Welcome back! We hope you’re feeling rested and ready to take on 2021.
Unfortunately, it does seem as if the COVID-19 virus didn’t check its calendar, and has continued unabated. So, it looks like “more of the same” for 2021.
THE FINANCIAL SECTOR CONDUCT AUTHORITY (THE FSCA)
Contingent Business Interruption Insurance Cover
On 23 December, the Supreme Court of Appeal (SCA) made known its judgment in the Guardrisk Insurance Company Limited v Café Chameleon CC case. The SCA upheld the ruling that instructed the insurer to pay the claim on the basis that the South African national lockdown in response to the COVID-19 pandemic constituted the proximate cause of the insured’s loss. An early Christmas present for the hospitality industry, and a heavy blow for insurers and reinsurers!
The FSCA subsequently commented and stated its expectation that insurers now get to the business of paying all valid claims. That seems to have started, but given the technical nature of determining the claims values, it’s not likely to be a quick process.
Read the full SCA order here.
and the FSCA’s comments here.
Request for Information on Personal Lines Claims
On 14 January, the FSCA published a request for information from all non-life insurers conducting personal lines business. The information relates to personal lines claims submitted during the 2020 calendar year, and is intended to assist the Ombud for Short-term Insurance in determining its ‘overturned decisions’ statistics.
Affected insurers are to submit the information to the FSCA by 26 February 2021.
The details of the information required are available here.
Draft Conduct Standard – Governance, Fit and Proper and Other Requirements for Managers of Collective Investment Schemes (CIS)
The FSCA released a draft Conduct Standard on 2 December 2020 which sets out principles and fit and proper requirements that CIS managers will have to comply with.
Specifically, the draft Conduct Standard aims to amend the requirements regarding:
- governance arrangements
- obligations of the board and directors
- honesty, integrity, and good standing
- competence
- significant owners
- financial soundness
- operational ability
- trustees and custodians
- appointment of auditors
- establishment of an audit committee
- conflicts of interest and complaints management
- risk management and liquidity risk management
- compliance function
- portfolio applications and approval
- winding up, amendment, and amalgamation of a portfolio
Notably, the requirements for directors aim to ensure that CIS managers appoint an executive director and provide clarity regarding the meaning of an ‘independent director’.
The remainder of the proposed changes are the same as we’re already used to under the FAIS [Financial Advisory and Intermediary Services] legislation, with some specific amendments to better suit the CIS requirements.
Comments are due by 15 February 2021.
Download the draft Conduct Standard and comment template here.
Regulatory Exam Guide
The FSCA released multiple updated guidelines for Key Individuals and Representatives who need to complete the RE1 and RE5 Regulatory Exams.
These have been updated to include the recent changes to the legislation. Given the recent proposed changes, the material will have to be updated again later this year, so please ensure that anyone undertaking the exams is using the correct material. This version of the guide is a good place to start.
You can download the guideline here.
Fintech Working Group – Initial Findings
On 8 December 2020, the Intergovernmental Fintech Working Group released a summary of its initial findings entitled “Fintech innovation in South Africa in the era of data security and protection”.
The review has noted that payments form the bulk of Fintech activity in South Africa – comprising 30%. Blockchain and Robotic Process Automation combined make up the second biggest activity segment of 48%. Fintechs are also making extensive use of non-traditional data to better profile clients for marketing and risk purposes.
It’s clear to the Regulators and those monitoring the progress in this industry that the measures taken to deal with the COVID-19 pandemic have accelerated these activities due to society’s move to online transacting. They therefore have a concern that any regulations they issue will be playing ‘catch-up’.
We’re sure that we can expect this to be a focus area for the Regulators this year.
Read the press release here.
Consultation Paper on Open Finance
On 10 December, the FSCA published its consultation paper on Open Finance.
Open Finance is the concept that consumers own the data created on FSPs’ (financial service providers’) platforms, and have the right to share it. By sharing it (obviously subject to explicit and informed consent), customers and companies enable third-party providers to develop targeted products.
The report aims to identify the benefits and risks in the implementation of Open Finance in South Africa.
You can read the full report here.
Commissioner of the FSCA
The FSCA has shortlisted two candidates to take on the permanent position of Commissioner, and has requested commentary from all interested parties. The candidates are Ms Astrid Ludin and Mr Unathi Kamlana.
Details of the candidates’ CVs and the submission process are available here.
Information Letter 1 of 2012 (ST) – Short-term Insurers and Persons acting in the capacity of a bailee (such as couriers and transporters)
The FSCA re-released this letter which was originally released in 2012. Obviously, there is a need to remind everyone of the correct structures.
Read the letter here.
Information Letter 3 of 2013 (LTSTLL): Binder Regulations: Activities that constitute binder functions, incidental to binder functions, and remuneration payable as a binder fee.
As above, it seems there is a need to remind everyone of the structures in terms of these regulations.
Read the letter here.
FAIS General Code of Conduct – Record of Advice and Complaints
During our last few monitoring meetings, we’ve discussed the amended requirements on Representatives when conducting analyses, providing advice, and handling complaints. It’s one thing to change your process and documentation, but another to get the people working with it to understand.
We’ve had some requests for awareness training on the amended requirements; should you feel that this would benefit your staff, please let us know. We’re providing the sessions via Teams so that all staff can safely attend.
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PRUDENTIAL AUTHORITY (PA)
Discussion Paper on Joint Audit Requirement for Insurers and Insurance Groups
On 2 December 2020, the PA released a discussion paper and requested comments regarding the joint appointment of auditors to insurers and insurance groups.
The PA acknowledges the importance of the role auditors play in enabling the PA to properly conduct its duties, and emphasised the need for accurate reporting from them. As such, they have noted the benefits in the joint audit arrangements from the banking sector (i.e. where two or more auditing firms jointly audit an institution’s financial statements).
In opening up the possibility to undertake joint audits, the PA is considering setting 1 January 2023 as the effective date for entities with year-ends on or after 1 January 2023.
Read the full document here.
Selected South African insurance sector data September 2020
During December 2020, the PA released the industry balance sheets and performance indicators as at 30 September 2020.
As was to be expected, it was a mixed result when comparing year-on-year results. We would also caution drawing too clear an opinion from the information, given the unpredictable nature of the COVID-19 pandemic effects and reactions from government, the public, and industry.
Read the report and draw your own conclusions.
INFORMATION REGULATOR – POPIA (PROTECTION OF PERSONAL INFORMATION ACT)
Annual Report for the 2019/20 Financial Year
The Information Regulator’s Annual Report was signed off on 30 October 2020.
Of note is the lack of progress made regarding the publication of Codes of Conduct, more specifically with the strategic objective of “Making guidelines for Codes of Conduct and produce Manual for POPIA.”
The delays for publishing the guidelines have been attributed to: (i) the time required to consider all inputs and comments received from stakeholders after the consultation session held in November 2019, and (ii) human resources capacity constraints, respectively.
In a nutshell, the registration of information officer’s deadline of 31 March 2021 may be postponed by a month or two.
We’ll keep you abreast of developments.
Promotion of Access to Information Act (PAIA), 2000: Private Body Exemption from Compiling PAIA Manual
The exemption from compiling PAIA manuals has been extended to 30 June 2021, when the administration of PAIA will be transferred to the Information Regulator from the South African Human Rights Commission.
The exemption applies as follows:
- A private body as per section 1 of the Companies Act, 2008 (Act No. 71 of 2008), operates within any of the sectors as listed below and has less than 50 employees in their employment: or
- Has a total annual turnover equal to or less than the applicable amount as listed below.
| Sector | Turnover |
| Agriculture | R6 million |
| Mining and Quarrying | R22.5 million |
| Manufacturing | R30 million |
| Electricity, Gas, and Water | R30 million |
| Construction | R15 million |
| Retail and Motor Trade and Repair Services | R45 million |
| Wholesale Trade, Commercial Agents, and Allied Services | R75 million |
| Catering, Accommodation, and other Trade | R15 million |
| Transport, Storage, and Communications | R30 million |
| Finance and Business Services | R30 million |
| Community, Special, and Personal Services | R15 million |
For a copy of the gazette, click here.
Revised WhatsApp Privacy Policy
The Information Regulator started assessing the revised WhatsApp Privacy Policy earlier this month after being provided with a copy by Facebook South Africa.
We’ll provide further feedback once the analysis has been completed and will discuss the implications. In the interim, most users have downloaded the Telegram app. The question is, what is the difference?
To read the full media statement from the Information Regulator, click here.
FINANCIAL INTELLIGENCE CENTRE (FIC)
On 11 December 2020, the FIC released a notice regarding an amendment by the Financial Action Task Force (FATF). As part of our commitment to anti-money laundering and prevention of terrorist financing, South Africa is a member of the FATF.
The amendment lists 16 countries that the FATF recommend increased monitoring of financial transactions with, and two countries with reduced monitoring requirements.
The 16 increased risk countries are: Albania, The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Myanmar, Nicaragua, Pakistan, Panama, Syria, Uganda, Yemen, and Zimbabwe.
The two reduced risk countries are: Iceland and Mongolia.
A subsequent document was released requesting substantially increased monitoring of transactions through the Democratic People’s Republic of Korea and the Islamic Republic of Iran.
We recommend that Accountable and Reporting Institutions update their Risk Management and Compliance Plans and systems to accommodate the increased monitoring of transactions through these countries and the similarly reduced requirement.
Read the full FATF statement here.
And the FIC subsequent statement here.
FINANCIAL SERVICES TRIBUNAL
Debarments
Decision: Kabelo Basiea Sesioana v First for Women Insurance Company Limited
An interesting call centre (direct marketing) case regarding the FSP’s failure to comply with section 14(3) of the FAIS Act, failure to participate in the debarment process, and the test for bias in respect of the fit and proper requirements, in which the Tribunal dismissed the application for reconsideration of the debarment.
The initial debarment in terms of section 14(1) was set aside and referred to the FSP for reconsideration.
The second debarment process commenced after the applicant had resigned from the FSP in March 2020. The Tribunal concluded that the FSP did not fail to meet the requirements of sections 14(3) and (5) of the FAIS Act.
The case illustrates how where a debarment has been set aside for reconsideration, the FSP can still apply for a debarment if the process is procedurally correct.
Read more here.
Decision: Alishia Govender v King Price Insurance Company Limited
In this case, the Financial Services Tribunal stated that an FSP, when debarring a Representative, cannot determine the period that a Representative should be debarred for, and that a Representative can apply for re-admission after 12 months.
Read more here.
FROM A-PROOFED
Using the right word (and phrase) matters. Using the wrong ones matters even more. Just one incorrectly used word – especially when you’re trying to make a good impression – can ruin everything. Unfair? Yes… but it happens!
To make sure that it doesn’t happen to you, have a look at some of the most common incorrectly used words (and phrases) that I’ve collected along the way. Some are cringe-worthy, and others are bad habits that you may have picked up. I’m going to help you to avoid making the same mistakes again.
A lot, Alot, and Allot
I hate to break it to all of you alot fans out there, but it isn’t a word. The word lot is a noun, like peach, or cat. You wouldn’t say apeach, or acat, so why has a lot become such common usage? If you’re trying to say that someone has lots of things, you’d say they have a lot of things. And if you’re trying to say that you want to set aside some money to buy something, you’d say that you’ll allot R500 a month for your insurance policy.
You’d never, ever, write alot!
Advice and advise
Apart from the fact that the two words are pronounced differently, advice is a noun while advise is a verb.
Advice [noun] means an opinion or recommendation: “My advice to you is to study for your exams.”
Advise [verb] means to give counsel: “I advise you not to bore me with your advice in the future.”
Every day and everyday
If you do something seven days a week, you do it every day. Day is a noun, and every is the adjective that modifies it – two different words.
Meanwhile, everyday, as a single word, is an adjective that means commonplace or routine. So, no, you don’t brush your teeth everyday. That doesn’t make sense. Tooth-brushing is, however, an everyday occurrence.
For all intensive purposes
If you’re using this phrase to mean “for all practical purposes,” then for all intents and purposes, you’re doing it wrong (see what I did there?). The phrase you’re actually looking for (as you’ve probably guessed by now) is for all intents and purposes.
Insure and ensure (and assure)
To insure is to arrange for compensation in the event of damage, loss, injury, or death.
To ensure is to make certain that something will happen.
To assure means to promise or say with confidence.
It’s and its
It’s is the shortened form of it is or it has. It cannot be used for anything else.
Its is the possessive form of it.
If you’re not sure that you’ve used it correctly, read the sentence and replace the word with it is or it has. If it sounds wrong, you should be using its.
Lose and Loose
Lose is a verb that means to be unable to find (something or someone), to fail to win (a game, contest, etc.), or to fail to keep or hold (something wanted or valued). It’s like losing your keys or losing a football match.
Loose is an adjective that means “not tightly fastened, attached, or held”, like loose clothing or a loose tooth.
Me and I
Most people understand the difference between the two of these, until it’s time to use one in a sentence. Read this sentence: Please send an email to Bryan and I. If you take the words ‘Bryan and’ out, it would be “Please send an email to I.” You’d never ask someone to send something to “I”. So, in that sentence, you would need to use “me”. Conversely, You wouldn’t say, “Me and Bryan played golf on Saturday.” Take ‘and Bryan’ out of the sentence, and you’re left with, “Me played golf on Saturday.” Really?
Referring to a brand or an entity as ‘They’
A business is not plural. So, it’s not ‘they’, but rather ‘it’.
The FSCA released its Annual Report in December.
Should of
Did you say ‘should of’ when you really meant should have? The habit comes from the use of the contraction should’ve. That leads to the assumption that the second word is pronounced ‘of’. It’s should have, would have and could have. There is no of in any of these phrases.
Than and then
Than is a conjunction that’s used when you’re comparing things: “Coca-Cola is nicer than Pepsi.”
Use then when you’re referring to time: “Come over this afternoon; I’ll be home then.” or “We saw a movie and then went out for dinner. Then we decided that the dinner was better than the movie.”
To and Too
We’ve all accidentally left the second o off too when texting in a hurry. But in business emails, you won’t be able to get away with it.
To is used before a noun or verb, and describes a destination, recipient, or action.
My friend drove me to my doctor’s appointment. (Destination)
I sent the files to my boss. (Recipient)
I’m going to get a cup of coffee. (Action)
Too, on the other hand, is a word that’s used as an alternative to also or as well. It’s also used to describe an adjective in extremes. (Incidentally, aswell is an incorrect contraction that’s used often.)
She, too, is vegan. (Also)
We both think it’s too cold outside. (Indicative.)
Sue and I went to the gym; Lisa came too.
Who’s and whose
Who’s is the shortened form of who is: “Who’s speaking at the conference today?”
Whose is usually before a noun to state (or ask) to whom it belongs: “Whose chocolate is this?”
…and, while talking about ‘to whom’
There’s a simple trick to remembering whether you should use ‘to whom’ or ‘whom’. If you can replace the phrase with ‘him’ or ‘her’, then ‘to whom’ is correct. If you can replace ‘whom’ with ‘he’ or ‘she’, then ‘whom’ is correct.
To whom was the parcel sent? (To him.)
Whom should I ask about grammar rules? (Kim.)
I’d love to hear from you if you have other examples, or if you need help with words that you may get wrong.
I can help you make sure that you’re using the right words. Please get in touch with me to find out how I can make your work—and you—look great.
Kim Hatchuel
083 657 3377 | kim@a-proofed.co.za
www.a-proofed.co.za
