Acts Online
GT Shield

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 VII : Furnishing of advice

 

 

8. Suitability
1) A provider other than a direct marketer, must, prior to providing a client with advice—
a) take reasonable steps to seek from the client appropriate and available information regarding the client's financial situation, financial product experience and objectives to enable the provider to provide the client with appropriate advice;
b) conduct an analysis, for purposes of the advice, based on the information obtained;
c) identify the financial product or products that will be appropriate to the client's risk profile and financial needs, subject to the limitations imposed on the provider under the Act or any contractual arrangement; and
d) where the financial product ("the replacement product") is to replace an existing financial product wholly or partially ("the terminated product") held by the client, fully disclose to the client the actual and potential financial implications, costs and consequences of such a replacement, including, where applicable, full details of—
i) fees and charges in respect of the replacement product compared to those in respect of the terminated product;

[Subparagraph (i) amended by section 3(a) of Board Notice 43 of 2008]

ii) special terms and conditions, exclusions of liability, waiting periods, loadings, penalties, excesses, restrictions or circumstances in which benefits will not be provided, which may be applicable to the replacement product compared to those applicable to the terminated product;

[Subparagraph (ii) amended by section 3(a) of Board Notice 43 of 2008]

iii) in the case of an insurance product, the impact of age and health changes on the premium payable;
iv) differences between the tax implications of the replacement product and the terminated product;
v) material differences between the investment risk of the replacement product and the terminated product;
vi) penalties or unrecovered expenses deductible or payable due to termination of the terminated product;
vii) to what extent the replacement product is readily realisable or the relevant funds accessible, compared to the terminated product;

[Subparagraph (vii) amended by section 3(a) of Board Notice 43 of 2008]

viii) vested rights, minimum guaranteed benefits or other guarantees or benefits which will be lost as a result of the replacement; and

[Subparagraph (viii) amended by section 3(a) of Board Notice 43 of 2008]

ix) any incentive, remuneration, consideration, commission, fee or brokerages received, directly or indirectly, by the provider on the terminated product and any incentive, remuneration, consideration, commission, fee or brokerages payable, directly or indirectly, to the provider on the replacement product where the provider rendered financial services on both the terminated and replacement product.

[Subparagraph (ix) inserted by section 3(b) of Board Notice 43 of 2008]

e) take reasonable steps to establish whether the financial product identified is wholly or partially a replacement for an existing financial product of the client and if it is such a replacement, the provider must comply with subparagraph (d).

[Paragraph (e) inserted by section 3(c) of Board Notice 43 of 2008]

 

2) The provider must take reasonable steps to ensure that the client understands the advice and that the client is in a position to make an informed decision.

 

3) A provider providing advice to a client to replace an existing long-term insurance contract or policy with any other financial product must at the earliest practicable opportunity after providing such advice, but in any event no later than the date on which any transaction requirement is submitted to a product supplier in respect of any replacement product, notify the issuer of the existing and the replacement long-term insurance contract or policy of such advice.

[Subsection 3 amended by section 3(d) of Board Notice 43 of 2008]

 

4) Where a client—
a) has not provided all information requested by a provider furnishing advice, as part of the analysis referred to in subsection (1)(b), or where the provider has been unable to conduct such an analysis because in the light of the circumstances surrounding the case, there was not reasonably sufficient time to do so, the provider must fully inform the client thereof and ensure that the client clearly understands that-
i) a full analysis in respect of the client referred to in subsection (1)(b) could not be undertaken;
ii) there may be limitations on the appropriateness of the advice provided; and
iii) the client should take particular care to consider on its own whether the advice is appropriate considering the client's objectives, financial situation and particular needs; or
b) elects to conclude a transaction that differs from that recommended by the provider, or otherwise elects not to follow the advice furnished, or elects to receive more limited information or advice than the provider is able to provide, the provider must alert the client as soon as reasonably possible of the clear existence of any risk to the client, and must advise the client to take particular care to consider whether any product selected is appropriate to the client's needs, objectives and circumstances.

 

 

9. Record of advice

 

1) A provider must, subject to and in addition to the duties imposed by section 18 of the Act and section 3(2) of this Code, maintain a record of the advice furnished to a client as contemplated in section 8, which record must reflect the basis on which the advice was given, and in particular—
a) a brief summary of the information and material on which the advice was based;
b) the financial products which were considered;

[Paragraph (b) amended by section 3(e) of Board Notice 43 of 2008]

c) the financial product or products recommended with an explanation of why the product or products selected, is or are likely to satisfy the client's identified needs and objectives; and

[Paragraph (c) amended by section 3(e) of Board Notice 43 of 2008]

d) where the financial product or products recommended is a replacement product as contemplated in section 8(1)(d)—
aa) the comparison of fees, charges, special terms and conditions, exclusions of liability, waiting periods, loadings, penalties, excesses, restrictions or circumstances in which benefits will not be provided, between the terminated product and the replacement product; and
bb) the reasons why the replacement product was considered to be more suitable to the client's needs than retaining or modifying the terminated product:

[Paragraph (d) inserted by section 3(f) of Board Notice 43 of 2008]

Provided that such record of advice is only required to be maintained where, to the knowledge of the provider, a transaction or contract in respect of a financial product is concluded by or on behalf of the client as a result of the advice furnished to the client in accordance with section 8.

 

2) A provider, other than a direct marketer, must provide a client with a copy of the record contemplated in 9(1) in writing.