions relating to unlawful conduct, provided that such exclusions may only be applied or relied on if there is a direct link between the cause of the loss and the unlawful conduct;
(bb) special risks referred to in the Conversion of the SASRIA Act, No. 134 of 1998;
(cc) exclusions relating to the condition of any asset insured at inception of the policy other than exclusions relating to the wear and tear of the asset;
(dd) exclusions relating to the maintenance and usage of the insured asset under a policy that insures against unforeseen mechanical or electrical component failure;
(ee) exclusions relating to consequential loss; or
(ff) any combination of (aa) to (ee);

 

"SAQA"

has the meaning assigned to it in section 1 of the NQF Act;

 

"structured deposit"

means a—

(a) combination of a short-term deposit or a long-term deposit and another Tier 1 financial product; or
(b) a short-term deposit or long-term deposit where the return or value is dependent on the performance of or is derived from the return or value of one or more underlying financial product, asset, rate or index, on a measure of economic value or on a default event;

 

"sole proprietor",

in relation to an FSP, means an FSP who is a natural person;

 

"the Act"

means the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002);

 

"Tier 1 financial products"

means the financial products listed in column A of Table 1 in Annexure Three;

 

"Tier 2 financial products"

means the financial products listed in column B of Table 1 in Annexure Three;

 

"verifiable"

in relation to CPD activities means activities that can be objectively verified and includes evidence of the identity of the person who partook in such activities and proof of the completion thereof;

 

"warrants, certificates or other instruments"

in relation to financial product means—

(a) any warrant, certificate, and other instrument acknowledging, conferring or creating rights to subscribe to, acquire, dispose of, or convert securities and instruments as referred to in paragraph (a)(iv) of the definition of 'financial product' in section 1 of the Act; and
(b) warrants, certificates or other instruments as contemplated in paragraph (a) that have a foreign currency denomination;

 

"wear and tear"

means the normal expected deterioration of the insured asset arising from normal usage and age.