OMEGA COMPLIANCE SOLUTIONS
November/December 2020
And so, 2020 reaches its end! In probably the most unprecedented year any of us have ever lived through, it seems that no-one will look back too fondly on 2020.
The uncertainties of 2021 are probably a little clearer given what we learnt this year, so let’s try to embrace all the opportunities the new year presents.
Whatever you’re doing over the festive season, we hope you take the time to relax and rejuvenate. The team at Omega Compliance Solutions wishes you well over the festive season, and look forward to working with you again next year.
We’re taking a break, but will be available on our cell phones should you need anything.
THE FINANCIAL SECTOR CONDUCT AUTHORITY (FSCA)
Update to Policies and Procedures
A reminder that the amended policies and procedures to accommodate the changes to the FAIS General Code of Conduct and Fit & Proper Regulations should be completed by 26 December.
Should you need assistance in completing this, please let us know.
Amendments to Premium Collection
As her last official act, Caroline da Silva signed FAIS Insurance Notices 19 and 20 of 2020 on 30 October. The Notices gave effect to the amendment of the premium collection Regulations.
Independent intermediaries collecting premium directly into their accounts are exempted from section 48 of the Short-term Insurance Act (53 of 1998) and sections 5.1(1) and 5.1(2) of its Regulations, and/or section 49 of the Long-term Insurance Act (52 of 1998) and sections 3.2(1) and (2) of its Regulations. Simply put, this means that the rules around new appointments of brokers to collect premium are removed and replaced with the conditions of the exemptions.
The conditions of the exemptions are:
- Intermediaries must:
- inform the FSCA of their intention to enter into a premium collection agreement at least 30 (thirty) days prior to entering into the agreement; and
- detail the remuneration or fee to be received by the intermediary.
- The remuneration:
- must be reasonable and commensurate with the services performed;
- may not be a percentage of the total premium; and
- must not result in the intermediary being remunerated more than once for this or a similar function.
- Intermediaries must at all times have:
- appropriate systems and data integration with the relevant insurers to allow them ready access to data;
- disaster recovery plans specific to the collection process in place and tested; and
- segregation of functions and access controls where the intermediary has agreements with multiple insurers and record keeping procedures.
The Notices go on to bind insurers to the same conditions, but from that perspective.
In principle, the exemptions should not apply retroactively, thus only new collection agreements should be subject to these requirements. However, it’s likely that any review conducted by the FSCA will expect the standard to be that described in the exemptions. The oversight functions of insurers will eventually lead to all agreements meeting these criteria.
We recommend that insurers, intermediaries and suitably authorised underwriting managers amend their agency approval process to encompass the amended criteria.
Read the official Notices here,
Executive Position Changes at the FSCA
Jurgen Boyd and Marius du Toit are retiring from their roles at the FSCA at the end of March 2021. After many years of service to the FSB [Financial Services Board] and then the FSCA, they leave the positions of Divisional Executive for Market Integrity Supervision and Divisional Executive for Specialist Support, respectively.
Additionally, Olano Makhubela has temporarily been appointed to the position of Commissioner of the FSCA until 5 February 2021.
It should also be noted that Abel Sithole has taken up his role at the Public Investment Corporation, and the positions of FSCA Deputy Commissioners are still vacant.
There are calls for the process of filling these positions to be completely transparent as the governance of the FSCA is in the public interest. We wish those leaving and the new candidates well, and hope that the structuring of the new executive team meets everyone’s expectations.
Proposed Amendment to the Fit & Proper Regulations
The FSCA released a draft amendment to the FAIS Fit & Proper Regulations on 1 December. The changes are essentially administrative and correct various errors in the original or subsequent exemptions and amendments. Some technical aspects may give training providers some headaches, but other changes will make their task easier.
The draft amendment and response document are available here should you wish to comment (by 19 February 2021).
Proposed Amendment to the FAIS General Code of Conduct
The FSCA released a draft amendment to the FAIS General Code of Conduct on 1 December.
The proposed changes add some control and clarity on upfront and ongoing fees charged by intermediaries – although these are in line with the TCF [Treating Customers Fairly] principles and PPR [Policyholder Protection Rules], so they’re not unexpected.
The amendment does propose to specifically allow for ‘advice fees’. It seems we’ve come full circle on this issue, but it’s good that we will have regulatory clarity, some rules to work with, and a somewhat more level playing field.
Premium collection requirements in long-term insurance are to be aligned with those we’re coming to grips with in the short-term insurance industry.
A practical change we have advocated has been included whereby accurate disclosure will have to be made where products sold are not financial products as defined in the Act.
There is a proposed exemption for insurers and banks from the need to have professional indemnity, “suitable guarantees” and fidelity cover. Should these entities prefer to transfer their risk in terms of FAIS exposures depends on their risk appetites – some may see an immediate cost saving, and others may have some advice or marketing exposure they would rather not carry.
The draft amendment and response document are available here should you wish to comment (by 19 February 2021).
Proposed Amendment to Qualifying Criteria for Compliance Officers
And another one! This time, changes to the qualifications and experience requirements for Compliance Officers.
You can see what the expectations are on “us” here (and comment by 19 February 2021 if you like).
Annual Report
The FSCA released its Annual Report for 2019-2020 this month.
As was to be expected, many of its strategic objectives were curtailed due to the COVID-19 pandemic. You can read the full report here.
Financial Sector Regulation Act
A reminder that the new Ombuds structure commenced on 1 November, and that Joint Standard 1 of 2020 which determines the conditions of fitness and propriety of significant owners commences on 1 December 2020. Note that intermediaries and underwriting managers are currently exempt from the requirement.
The FSCA has issued further guidance on the Joint Standard here.
The End of Cheques
A joint statement from the South African Reserve Bank, the FSCA, the Payments Association of South Africa, and the Banking Association of South Africa was released on 18 November. It states that accepting and collecting cheques will end on 31 December 2020. (So that chequebook lying in the bottom drawer at the office that you “just might need” can really be thrown away now – Ed.)
Note that this means that a verification of account or banking details in terms of Anti-money Laundering controls by receipt of a cancelled cheque will no longer be acceptable, and bank letters or statements will need to be obtained.
The official statement is available here.
Contingent Business Interruption (CBI) Insurance Cover
The validity of CBI claims is moving in favour of policyholders as per the ruling of the Western Cape High Court in the case of Ma-Afrika Hotels (Pty) Limited and The Stellenbosch Kitchen (Pty) Limited V Santam Limited. The High Court ruled that Santam was liable to cover losses without limitations for the full 18-month period under its policy.
The Supreme Court of Appeal has heard the arguments brought by Guardrisk, and has reserved judgement on the matter, stating that it will do its best to give a ruling before Christmas.
Despite stating a need for legal clarity, which it would seem we may now have, the insurers are still not done.
In the interim, the FSCA is urging insurers to consider paying CBI claims based on the legal certainty provided by the courts to date.
The full FSCA press release is available here.
Crypto Assets – Inclusion as a Financial Product
The FSCA released a draft declaration with the intention to include crypto assets as a financial product. However, this is limited to the definition in terms of FAIS, and is aimed at ensuring that proper advice and sufficient disclosures as encompassed in the FAIS legislation are provided to investors.
So, anyone providing advice or intermediary services in terms of crypto assets may need to register as a Financial Services Provider (FSP). This would include crypto asset exchanges and platforms, as well as brokers and advisors.
Comments can be submitted to the FSCA by 28 January 2021.
Download the draft declaration here.
NATIONAL TREASURY
Document for Consultation – “An Inclusive Financial Sector for All”
National Treasury released a draft document for consultation entitled “An Inclusive Financial Sector for All”. The stated objective of the document is “to establish the policy framework for financial inclusion in South Africa and to sketch the approach to its implementation.”
Broadly, financial inclusion aims to ensure that convenient and affordable financial services are delivered to historically under-served or excluded people. This is important as access to financial services has tremendous potential for social and economic development.
The proposed projects (very broadly) include:
- Promotion of transactional accounts;
- Development of alternate payment options (including “e-money”);
- A formal, yet non-banking, remittance system;
- Formalising the now informal savings pool in South Africa;
- Promoting credit, investment, and insurance options for under-served people;
- Facilitating the social grant payment process;
- Developing efficiencies in client take-on (namely revised FICA requirements);
- Improving access to and the analysis structures around credit and financing market for SMMEs;
- Supporting and developing co-operative banks;
- Broadening the points of access to the financial sector; and
- Developing a fintech policy.
The document does go into the effects of the COVID-19 pandemic on these plans, and argues that they’re essential in the redevelopment of the South African economy.
To read the full document and form your own opinion, click here.
INFORMATION REGULATOR – POPIA (PROTECTION OF PERSONAL INFORMATION ACT)
No news from the Information Regulator is good news.
There have been no further developments regarding the finalisation of Guidance Notes for the sectoral codes of conduct or the appointment of information officers.
The Regulator is currently struggling to obtain the necessary funding from Treasury and the Minister of Finance to enable them to do their job.
While the Information Regulator’s financial woes may delay the release of guidance and planned activities, we doubt that this will have an impact on the effective date of 1 July 2021, which is only seven months away. How time flies when you’re having fun!
FINANCIAL INTELLIGENCE CENTRE (FIC)
Guidance on Money Laundering, Terrorist Financing, and Proliferation Financing Risk Considerations Relating to Geographic Areas
On 6 November, the FIC released the above draft public consultation communication (draft PCC 110).
The document aims to provide guidance on the Risk-Based Approach to identification, management, and mitigation of money laundering, terrorist financing, and proliferation financing.
The draft provides suggestions for credible third-party resources to assist in the undertaking of these tasks, as well as clarify the meaning and management of geographic area risks.
PCC 110 provides good guidance on the geographical reporting requirement, but ultimately would leave the exact criteria to the institutions. We would recommend a careful review of your client base and approaches from new clients outside of South Africa as well as automatically rating these clients higher on risk assessments.
Read the communication here.
goAML Reporting Amendment
On 10 November, the FIC released a revision to a previous Notice entitled Notice 04A. This Notice explains the revised process for correcting or resubmitting reports on the goAML system.
Any Accountable or Reporting Institution should take careful note of the contents to ensure the reports to the FIC are handled correctly. The changes will require some technical aspects of the report submissions process to be amended.
For the full document click here.
Guidance on the Measures Required for the Mitigation of Loss of Intelligence Data Due to Reporting Failures
On 18 November, the FIC released the above draft public consultation communication (draft PCC 111).
The draft provides guidance on the measures to be taken by Accountable and Reporting Institutions to mitigate the loss of information as well as remediation of reporting errors and the prevention of reporting failures.
Comments are to be submitted by 18 December.
For the full document click here.
Annual Report
The FIC released its Annual Report for 2019-2020 this month. (It’s that time of year! – Ed.)
In contrast to the FSCA, the FIC achieved and exceeded the majority of its strategic objectives over the year. Read the full report here.
FINANCIAL SERVICES TRIBUNAL
Debarments
Decision: Julian Singh V FNB
The debarment in this case was upheld by the Tribunal based on the Representative no longer meeting the Fit and Proper requirements of honesty and integrity. The Representative argued that the process was procedurally flawed in addition to other allegations in his defence.
Read more here.
Decision: Noelle Louise Harris V Indwe Risk Services
The debarment in this case was overturned because the Tribunal found that the circumstances of the Representative’s dismissal were warranted but were insufficient to justify debarring her.
Read more here.
Decision: J Maharaj V Ashish Singh T/A First Consult SA (Gospel Gear cc)
The debarment in this case was overturned because the Tribunal found that the process during lockdown level 4, (insurance was viewed as a non-essential service by the Tribunal) particularly the debarment hearing, was flawed as it was not “procedurally fair”. On the day of the hearing, the Representative advised the FSP that she was sick. The FSP nonetheless continued with the debarment hearing.
Read more here.
Decision: Azwindini Freddy Muswede V the FSCA
This case casts a light on a Key Individual’s responsibilities where they’re a director but not a majority shareholder as well as where they attempt to limit responsibility for oversight and guidance on certain products.
As a result of the applicant’s lack of interest in managing or overseeing the activities of the FSP, in addition to the FSP having its licence withdrawn for trading in a product that it was not licenced for, the applicant was debarred by the FSCA for turning a blind eye to the activities of the shareholder who had been appointed as a Representative of the FSP, in contravention of regulation 9(1)(l) of Board Notice 194 of 2017.
The Tribunal confirmed that the applicant should be debarred as a Key Individual, but questioned whether the applicant should be debarred as a Representative.
Another interesting aspect of this case is the resignation of the applicant from the FSP. When you resign as a Key Individual or a Representative of an FSP, ensure that your resignation is registered with the FSCA.
Read more here.
Decision: Samantha Williams-Mothei V AdviceCube
The case describes in the Tribunal’s opinion what constitutes a lawful, reasonable, and procedurally fair debarment process.
At issue was the fact that a disciplinary hearing which had the purpose of mediation and an attempt to resolve the matter with all parties being aware of the purpose, suddenly turned into a disciplinary/debarment hearing.
Read more here.
Decision: Leslie van Rooyen V FNB
This case focuses on the reasons for a debarment: must (a) have occurred, and (b) become known to the FSP while the person was a Representative of the FSP.
The Tribunal dismissed the application for reconsideration.
Read more here.
FROM A-PROOFED
Great job! You’re awesome! Keep it up! Thanks for all that you do. Excellent work.
How many letters of complaint have you written? Lots, I’m sure! We’re very quick to complain when we’re not happy about a product or service we’ve paid for, but sadly we’re not as quick to pay a compliment for a job well done.
Everyone loves getting compliments. I don’t know anyone who doesn’t want to be complimented; even those who prefer not to be made a fuss of secretly enjoy being noticed.
If you genuinely appreciate what someone has done for you, or the products their company sells, take the time to express your satisfaction in words. There are many benefits of writing a compliment or thank you letter. One of them is to let someone know that their good customer service is being valued by clients. Your email will make them feel appreciated, and is often the best way to motivate someone to do even better!
Here are some tips on how to write a sincere compliment letter.
- Make sure that the tone is personal and sincere, yet at the same time professional.
- Keep it brief, but don’t forget to say what you like about the person, the service, or the product.
- If the compliment is meant for a specific person, make sure that you know their full name and job title, and please ensure that you spell their name correctly.
- It’s important to be clear. Write specific dates and time of the event and what they did to earn your appreciation. The tone should be simple and sincere, and flowery language, or fluff, should be avoided. You could write, for example, “We want you to know that we’re really impressed with the quality of the products and services your company provides.” Also consider, “I want you to know how much we appreciate the outstanding service you’ve provided us.”
- If you can, put your compliment on the company’s social media pages (Facebook and Twitter), and Customer Service websites like www.hellopeter.com.
If you’re an employer and want to bring the best out of your staff, be generous with your compliments. When your people know that you recognise and appreciate their efforts, they’ll feel motivated to keep up the great service they provide to your clients. Soon, you’ll see that your company is operating so much better because your people are highly motivated.
Here’s an example of a compliment for great service:
Dear Peter
I’d like to compliment one of your employees, Nicole, for the excellent service I received from her yesterday. I needed to add a vehicle to my current personal lines insurance policy, and she processed the addition and sent me an amended policy schedule within an hour of me calling.
It has always been a pleasure dealing with your company, and I’d like to make specific mention of this incident as Nicole’s professionalism and friendly manner exceeded my expectations.
Such commitment to great customer service is to be commended. You can be sure that I will continue to do business with your company for years to come.
Best regards
There are times when a compliment and a complaint are necessary in the same letter. For instance, your experience was outstanding, but one incident might have soured the event. The mention of that incident – well-worded, and expressed without emotion – can serve as an opportunity for improvement. Then close with a further positive comment.
If you’re on the receiving end of a compliment, the best way to respond is to offer a sincere and simple thanks. Even though some may think it sounds conceited to say it directly, it’s important to remember that acknowledging the praise is polite and lets the person know his or her accolade is appreciated.
Pay compliments! Verbally, as well as in written form.
Comedian and speech writer Robert Orben said, “A compliment is verbal sunshine.” When you compliment people and magnify their strengths, not their weaknesses, you’ll find that two things happen: it will put a smile on your dial, and you’ll make someone else’s day!
And if you need help, remember that I’m here to help you make your work look good. Call me.
Kim Hatchuel
083 657 3377 | kim@a-proofed.co.za
www.a-proofed.co.za
