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

General code of conduct for authorised financial services providers and representatives, 2003

Part I : Introductory provisions

1. Definitions, construction and application

 

 

1) In this Code "the Act" means the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002), a word or expression to which a meaning has been assigned in the Act shall have that meaning, and, unless the context indicates otherwise-

 

"advertisement"

in relation to a provider, means any written, printed, electronic or oral communication (including a communication by means of a public radio service), which is directed to the general public, or any section thereof, or to any client on request, by any such person, which is intended merely to call attention to the marketing or promotion of financial services offered by such person, and which does not purport to provide detailed information regarding any such financial services; and

 

"advertising" or "advertises"

has a corresponding meaning;

 

"associate"
a) in relation to a natural person, means
i) a person who is recognised in law or the tenets of religion as the spouse, life partner or civil union partner of that person;
ii) a child of that person, including a stepchild, adopted child and a child born out of wedlock;
iii) a parent or step-parent of that person;
iv) a person in respect of which that person 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 first mentioned person;
v) a person who is the spouse, life partner or civil union partner of a person referred to n subparagraphs (ii) to (iv);
vi) a person who is in a commercial partnership with that person;
b) in relation to a juristic person-
i) which is a company, means any subsidiary or holding company of that company, any other subsidiary of that holding company and any other company of which that holding company is a subsidiary;
ii) which is a close corporation registered under the Close Corporations Act, 1984 (Act No. 69 of 1984), means any member thereof as defined in section 1 of that Act;
iii) which is not a company or a close corporation as referred to in subparagraphs (i) or (ii), means another juristic person which would have been a subsidiary or holding company of the first-mentioned juristic person-
aa) had such first-mentioned juristic person been a company; or
bb) in the case where that other juristic person, too, is not a company, had both the first-mentioned juristic person and that other juristic person been a company;
iv) means any person in accordance with whose directions or instructions the board of directors of or, in the case where such juristic person is not a company, the governing body of such juristic person is accustomed to act;
c) in relation to any person-
i) means any juristic person of which the board of directors or, in the case where such juristic person is not a company, of which the governing body is accustomed to act in accordance with the directions or instructions of the person first-mentioned in this paragraph;
ii) includes any trust controlled or administered by that person.

 

"company"

means a company under the Companies Act, 1973 (Act No. 61 of 1973);

 

"conflict of interest"

means any situation in which a provider or a representative has an actual or potential interest that may, in rendering a financial service to a client,-

a) influence the objective performance of his, her or its obligations to that client; or
b) prevent a provider or representative from rendering an unbiased and fair financial service to that client, or from acting in the interests of that client,

including but not limited to-

i) a financial interest;
ii) an ownership interest;
iii) any relationship with a third party;

 

"Direct marketing"

means the rendering of financial services by way of telephone, internet, media insert, direct mail, or electronic mail, excluding any such means which are advertisements not containing transaction requirements.

 

"Direct marketer"

means a provider who, in the normal course of business, provides all or the predominant part of the financial services concerned in the form of direct marketing.

 

"distribution channel"

means-

a) any arrangement between a product supplier or any of its associates and one or more providers or any of its associates in terms of which arrangement any support or service is provided to the provider or providers in rendering a financial service to a client;
b) any arrangement between two or more providers or any of their associates, which arrangement facilitates, supports or enhances a relationship between the provider or providers and a product supplier;
c) any arrangement between two or more product suppliers or any of their associates, which arrangement facilitates, supports or enhances a relationship between a provider or providers and a product supplier;

 

"fair value"

has the meaning assigned to it in the financial reporting standards adopted or issued under the Companies Act, 1973 (Act No. 61 of 1973);

 

"financial interest"

means any cash, cash equivalent, voucher, gift, service, advantage, benefit, discount, domestic or foreign travel, hospitality, accommodation, sponsorship, other incentive or valuable consideration, other than-

a) an ownership interest;
b) training, that is not exclusively available to a selected group of providers or representatives, on-
i) products and legal matters relating to those products;
ii) general financial and industry information;
iii) specialised technological systems of a third party necessary for the rendering of a financial service; but excluding travel and accommodation associated with that training;

 

"holding company"

means a holding company as defined in section 1(4) of the Companies Act, 1973 (Act No. 61 of 1973);

 

"immaterial financial interest"

means any financial interest with a determinable monetary value, the aggregate of which does not exceed R1 000 in any calendar year from the same third party in that calendar year received by-

a) a provider who is a sole proprietor; or
b) a representative for that representative’s direct benefit;
c) a provider, who for its benefit or that of some or all of its representatives, aggregates the immaterial financial interest paid to its representatives;

 

"new entrant"

means a person who has never been authorised as a financial services provider or appointed as a representative by any financial services provider"

[Definition inserted by section 2(a) of Board Notice 146 of 2014]

 

"provider"

means an authorised financial services provider, and includes a representative;

 

"sign-on-bonus"

means—

(a) any financial interest offered or received directly or indirectly, upfront or deferred, and with or without conditions, as an incentive to become a provider; and
(b) a financial interest referred to in paragraph (a) includes but is not limited to—
(i) compensation for the—
(aa) potential or actual loss of any benefit including any form of income, or part thereof; or
(bb) cost associated with the establishment of a provider's business or operations, including the sourcing of business, relating to the rendering of financial services; or
(ii) a loan, advance, credit facility or any other similar arrangement.

[Definition inserted by section 2(b) of Board Notice 146 of 2014]

 

"ownership interest"

means-

a) any equity or proprietary interest, for which fair value was paid by the owner at the time of acquisition, other than equity or a proprietary interest held as an approved nominee on behalf of another person; and
b) includes any dividend, profit share or similar benefit derived from that equity or ownership interest;

 

"subsidiary"

means a subsidiary as defined in section 1(3) of the Companies Act, 1973 (Act No. 61 of 1973);

 

"third party"

means-

a) a product supplier;
b) another provider;
c) an associate of a product supplier or a provider;
d) a distribution channel;
e) any person who in terms of an agreement or arrangement with a person referred to in paragraphs (a) to (d) above provides a financial interest to a provider or its representatives;

 

"transaction requirement"

means any application, proposal, order, instruction or other contractual information required to be completed for, or submitted to, a product supplier by or on behalf of a client relating to the purchase of or investment in any financial product, including any amendment thereof or variation thereto;

 

"writing"

includes communication by telefax or any appropriate electronic medium that is accurately and readily reducible to written or printed form; and "written" has a corresponding meaning.

 

2)
a) This Code must be construed-
i) in conjunction with the provisions of the Act and in manner conducive to the promotion and achievement of the objectives of codes of conduct as stated in section 16 of the Act; and
ii) as being in addition to any other law not inconsistent with its provisions and not as replacing any such law.
b) In the case of any inconsistency or conflict between-
i) a provision of this Code and a provision of any other specific Code drafted under section 15 of the Act, the last mentioned provision shall prevail; and
ii) a provision of this Code and a provision of any other law specifically regulating market conduct in the rendering of financial services in respect of one or more specific financial products, the last mentioned provision, unless inconsistent or in conflict with the Act, shall prevail.

 

3) The provisions of this Code apply, unless stated otherwise in this Code or otherwise by law, to all financial services providers and representatives.