Feedback from the Supervision Desk. Felicity Mabaso HOD :FAIS Supervision Department

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1 Feedback from the Supervision Desk Felicity Mabaso HOD :FAIS Supervision Department

2 Content FSP statistics Supervisory approach Feedback - theme visits 2016/17 Planned - theme visits 2017/18 New developments and projects

3 Statistics Authorised FSPs (10 513) Category I (9 699) Category II 632 (693) Category IIA 119 Category III 27 (27) Compliance Officers (4 053) Active 978 Inactive Staff complement 132: FAIS Division 65: FAIS Supervision Category IV 112 (94)

4 Supervisory approach Compliance report Quality of information Irregularity reports Conduct of Business Report Published December 2016 for comments Feedback from Industry Data Collection and Analysis Core to supervision activities Outcomes and Principles based Risk-based and proportional Annual Financial Statements Integrity of data Extension requests Exemption applications Irregularity reports Improved interaction with regulated entities and other stakeholders

5 Category I (without compliance officer) Educational Intervention Initiative started in 2014 A total of 99 FSPs participated in this initiative Theme Visits: 2016/2017 Focus Area Risk management plan Record of advice Business continuity plans Financial soundness requirements Competency requirements; i.e. regulatory examinations and qualifications Suitable guarantees and/or professional indemnity cover ; and Conflict of interest management policy Contraventions Regulatory examination 1 or key individuals (RE1) Regulatory examination 5 for Theme Visits representatives (RE5) Qualification Professional indemnity PI Disclosures Impact study Status of 99 FSPs that participated in the initiative as at 31 January 2017 Out of 99 FSPs visited, a total of 80 FSPs were still authorised A total of 6 FSPs lapsed their licenses. The FSPs comprised of 2 close corporations, 2 companies and 2 natural persons A total of 13 FSPs did not comply with the legislation, despite additional assistance. Regulatory action was taken against these FSPs. Six FSPs are currently suspended and seven FSPs authorisation has been withdrawn. These FSPs comprise of 10 natural persons and 3 close corporations.

6 Impact analysis

7 Focus Area Category I (with juristic representatives) Theme Visits: 2016/17 Compliance with section 13(1)(c) by various sectors Ensure consumers know with whom they are contracting Prevent undesirable business practice of renting a license Remove any uncertainty if the representative is acting for or on behalf of a principal or on own behalf To ensure that all moneys received by a FSP and its juristic representative(s) are reported on by the auditor Contraventions Remedial Action Collection of premiums by juristic representatives Contracting with product suppliers in the name of the FSP and not the juristic representatives Insurance cover must be held by the FSP and extended to the juristic representatives Advertising and business documentation must clearly reflect the FSP as the principal Compliance monitoring at the juristic representative Collection of Premiums Micro Lenders Retailers Freight Forwarders Travel agents Motor dealers Review of various business models currently underway

8 Category II and IIA Theme Visits: 2016/17 Focus Area Unregulated products Business continuity plans Disaster recovery plans Adequacy of professional indemnity cover and fidelity insurance Third party agreements Risk management plan Contraventions Risk management plan Trends General compliance with the provisions of the FAIS legislation applicable to the FSPs

9 Theme Visits: 2016/17 Category III Focus Area Unregistered CIS funds Transfer of clients mandates Contraventions Trends Reports are in the various stages of finalisation Unallocated client funds

10 Theme Visits: 2017/18 CATEGORY I (WITHOUT COMPLIANCE OFFICER) CATEGORY I (WITH JURISTIC REPRESENTATIVE S) CATEGORY II CATEGORY IIA CATEGORY III Compliance with the FAIS legislation Compliance with section 13(1)(c) of the FAIS Act Ad hoc visits On-site visit conducted every two years Ad hoc visits Training interventions Contraventio ns identified through desk based supervision Complaints Contraventio ns identified through desk based supervision Complaints

11 New developments and projects Conduct of Business Report Published on 6 December 2016 Closing date for comments 28 February 2017 Framework for crowdfunding Research completed and proposals on applicable framework is currently under consideration Derivatives (Binary Options) An increase in the number of complaints received from retail investors who have suffered significant losses by trading in binary options Amendments to the audit requirements Risk management and internal control systems Financial Intelligence Centre Act (amendment of the Schedule to the FIC Act) Short-term insurers and short-term insurance brokers will in future be included as accountable institutions Consultation with short-term insurance industry on 12 May

12 Thank You