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Look out!
Do some checking before you hand your cash over to smooth operators, warn Gaenor Vaida and Chris Needham
10 April 2005

IT’S child’s play for a one-man-show to set up an impressive website these days, but if you come across the details of a wealth manager you’ve never heard of, there are ways to check their standing before you entrust your money to them. Astrid de Vos, the Financial Services Board’s (FSB) spokesman, says financial services providers (FSP) such as wealth managers are subject to the Financial Advisory and Intermediary Services (FAIS) Act. This means anyone operating in this field has to be registered with the FSB. Business entities are given a unique FSP number when they apply for registration. De Vos says there are two ways for consumers to determine if an outfit is legitimate: •Phone the FSB’s call centre on 0800202087 or 0800110 443. The call centre operators can check if an entity is registered. •Visit the FSB’s website (www.fsb.co.za) to check for registration. If the outfit has an FSP number, type it in here and the site will display the status of the entity’s application. Under the FAIS Act, all entities are obliged to display certified copies of their FSB certificate in their offices and display their FSP number on all their business documentation, advertisements or other marketing material. De Vos warns the public to be wary of a deal that sounds too good to be true, or of promised returns that are much better than everyone else’s. She says the FSB takes care to ensure that entities are fit and proper to conduct investment business. However, she warns that just because an entity is registered with the FSB, doesn’t mean it will not engage in underhanded business activities. If you believe a financial body is engaging in illegal activities, you can

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contact the FSB. The regulatory body will investigate and — if an entity is found to have transgressed the FAIS Act or any of the rules of conduct — has the power to impose a fine of up to R1-million or 10 years’ imprisonment, or revoke a licence. Last month Gordon van der Spuy, a broker from Centurion who conducted unregistered investment business, was convicted on two counts of fraud and sentenced to five years’ imprisonment by the Special Commercial Crimes Court. The FSB had received a complaint from one of Van der Spuy’s clients in October 2003. The FSB investigated and turned the matter over to the Special Commercial Crimes Unit, who arrested Van der Spuy. However, if a consumer has lost out because of advice from a financial intermediary since FAIS came into being, there is a specific forum to deal with such complaints: the office of the FAIS Ombudsman, Charles Pillay (details below). When it comes to dealing with financial advisers rather than a financial company, Chris Rogers, the managing director of mCubed Unit Trusts, says some operators are managing assets without the necessary experience, qualifications or skill. FAIS includes “fit and proper requirements”, which stipulate the requirements and qualifications for FSPs to register as such with the FSB. “Whether financial adviser, asset manager or investment manager, all receive the same registration as an FSP under this Act,” Rogers says. But even if a financial adviser or asset manager is licensed, does it mean he knows what he is doing? “Although these fit and proper requirements set out minimum standards in terms of experience and qualifications, it is up to the investor to satisfy themselves of their financial adviser’s experience and qualifications, as well as the size and knowledge of the team managing the assets.” Rogers warns that financial advisers typically ask clients to sign a mandate, which gives the adviser discretion over their investments. “Should your adviser have full discretion, it means you have given him permission to move your assets into any investment he sees fit — and with any fees he deems fit to charge. “If you want a specific investment, why would you want to give your adviser the discretion to move it elsewhere?” If you give your adviser a full discretionary mandate, it’s crucial you know he will act ethically and has the know-how to invest your hardearned money. Gerhardt Meyer, head of financial planning at acsis, says some FSPs may be operating without a licence, but this can be permissible if they

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have applied for one — in which case the FSB should be able to verify this. Meyer says you can check to see if advisers are members of the Financial Planning Institute. If they are, your next step is to check whether they are a certified financial planner. The FPI’s website offers a search facility in this regard. If you’re worried about a product, Meyer says you should ask the FSB if it is registered with them — especially with offshore products. Simply call them up and tell them the name of the product you’re being sold. If it is not registered, your advisor is not supposed to advise you about the product and you should steer clear. •FAIS Ombud Tel: 0860 324766 E-mail: info@faisombud.co.za PO Box 74571 Lynnwood Ridge, 0040

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