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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 II : General provisions

 

 

2. General duty of provider

 

A provider must at all times render financial services honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry.

 

 

3. Specific duties of provider

 

1) When a provider renders a financial service-
a) representations made and information provided to a client by the provider-
i) must be factually correct;
ii) must be provided in plain language, avoid uncertainty or confusion and not be misleading;
iii) must be adequate and appropriate in the circumstances of the particular financial service, taking into account the factually established or reasonably assumed level of knowledge of the client;
iv) must be provided timeously so as to afford the client reasonably sufficient time to make an informed decision about the proposed transaction;
v) may, subject to the provisions of this Code, be provided orally and, at the client’s request, confirmed in writing within a reasonable time after such request;
vi) must, where provided in writing or by means of standard forms or format, be in a clear and readable print size, spacing and format;
vii) must, as regards all amounts, sums, values, charges, fees, remuneration or monetary obligations mentioned or referred to therein and payable to the product supplier or the provider, be reflected in specific monetary terms: Provided that where any such amount, sum, value, charge, fee, remuneration or monetary obligation is not reasonably pre-determinable, its basis of calculation must be adequately described; and
viii) need not be duplicated or repeated to the same client unless material or significant changes affecting that client occur, or the relevant financial service renders it necessary, in which case a disclosure of the changes to the client must be made without delay;
b) a provider and a representative must avoid and where this is not possible mitigate, any conflict of interest between the provider and a client or the representative and a client;
c) a provider or a representative must, in writing, at the earliest reasonable opportunity-
i) disclose to a client any conflict of interest in respect of that client, including-
aa) the measures taken, in accordance with the conflict of interest management policy of the provider referred to in section 3A(2), to avoid or mitigate the conflict;
bb) any ownership interest or financial interest, other than an immaterial financial interest, that the provider or representative may be or become eligible for;
cc) the nature of any relationship or arrangement with a third party that gives rise to a conflict of interest, in sufficient detail to a client to enable the client to understand the exact nature of the relationship or arrangement with the conflict of interest; and
ii) inform a client of the conflict of interest management policy referred to in section 3A(2) and how it may be accessed;
d) the provider must disclose to the client the existence of any personal interest in the relevant service, or of any circumstance which gives rise to an actual or potential conflict of interest in relation to such service, and take all reasonable steps to ensure fair treatment of the client;
e) non-cash incentives offered and/or other indirect consideration payable by another provider, a product supplier or any other person to the provider could be viewed as a potential conflict of interest;
f) the service must be rendered in accordance with the contractual relationship and reasonable requests or instructions of the client, which must be executed as soon as reasonably possible and with due regard to the interests of the client which must be accorded appropriate priority over any interests of the provider;
g) transactions of a client must be accurately accounted for; and
h) the provider involved must not deal in any financial product for own benefit, account or interest where the dealing is based upon advance knowledge of pending transactions for or with clients, or on any non-public information the disclosure of which would be expected to affect the prices of such product.

 

2)
a) A provider must have appropriate procedures and systems in place to-
i) record such verbal and written communications relating to a financial service rendered to a client as are contemplated in the Act, this Code or any other Code drafted in terms of section 15 of the Act;
ii) store and retrieve such records and any other material documentation relating to the client or financial service rendered to the client; and
iii) keep such client records and documentation safe from destruction.
b) All such records must be kept for a period of five years after termination, to the knowledge of the provider, of the product concerned or, in any other case, after the rendering of the financial service concerned.
c) Providers are not required to keep the records themselves but must ensure that they are available for inspection within seven days of the registrar's request.
d) Records may be kept in an appropriate electronic or recorded format, which are accessible and readily reducible to written or printed form.

 

3) A provider may not disclose any confidential information acquired or obtained from a client or, subject to section 4(1), a product supplier in regard to such client or supplier, unless the written consent of the client or product supplier, as the case may be, has been obtained beforehand or disclosure of the information is required in the public interest or under any law.

 

3A. Financial interest and conflict of interest management policy

 

1)
a) A provider or its representatives may only receive or offer the following financial interest from or to a third party-
i) commission authorised under the Long-term Insurance Act, 1998 (Act No. 52 of 1998) or the Short-term Insurance Act, 1998 (Act No. 53 of 1998);
ii) commission authorised under the Medical Schemes Act, 1998 (Act No. 131 of 1998);
iii) fees authorised under the Long-term Insurance Act, 1998 (Act No. 52 of 1998), the Short-term Insurance Act, 1998 (Act No. 53 of 1998) or the Medical Schemes Act, 1998 (Act No. 131 of 1998), if those fees are reasonably commensurate to a service being rendered;
iv) fees for the rendering of a financial service in respect of which commission or fees referred to in subparagraph (i), (ii) or (iii) is not paid, if those fees-
aa) are specifically agreed to by a client in writing; and
bb) may be stopped at the discretion of that client;
v) fees or remuneration for the rendering of a service to a third party, which fees or remuneration are reasonably commensurate to the service being rendered;
vi) subject to any other law, an immaterial financial interest; and
vii) a financial interest, not referred to under subparagraph (i) to (vi), for which a consideration, fair value or remuneration that is reasonably commensurate to the value of the financial interest, is paid by that provider or representative at the time of receipt thereof.
b) A provider may not offer any financial interest to a representative of that provider for-
i) giving preference to the quantity of business secured for the provider to the exclusion of the quality of the service rendered to clients; or
ii) giving preference to a specific product supplier, where a representative may recommend more than one product supplier to a client; or
iii) giving preference to a specific product of a product supplier, where a representative may recommend more than one product of that product supplier to a client.
c) For the purposes of this section, where the same legal entity is a product supplier and a provider, paragraph (a) does not apply to the representatives of that entity. That entity is subject to section 3A(1)(b), in respect of its representatives.

 

 

(1A)
(a) A Category I provider that is authorised or appointed to give advice may not receive a sign-on bonus from any person.
(b) No person may offer or provide a sign-on bonus to any person, other than a new entrant, as an incentive to become a Category I provider that is authorised or appointed to give advice.

[Subsection (1A) inserted by section 3 of Board Notice 146 of 2014]

 

 

2)
a) Every provider, other than a representative, must adopt, maintain and implement a conflict of interest management policy that complies with the provisions of the Act.
b) A conflict of interest management policy must-
i) provide for the management of conflicts of interest as defined in section 1, and-
aa) mechanisms for the identification of conflicts of interest;
bb) measures for the avoidance of conflicts of interest, and where avoidance is not possible, the reasons therefore and the measures for the mitigation of such conflicts of interest;
cc) measures for the disclosure of conflicts of interest;
dd) processes, procedures and internal controls to facilitate compliance with the policy; and
ee) consequences of non-compliance with the policy by the provider’s employees and representatives; and
ii) specify the type of and the basis on which a representative will qualify for a financial interest that the provider will offer a representative and motivate how that financial interest complies with section 3A(1)(b);
iii) include a list of all is associates;
iv) include the names of any third parties in which the provider holds an ownership interest;
v) include the names of any third parties that holds an ownership interest in the provider; and
vi) include the nature and extent of the ownership interest referred to in subparagraph (v) and (vi); and
vii) be drafted in an easily comprehensible form and manner.
c) A conflict of interest management policy must be adopted by the sole proprietor of a provider, the board of directors of a provider or, in the case where a provider is not a company, the governing body of the provider.
d) A provider must ensure that its employees, representatives and, where appropriate, associates are aware of the contents of its conflict of interest management policy and provide for appropriate training and educational material in this regard.
e) A provider must continuously monitor compliance with its conflict of interest management policy and annually conduct a review of the policy.
f) A provider must publish its conflict of interest management policy in appropriate media and ensure that it is easily accessible for public inspection at all reasonable times.

 

3) A provider or representative may not avoid, limit or circumvent or attempt to avoid, limit or circumvent compliance with this section through an associate or an arrangement involving an associate.

 

4)
a) A compliance officer or, where the provider need not, in terms of the Act, have a compliance officer, the provider, must include a report on the provider’s conflict of interest management policy in compliance reports submitted to the Registrar under the Act.
b) The report referred to in paragraph (a) must report on at least the implementation, monitoring and compliance with, and the accessibility of the conflict of interest management policy.