On 1 September it will be two years since we officially launched Omega Compliance Solutions with the aim to create a trusted compliance practice that provides the financial services industry with simple solutions to their compliance requirements.
To our “old” clients we thank you for your ongoing support, and to our new clients we thank you for placing your trust in us.
Now: if you haven’t already, please go and get vaccinated!
THE FINANCIAL SECTOR CONDUCT AUTHORITY (THE FSCA)
2021 Levies on Financial Institutions
The FSCA released its finalised levies on 11 August. It has taken the ongoing financial effects of the COVID-19 pandemic into account and reduced the increase in fees to 3%. There has also not been an increase in the levies on Category A Representatives or Assets Under Management.
Levies on financial services providers (FSPs) are payable by 31 October, but note the (earlier) 31 August deadline for some other financial institutions.
The levies on Category I and IV FSPs are as follows:
A base amount of R3,792 plus R605 for each Key Individual or Representative (but not duplicated) subject to a maximum of R1,956,451.
The levies on Category II and III FSPs are as follows:
A base amount of R7,642 plus R605 for each Key Individual or Representative (but not duplicated) and 0.0000184595 times the clients’ investments managed at 30 June subject to a maximum of R1,956,451.
The levies on Category I and IV FSPs limited to Long-term insurance sub-category A or Friendly Society Benefits are as follows:
A base amount of R3,792 plus R250 for each Key Individual or Representative (but not duplicated) subject to a maximum of R1,956,451.
The levies in terms of the Ombud levy, which is applicable to all FSPs, are:
A base amount of R1,172 plus R447 for each Key Individual or Representative (but not duplicated) subject to a maximum of R317,376.
These invoices are issued during September based on FSPs’ Key Individual and Representative registers as at 31 August.
In the commentary, the FSCA stated that the contentious maxima and issues around the manipulation of the levies by FSPs will be addressed as part of the equivalent section in COFI (Conduct of Financial Institutions).
Click here for the full details or if you need the levies for other financial institutions.
Financial Ombud System Diagnostic Report
National Treasury and the FSCA published a diagnostic study entitled: “South Africa – Financial Ombud System Diagnostic” which was prepared by the World Bank Group. The report aims to provide an independent review of South Africa’s financial Ombud system and recommend reforms to enhance customer protection and outcomes in the financial services sector.
The study covered the following Ombud schemes:
- Credit Ombud
- Ombudsman for Short-term insurance
- Ombudsman for Banking Services
- Ombudsman for Long-term insurance
- Pension Funds Adjudicator
- Ombud for FSPs (FAIS Ombud)
- Johannesburg Stock Exchange Ombud
Recommendations to address the findings include:
- Establishing a National Financial Ombud to replace the current seven schemes except for retirement funds which it proposes a reformed Pension Funds Adjudicator would become the Retirement Funds Ombud.
- Introducing enhancements to the current Ombud Council framework.
- Implementing an update of complaint-handling requirements to improve consistency among FSPs.
Should you wish to comment, the report and annexures are here. Comments are due by 3 September 2021.
Draft Conduct Standard for Conditions Prescribed in terms of Pension Fund Benefit Administrators
The FSCA published its draft conduct standard for comment. The stated intention is to align the regulatory framework governing pension fund administrators with the Treating Customers Fairly (TCF) and Retail Distribution Review (RDR) outcomes.
The draft conduct standard intends to improve conditions regarding administration agreements, appointment of auditors, indemnity and fidelity guarantee insurance, current asset and liquidity requirements, trust accounts, safe custody of documents, and liquidation of businesses.
Additional conditions include:
- Standards regarding business principles, culture, and governance which would be more descriptive and aligned with TCF outcomes.
- Notification of changes in business information.
- Appointment of a responsible key person.
- Fit and Proper requirements for directors, senior managers, and heads of control functions.
- Conditions on outsourcing.
- Conflict of interest policy, standards, and training.
- Communication, disclosure, and complaints management standards.
- Record maintenance procedures.
- Conditions on various financial matters.
- Operational ability.
All of which sound very familiar to registered FSPs who have embraced TCF, the revised Policyholder Protection Rules (PPR), and FAIS Fit & Proper and General Code of Conduct over the last few years.
Again, should you wish to comment on the report, annexures and comment forms are available here. Comments are due by 13 September 2021.
A further explanation on the rationale was released by National Treasury.
Proposed Amendments to the PPR
The FSCA released draft amendments to the PPR on 30 July 2021. It has been four years since the last changes, and it’s likely that we will see changes continue as the FSCA fulfils its responsibility to support positive outcomes for financial service industry clients.
The stated intentions of these further revisions are:
- To adjust them based on findings of the reinstatement practices at life insurers and excess structures at non-life insurers.
- Expansion on issues around product design, premium review practices, and loyalty benefits.
- Addressing gaps identified in the funeral and risk classes of life insurance.
- Expansion of the scope of the Short-term Insurance Act (STIA) PPRs to include commercial lines business (potentially creating a 15-day grace period! – Ed.).
- Alignment of client and insurer agreement provisions, misrepresentation and contract validity of the STIA to those of the Long-term Insurance Act.
- Correction and clarity on parts of the previous versions.
- Incorporation of further proposals to support customer protection.
Once the legislation is passed, we’ll assist in implementing the necessary changes.
Comments are due by 10 September 2021. Read the full documents and use the comment submission templates available here.
Draft Conduct Standard for Co-operative Financial Institutions (CFIs)
The FSCA released a draft conduct standard on 11 August which targets CFIs.
The Co-operative Banks Act of 2008 is a prudential legislative framework that allows member-based deposit-taking financial co-operatives to register as CFIs, and includes co-operative banks. CFIs are owned and controlled by members who have a common bond and provide members with a wide range of banking and financial services such as savings accounts and loans.
Under the twin peaks model of regulation as imposed by the Financial Sector Regulation Act (FSRA), the supervision of the prudential framework for CFIs now falls under the Prudential Authority (PA).
The FSRA gave the FSCA jurisdiction over the conduct of CFIs. This includes ensuring that CFIs provide fair and appropriate financial services and products that meet the needs and reasonable expectations of their members.
The main purpose of the conduct standard is to introduce requirements which promote the fair treatment of members of CFIs.
As this will be the first conduct standard applicable to CFIs, the aim is to establish requirements that are predominantly positioned at a principle-based level and sets out business principles in accordance with which a CFI must operate. These include, amongst other things, an obligation to conduct business with integrity, honestly, fairly, with due skill, care and diligence, and in a manner that promotes the fair treatment of members. In addition, a requirement is proposed that a CFI must identify and promote a culture that supports ethical behaviour and aim to ensure that the business principles referred to above are central to the values of the CFI.
The draft conduct standard establishes governance requirements for CFIs which require that a CFI must document, adopt, implement, and monitor the effectiveness of governance arrangements that are reasonably necessary to ensure adherence to the conduct standard.
The draft conduct standard proposes to regulate the design, suitability and performance requirements for financial products and financial services; advertising, disclosure and complaints standards (which all match TCF and FAIS General Code of Conduct standards). There is an additional draft standard specific to CFIs which deals with account closure and switching, whether initiated by the CFI or by members. The requirements are principles-based to provide flexibility for CFIs when implementing the requirements.
Comments are due by 24 September 2021. The complete draft standard and comment template are available here.
The FSCA’s expectations regarding premium increases on funeral policies
The FSCA released communication 17 of 2021 which noted the premium increases on funeral policies throughout the industry.
The FSCA notes several sections of the PPR which they consider to have been breached, essentially informing the industry that the increases are unfair on consumers despite being actuarially sound.
Rule 15 of the PPR does appear to have been overlooked as it requires insurers to inform policyholders of pending premium reviews or increases and for insurers to provide policyholders with options prior to the changes being implemented.
We’re sure the insurers will provide suitable information in their responses and hope some middle ground will be reached.
FINANCIAL INTELLIGENCE CENTRE (FIC)
Outcomes of the June 2021 Meeting of the Financial Action Task Force (FATF)
As a member of the FATF, South Africa attended this meeting in June 2021. The FATF is an international task force which aims to develop and enhance anti-money laundering (AML) and combating the financing of terrorism (CFT) controls worldwide.
One of the topics was the mutual evaluation of South Africa by the other members. The conclusions were that, as much as South Africa has a “solid legal framework” for combating money laundering and terrorist financing, it does not conduct its AML and CFT activities in line with its risk profile and does not proactively seek international cooperation. In addition, South Africa needs to detect and seize illicit cash flows, improve the availability of beneficial ownership information and should improve the activities of the FIC.
It’s not great feedback, which means we can expect further monitoring and reviews of compliance with the applicable legislation from the authorities. We’d recommend Reporting and Accountable Institutions liaise with their compliance teams to make sure their Risk Management and Compliance Programme is up to date and effective.
Various other reports were released which can be found in the FIC’s full summary here.
INFORMATION REGULATOR (IR) – POPIA (PROTECTION OF PERSONAL INFORMATION ACT)
No news is good news, but not all the time. At the time of writing, the IR has still not provided the following:
- Gazetted PAIA (Promotion of Access to Information Act) regulations: these are to be finalised and gazetted by the Minister of Justice.
- PAIA Manual guidance: this has yet to be published and there’s no indication of the exemption being extended.
As a result of the delays, the Regulator is unable to accept complaints as the complaints form is prescribed in the regulations.
Registration portal
The IR is in the process of revamping the registration portal. Once the system is up and running, the IR’s communications department will issue communications via its different platforms.
Other guidance we expect the Information Regulator to publish as per their webinar of 27 July:
Prior authorisation
Applications that have been submitted are being assessed. The IR advised that it will be able to provide examples of the types of processing activities which may require prior authorisation. For the time being, a personal information impact assessment is a necessary tool but is not a prerequisite to applying for prior authorisation.
Direct marketing
The main query is whether these direct marketing calls can be included in the definition of electronic communication.
We expect guidance notes on section 69 of POPIA to be published by the IR.
Personal Information Impact Assessments (PIIA)
The POPIA Regulations require the Information Officer (IO) to ensure that “a personal information impact assessment is done to ensure that adequate measures and standards exist in order to comply with the conditions for the lawful processing of personal information.”
The IR is not sure whether it will be publishing any guidance soon. However, it suggested that in the interim IO’s use the guidance from other jurisdictions such as Australia, Canada, the European Union, and the United Kingdom.
Should you wish to view the webinar and download the transcript click here for YouTube and here for the transcript.
PRUDENTIAL AUTHORITY
Draft Guidance Note on Liquidity Risk Management of Insurers
The PA released draft guidance in terms of Liquidity Risk Management in terms of the GOIs (Governance of Insurers) for insurers on 17 August.
The Regulator goes to some lengths to explain the necessity and the exact requirements. Some work will need to be done to assess and classify the assets held by insurers as part of the exercise.
Comments are to be submitted by 28 September 2021, and the comment template is available in the link above.
Technical Supervisory Observation on Financial Soundness Standards for Insurers
The PA released the Supervisory Observation to guide insurers on their financial soundness obligations as it has noted a need for some guidance. This guidance explains the PA’s stance on Encumbered Assets and is available here.
THE FINANCIAL SERVICES TRIBUNAL
Nokulunga Mkhatshwa and Old Mutual Life Assurance Company (SA) Ltd
The debarment of the applicant was set aside by the Tribunal which felt that the applicant had been incorrectly debarred by the “erstwhile employer”.
The case involved the sale of a funeral policy where the beneficiary was somehow related to the insured and their desire to obtain cover for the insured was questionable given that the beneficiary understood the insured was seriously ill.
The applicant was debarred for her negligence as she did not follow the underwriting processes of the respondent.
The Tribunal was of the opinion that the respondent “conflated negligence and the failure to follow procedures with the fit and proper requirements of the FAIS Act.”
For a copy of the decision, click here.
A-PROOFED
Homophones
(From Wikipedia) A homophone is a word that is pronounced the same as another word but differs in meaning, and may differ in spelling. The words may be spelled the same, such as rose (flower) and rose (past tense of ‘rise’); or differently, such as carat, caret, and carrot; or to, two, and too. Homophones that are spelled the same are also both homographs and homonyms.
Write and right is a good example of a pair of homophones. There are thousands of pairs and trios. The list is interminable; the possibilities for word mix-ups, endless!
The word homophone comes from the Greek words homos, meaning ‘same’, and phone, meaning ‘sound’. It can be a word that sounds the same as something else – like by (near) and buy (purchase) – or it can be spelled exactly the same way and pronounced differently – like minute (unit of time) and minute (tiny).
It’s important to be aware of them to make sure that you’re actually saying—and writing—what you mean. To help you with this, here’s a list of some commonly misunderstood words that people often confuse.
Accept | Except
Accept is a verb meaning to receive.
Except is usually a preposition meaning excluding.
I will accept all the packages except that one.
Affect | Effect
Affect is usually a verb meaning to influence.
Effect is usually a noun meaning result. It can also be a verb meaning to bring about.
The drug did not affect the disease, and it had several adverse side effects.
Allowed | Aloud
Allowed means that you are permitted to do something.
Aloud implies that you can hear what you’re doing because it’s audible.
In the library you’re not allowed to speak aloud.
Compliment | Complement
A compliment is a flattering remark you might give to a friend or loved one.
Complement refers to the way two things might work together to improve or complete something.
If you want people to compliment your cooking, complement the meal with fine wine.
Lose | Loose
This confusion can easily be avoided if you pronounce the word intended aloud. If it has a voiced Z sound, then it’s lose. If it has a hissy S sound, then it’s loose.
Julia had a bunch of loose keys. She put them all on a keyring so she wouldn’t lose them.
Here | Hear
Here denotes a specific location and means ‘this place, not that place.’
Hear, on the other hand, is what you do with your ears and is also used to show strong agreement in the phrase ‘Hear! Hear!’
Please come here so that you can hear me better.
Principal | Principle
Principal is a noun meaning the head of a school or an organisation, or first in order of importance.
The principal reason for reading this article is to learn something new.
Principle is a noun meaning a basic truth or law.
The principal taught us many important life principles.
Right | Write | Rite
Right can either refer to direction (the opposite of left), used to show that someone is correct, or is a declaration of something to which you are entitled.
Write is what you do with a pen or keyboard.
Rite refers to a ceremony or ritual – some might even say that learning and discerning homophones is a rite of passage to becoming proficient in English.
Stationary | Stationery
The word stationary means not moving or not changing (as in a stationary bike.)
Stationery, with an e, is paper that you use for writing letters or notes. It also applies to things like pens, pencils, and similar writing implements. I like to buy all my stationery at CNA.
Than | Then
Than is a conjunction used in comparisons. The pizza is more than I can eat.
Then is an adverb denoting time. I laughed, and then ate the whole thing.
Their | There | They’re
When you want to show that something belongs to others, you say that it’s theirs.
The word there has two uses: the first is as a way to indicate that something exists (e.g., there is only one way); the second is to describe a place that is not here.
And if more than one person is going to do something, you would say they’re (they are).
There are people who never paid attention to their teacher in school. They’re probably wondering what this means.
To | Too | Two
To means ‘headed towards’. I’m going to play golf.
Too means ‘also’. Mark is going too.
Or before ‘much’, ‘many’, ‘few’, etc. I’ve now eaten too much pizza.
Two is a number.
Your | You’re
If something belongs to you, it’s yours.
You’re is a way of shortening you are.
Sound out you are in the sentence. If it works in the sentence it can be written as you’re. If it sounds awkward, it’s probably supposed to be your.
If you’re happy and you know it, clap your hands.
Whatever you do, please do not write “I hope your well.”
All these similar-sounding words give our language depth, but they can also give you a big headache! You’re probably already taking some basic precautions by looking up words online and using spell check on every document or letter. Butt dew knot re-lie on spell check too fined yore miss-takes! It doesn’t work for those troublesome homophones.
Remember that if you need assistance with this and other communication/proofreading assistance, you can get in touch with me.
Kim Hatchuel
083 657 3377 | kim@a-proofed.co.za
www.a-proofed.co.za
