FAIS Conflict of interest management Board Notice 58 of Wendy Hattingh Head FAIS Supervision Financial Services Board

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1 FAIS Conflict of interest management Board Notice 58 of 2010 Wendy Hattingh Head FAIS Supervision Financial Services Board

2 General duty on a FSP A provider must at all times render financial services honestly, fairly, with due skill, care and diligence, and in the interest of clients and the integrity of the financial services industry History shows that where ethics and economics come in conflict, victory is always with economics. Vested interest have never been known to have willingly divested themselves unless there was sufficient force to compel them BR Ambedkar

3 Previous provisions General Code section 3(1)(b) and (c) The provider must disclose to the client the existence of any personal interest in the relevant services, or of any circumstance which gives rise to an actual or potential conflict of interest in relation to such service, and take all reasonable steps to ensure fair treatment of the client Non-cash incentives offered and/or other indirect consideration payable by another provide, a product supplier or any other person the provider could be viewed as a potential conflict of interest

4 Defining Conflict of Interest

5 Board Notice 58 of 2010 Avoid conflict of interest s 3(1) Develop conflict of interest management policy - s 3A(2) Disclosure s 3(2) Implement controls to ensure comply with prohibitions on financial interest FSPs dealing with other FSPs s 3A(1)(a) Financial interest Immaterial interest FSPs representatives s 3A(1)(b) and (c) Compliance officer must ensure that do monitoring on the COI policy s 3A(4)

6 How do you manage COI? Section 3(1)(b) An FSP and a representative Must avoid and where not possible mitigate any conflict of interest between the provider or representative and a client May not avoid, limit or circumvent or attempt to circumvent compliance through an associate or an arrangement involving an associate

7 How do you mitigate COI? Mere disclosure is not mitigation of COI Code require disclosure of COI in sec 3(1)(c)

8 What must be disclosed?

9 What must be disclosed?

10 COI management policy Conflict of interest management policy must be in place by 20 April 2011 Inform a client of the COI management policy and how it may be accessed Publish the policy in appropriate media easily accessible for public inspection at reasonable times Policy must be adopted by sole proprietor or governing body of the provider Policy must be reviewed annually FSP provide training to its employees, representatives and associates (where applicable) to ensure they are aware of the contents of the policy FSP must monitor compliance with the policy on an ongoing basis

11 COI management policy Provide for the management for COI Specify the type and basis on which representative will qualify for a financial interest that the provider will offer a representative and motivate how that financial interest complies with section 3A(1)(b) Include a list of all associates Include the names of any third parties which the provider hold an ownership interest Include the nature and extent of ownership interest of Associates Third parties

12 Receiving or Offering of Financial interest

13 Section 3A(1)(a) Financial interest An FSP or its representative may only Receive or Offer the following financial interest Commission and fees specified in LTIA,STIA,MSA Fees for rendering of financial services Are specifically agreed to by the client in writing; May be stopped at the discretion of the client Fees or remuneration for the rendering of services to a third party, reasonably commensurate to service being rendered For which fair value is paid from or to a third party

14 Immaterial financial interest

15 Offering of financial interest to representatives

16 Thank you