2007 ANNUAL COMPLIANCE REPORT GUIDELINES FOR COMPLETION SCHEDULE A Schedule A of the compliance report must be completed by all compliance officers where a compliance officer is required by the Act or where a compliance officer has in any case been appointed by a FSP who is exempted from such requirement. It is strongly recommended that as much information as possible is provided to avoid further queries by the FSB. It would be wise to report all cases of non-compliance and what measures are being taken, or have been taken, to address the situation. The FSB are under no illusion that most brokers are not yet fully compliant in all areas covered by the Act. Please don’t be caught in the trap of furnishing incorrect or incomplete information, as this may constitute an offence in terms of the Act. 1. FSP’s will have to complete the following sections: Section 1 – all members Section 5 – members rendering health services benefits Section 6 – all members Section 7 – all members 2. Documentary proof: Where documentary proof is specifically required, fill in the annexure number, ex. 1, 2, 3 etc. in column 5 and list the question number, name of the document and number of the document in section 7 of the schedule. Example: SECTION 7 - ATTACHMENTS Additional information Question Comments attached number Annexure reference no 1.1.4 Failure to notify the Registrar within 15 days 1 2.4.3 Changes in personal circumstances of key individual 2 10.3.1 FICA internal rules 3 10.3.2 Particulars of FICA compliance officer 4 3. Developmental areas: If the answer to any question is an area where development must still take place, then this must be noted in column 4. This will be cases where there is a need for improvement of control, processes or compliance issues and where plans have been made to effect such improvements within a reasonable time. If you noted such areas in your 2006 report you should indicate in a document attached to the 2007 report what measures have been taken to improve the said developmental areas. 4. Reporting period: This is the period from date of authorization as a FSP (license date), or the first day of the month following your 2006 reporting date, until the 2007 reporting date. Please see table below to determine your reporting date, which is according to the financial year end of the FSP, or personal financial year end if you are a sole proprietor. TABLE A Column One Column Two Provider’s Financial year end Reporting date 31 January 2007 31 August 2007 28 February 2007 31 August 2007 31 March 2007 30 September 2007 30 April 2007 31 October 2007 31 May 2007 30 November 2007 30 June 2007 31 December 2007 31 July 2007 31 December 2007 31 August 2007 31 December 2007 30 September 2007 31 December 2007 31 October 2007 31 December 2007 30 November 2007 31 December 2007 31 December 2007 31 December 2007 Example: Financial year end : 28/02/2007 Reporting date : 31/08/2007 Reporting period : 01/09/2006 to 31/08/2007 Financial year end : 30/06/2007 Reporting date : 31/12/2007 Reporting period : 01/01/2007 to 31/12/2007 The report must be submitted to the FSB within two months after the reporting date as set out in Column Two of Table A. Reporting date : 31/08/2007 Report at FSB by : 31/10/2007 COMPLETING THE REPORT All questions must be answered by making a tick or a cross in the applicable space provided, and entering document numbers (or monetary amounts or numerals) in column 5. SCOPE: The authorized compliance officer must fill in his/her name in the space provided. The report requires the name of the FSP and the FSP number issued by the FSB for identification purposes. See point 4 above to determine the reporting period. SECTION 1 – ALL FSP’s Question 1 – Conditions and restrictions imposed, made, given or issued 1.1.1 Mostly changes only in respect of FSP1, 3, 4 and 9 of the license application form. See Licensing News 60 – Profile changes. The FSB must be informed within 15 days after the change. “Procedures” refer to completion of the applicable FSP form or written notification of a change occurring, and submitting it to the FSB. See annexure to your license for conditions imposed. 1.1.2 See annexure to your license for conditions imposed. 1.1.3 Tick applicable space. 1.1.4 If applicable, insert “1” in column 5. Go to section 7 of the schedule and insert “1.1.4, name of document and number of document” in the columns provided. See example at point 2 above. 1.2.1 This refers to a change in the trading name under which the FSP was originally licensed. 1.2.2 22.214.171.124 – were al procedures followed in terms of ex. the Companies Act, Close Corporations Act etc. as regards a change in name? 126.96.36.199 – was the Registrar informed of such change and procedures? 188.8.131.52 – a new license certificate must be issued and this must be displayed. 1.3.1 This refers to measures to ensure that all products marketed are categorized in terms of FSP2 of the license application form. Investment products are highlighted. See annexure to your license for conditions imposed. 1.3.2 This refers to investment products not categorized in terms of form FSP2. 1.3.3 List and describe these investment products in a separate annexure and fill in annexure number in column 5. 1.4.1 This refers to measures to ensure that financial services are rendered only in respect of products specifically licensed for, and subject to any conditions or restrictions – see annexure to your license. 1.4.2 Was any monitoring done to ensure that only licensed products are sold? In nearly all cases the answer should be YES, based on the fact that you have specific contracts with product suppliers. See annexure to your license for limitations imposed. 1.4.3 The answer should then also be YES, unless there are specific limitations on the license. 1.4.4 Provide details of non-compliance in a separate annexure – list the number in column 5. Question 2 – Key individuals 2.1 Number of key individuals – column 5. Fill in “0” if no key individuals. 2.2.1 Tick applicable space. 2.2.2 This process would have involved completing form FSP4 and submitting it to the Registrar for approval of the key individual. 2.3.1 See questions on form FSP4 and Compliance News 23 as a guideline. See annexure to your license for conditions imposed on a key individual, if any. 2.4.1 See questions on FSP4 as a guideline – tick applicable space. 2.4.2 Tick applicable space. 2.4.3 If answer is NO, insert annexure number in column 5. Go to section 7 of the schedule and insert “2.4.3, name of document and number of document” in the columns provided. 2.4.4 Did key individuals comply with the qualification requirements in achieving the necessary credits? The new requirements have been postponed until 31/12/2008 and 31/12/2009. 2.4.5 This will involve submitting a certified certificate of credits achieved to the FSB. Question 3 – License of the FSP 3.1 Tick applicable space. A copy may be certified as such by a Commissioner of Oaths. 3.2 Tick applicable space. 3.3 Insert number of offices operating under the FSP license in column 5. 3.4 Your reference to “Authorized Financial Services Provider”. Tick applicable space. Documents should not reflect authorization before a license has been granted. Question 4 – Representatives 4.1 Tick applicable space. 4.2 Number of representatives as at reporting date. 4.3 Tick applicable space. 4.3.1 – provide number in column 5 4.3.2 – complete a separate annexure and insert number in column 5. 4.4.1 See Compliance News 18 as a guideline – mandate to representative by the FSP to act as such on behalf of the FSP. 4.5.1 See the questions on form FSP4 as a guideline to determine the honesty and integrity qualities of the representative and the operational ability. The FSP must keep record of the minimum qualifications and experience of the representative, and ensure that all comply with the further studies requirements. See Compliance News 24. 4.5.2 See Compliance News 33 for information on supervision stipulations. 184.108.40.206 Applicable only if any representatives worked under supervision. 220.127.116.11 List number of supervisors in column 5. 18.104.22.168 See Compliance News 33 – appraisal of the representative by the supervisor. The example contained in this news letter can be used as the procedures used for the appraisal. This must be attached to the report. List the document in section 7. 22.214.171.124 See Compliance News 2. The disclosure document refers to supervision. 4.6.1 See Compliance News 15. 4.6.2 Tick applicable space. 4.7.1 Was the Registrar informed about the appointment or removal of a representative from the register of representatives? See Compliance News 11. 4.8.1 See Compliance News 26. 4.8.2 Tick applicable space. 4.8.3 Tick applicable space. Question 5 – Insurance cover 5.1 Tick applicable space and provide amount of cover. 5.2 Tick applicable space and provide amount of cover. Mainly aimed at short-term insurance. 5.3 Tick applicable space and provide amount of cover. Mainly aimed at short-term insurance. 5.4 See Compliance News 2. The disclosure document refers to insurance and guarantees. Question 6 – Compliance function 6.1 See Compliance News 1, 19 and 32. This may still be a developmental area as compliance functions, processes and procedures are established. Risk management refers to measures to ensure compliance with Act and procedures to ensure an orderly flow of business. See Compliance News 9. Just about all the compliance newsletters have to do with this issue and would thus form part of your risk management processes. Tick applicable spaces. 6.2 This is an ongoing process. The external or internal compliance officer should keep track of all compliance matters and keep checklists and progress reports. See Compliance News 19 and 35. Section 17 of the Act refers to the processes and procedures a FSP and representative must have in place to ensure compliance with the Act. The above documents will once again be applicable. See Compliance News 15 and 33 for a checklist that can also be utilized in the compliance process. Even sole proprietors or single key individuals should keep ongoing written reports on their own monitoring procedures. 6.3 Tick applicable space. 6.4 Tick applicable space. List number of visits in column 5, if applicable. 6.5 Procedures may still be a developmental area and you should make some comments what you have in place and what still needs to be established. You can refer to all the newsletters, documents, checklists and forms the IBC provide you with as part of an ongoing compliance support program. Attendance of compliance workshops may also be mentioned as part of a process to improve maintenance and efficiency of compliance measures. Enter number of document in column 5, if applicable, and attach document to report. Question 7 – Maintenance of records 7.1 See Compliance News 14. 7.2 See Compliance News 10. 7.3 See Compliance News 5 and 8. 7.4 Tick applicable space. 7.5 Tick applicable space. 7.5.1 – tick applicable space. 7.6 Tick applicable space. 7.7 Tick applicable space. 7.7.1 – tick applicable space. 7.8 Tick applicable space. 7.9 Tick applicable space. Question 8 – General Code of Conduct 8.1.1 Includes awards such as trips inside and outside borders of SA etc. See Compliance News 5. 8.1.2 Tick applicable space. 8.1.3 Tick applicable space. 8.1.4 See Compliance News 30 as a guideline. This requirement includes brokers’ notes. 8.1.5 See Compliance News 30 as a guideline. This is an essential requirement where, inter alia, the rights and obligations of all parties, as well the instructions from the client are recorded. 8.2.1 See Compliance News 2, 3, 7 and 29. 8.2.2 Tick applicable space. 8.2.3 Tick applicable space. 8.2.4 Tick applicable space. 8.2.5 Tick applicable space. 8.2.6 Tick applicable space. 8.2.7 Tick applicable space. 8.2.8 Tick applicable space. 8.2.9 Tick applicable space. 126.96.36.199 Tick applicable space. 188.8.131.52 Tick applicable space. 8.2.11 Tick applicable space. 8.2.12 See Compliance News 7. 8.2.13 Tick applicable space. 8.2.14 Tick applicable space. 8.2.15 Tick applicable space. 8.2.16 Tick applicable space. 8.2.17 Tick applicable space. 8.2.18 Tick applicable space. 8.3.1 Tick applicable space. 184.108.40.206 Tick applicable space. See Compliance News 8 and 16. 220.127.116.11 Tick applicable space. 18.104.22.168 Tick applicable space. 22.214.171.124 Tick applicable space. 126.96.36.199 See Compliance News 12. 188.8.131.52 See Compliance News 16 and 17. 184.108.40.206 List number of cases in column 5. 220.127.116.11 Tick applicable space. 18.104.22.168 The record of advice must be in writing and handed to the client. 22.214.171.124 Tick applicable space. 126.96.36.199 Tick applicable space. 188.8.131.52 Tick applicable space. 8.4.1 This refers to premiums or funds of a wide financial nature – see Compliance News 21 and 28. 184.108.40.206 Tick applicable space. See Compliance News 28. 220.127.116.11 Tick applicable space. 18.104.22.168 This refers to the receipt of premiums by the FSP with authorization by the short-term insurer, and the keeping of clients’ funds in a separate account. See Compliance News 21 and 28. 8.4.3 Tick applicable space. 8.4.4 Tick applicable space. 8.4.5 Tick applicable space. 8.5.1 See Compliance News 9. 8.5.2 Tick applicable space. 8.6.1 See Compliance News 22. 8.6.2 Tick applicable space. 22.214.171.124 – tick applicable space. 8.6.3 Tick applicable space. 8.7.1 All our members should answer this as NO. 8.7.2 126.96.36.199 – not applicable. 188.8.131.52 – not applicable. 184.108.40.206 – not applicable. 220.127.116.11 – not applicable. 18.104.22.168 – not applicable. 8.8.1 See Compliance News 4. 8.8.2 Tick applicable space. 22.214.171.124 – tick applicable space. 8.9.1 See Compliance News 9. Question 9 – Exemptions 9.1.1 This refers to the exemption granted by the Registrar if your application for a license was submitted to the FSB before or on 29/09/2004. 9.1.2 If you were not yet licensed by 29/09/2004, but your application was submitted, did you inform your clients in writing or electronically of their right to submit complaints against the FSP directly to the Ombud, until such time a license has been issued by the Registrar? 9.1.3 This refers to an exemption granted to providers of only Long-term insurance Category A, and will not be applicable to our members – answer as no. 9.1.4 Not applicable to in terms of 9.1.3 above – answer as no. 9.2.1 Answer is NO. 9.2.2 Not applicable. 9.3.1 Answer is NO. 9.3.2 Not applicable – answer as no. 9.3.3 Not applicable. Question 10 – Money laundering control procedures 10.1 See Compliance News 20. 10.2 Answer is YES. Answer is NO if you are licensed only for short-term insurance. 10.3.1 See Compliance News 20. Attach internal rules to report and list document in column 5. Section 29 of FICA is applicable also to short-term insurance. 10.3.2 This can be the compliance officer, a key individual, designated representative or sole proprietor. Also applicable to short-term insurance. 10.3.3 Tick applicable space. Not applicable if licensed only for short-term insurance. 10.3.4 List all instances in a separate annexure and list number in column 5. 10.3.5 Tick applicable space 10.3.6 Many product suppliers requested confirmation of client details by the FSP. Question 11 – Financial soundness 11.1 This refers to the fact that the FSP’s assets must exceed its liabilities, subject to the exemption that this requirement only applies to those FSP’s handling clients’ funds or assets, or receive premiums, because of such funds, assets or premiums being at risk. 11.2 Also take note of the exemption – FSP’s must be able to meet their financial liabilities in rendering financial advice. 11.3 See Compliance News 28. Accounting records must be kept and updated on a monthly basis. 11.4 Tick applicable space. SECTION 5 – HEALTH SERVICE BENEFITS Question 15 – Accreditation under section 65(3) of the Medical Schemes Act 15.1 Refers to Category 1.16 of your application for a license – tick applicable space. 15.2.1 Tick applicable space and provide details per separate annexure where applicable. 15.2.2 Insert accreditation number in column 5. 15.2.3 Attach certificate and number annexure in column 5. SECTION 6 – SAMPLING Question 16 16 In this report you can refer to the various documents, checklists and forms used to monitor compliance with the Act and the General Code of Conduct. The report should refer to how regularly these procedures are applied, whether appraisal sessions are held, and whether registers are maintained and updated. List the number of the document in column 5 and complete the particulars in section 7. SECTION 7 – ATTACHMENTS All documents and attachments must be listed in the space provided under section 7. Remember to clearly mark the document with a number for identification purposes. It may be necessary, if applicable, to complete a separate document and attach it to the report in respect of the following questions: 1.1.4 1.3.3 1.4.4 2.4.3 4.3.2 126.96.36.199 6.5 15.2.3 It is necessary to complete a separate document and attach it to the report in respect of the following questions: 10.3.1 10.3.2 16 See example hereunder. SECTION 7 - ATTACHMENTS Additional information Question Comments attached number Annexure reference no 1.1.4 Failure to notify the Registrar within 15 days 1 2.4.3 Changes in personal circumstances of key individual 2 6.5 Comments by compliance officer 3 10.3.1 FICA internal rules 4 General: Remember to sign and date the report. The last section must be completed by the compliance officer and confirmed by a key individual where applicable. Reports can be forwarded to: Financial Services Board FAIS Department PO Box 35655 Menlo Park 0102 Mark the envelope “ANNUAL FAIS COMPLIANCE REPORT” You should keep copies of the report and attached documents. You will find most of the answers in the compliance documents I have compiled and distributed to members. The Act and all relevant subordinate legislation can be found on the FSB and IBC websites.