CONTENTS GENERAL NOTICE NAMIBIA FINANCIAL INSTITUTIONS SUPERVISORY AUTHORITY

Transcription

1 CONTENTS No. 1 NAMFISA: Standards under the Financial Institutions and Markets Act, 2016 (Act No. x of 2016) GENERAL NOTICE NAMIBIA FINANCIAL INSTITUTIONS SUPERVISORY AUTHORITY No STANDARDS UNDER THE FINANCIAL INSTITUTIONS AND MARKETS ACT, 2016 (ACT NO. X OF 2016) The Namibia Financial Institutions Supervisory Authority, under section 382(1) of the Financial Institutions and Markets Act, 2016 (Act No. X of 2016), hereby issues Standards set out in the Schedule. ESTELLE TJIPUKA CHAIRMAN Windhoek, 2016

2 STANDARDS UNDER THE FINANCIAL INSTITUTIONS AND MARKETS ACT, 2016 (ACT NO. x OF 2016) ARRANGEMENT OF SECTIONS PART I PRELIMINARY 1. Definitions 3 2. Conflict or inconsistency 6 3. Interpretation of Standards 6 4. Citation of Standards 6 5. Commencement 6 6. Fit and proper requirements for any person registered under this Act, and for directors, members of a board, principal officers, other officers, trustees, custodians, auditors and valuators of financial institutions and financial intermediaries, and for any other person subject to this Act 7 7. The independence of directors, members of a board, trustees, custodians, auditors and valuators and of any other person required to be independent under the Act Code of Conduct Outsourcing of functions and responsibilities by financial institutions and financial intermediaries Institutional Investment The Content of Investment Mandates Payment of Contributions Information from List Applicants and Others on Listed Individuals, Listed Companies and Others Imposition of Penalties on List Applicants and Others Pursuant to Sections 56(2), 89(2), 94(6), 174(2) or 176(6) Description of Plain Language The Fiduciary Responsibilities of Financial Institutions and Financial Intermediaries and of Their Directors, Members of Boards, Principal Officers and Other Officers 47

3 STANDARDS UNDER THE FINANCIAL INSTITUTIONS AND MARKETS ACT, 2016 (ACT NO. x OF 2016) SCHEDULE 1. Definitions PART I: PRELIMINARY (1) In these Standards: Act means the Financial Institutions and Markets Act, 2016 [Act No. of 2016], and includes the regulations prescribed under the Act and the standards and other subordinate measures issued by NAMFISA under the Act; authorisation for registration means the authorisation by a list applicant of a listed individual or listed company for registration by NAMFISA; [or: means the authorisation by a list applicant of a listed individual or listed company, within the meaning of Standard GEN 9-14, for registration by NAMFISA] category or categories of industry participants means those industry participants that provide any particular type or types of financial services as their principal business; business function includes a business activity, a business process and a business responsibility, but does not include the principal business of an industry participant; Companies Act means the Companies Act, 2004 (Act No.28 of 2004); conflict of interest means a situation which a financial institution or financial intermediary encounters, while rendering a financial service to a client, if that situation: (i) influences the objectivity of the financial institution or financial intermediary in any aspect of rendering the financial service to the client; or (ii) prevents the financial institution or financial intermediary from rendering the financial service to the client in an unbiased and fair manner or from acting in the best interest of the client. fiduciary means a financial institution or a functionary of a financial institution; fiduciary duty means a duty arising when a client or investor reposes confidence and trust in a fiduciary, to act in the interest of and for the benefit of the client or investor, with the necessary loyalty and care required of a fiduciary, before, during or after providing a financial service; Financial Intelligence Act means the Financial Intelligence Act 2012 (Act No. 13 of 2012); financial institutions and markets sector means the sector comprising the financial institutions and financial intermediaries registered under the Act;

4 functionary means a director, member of the board, principal officer, other officer and employee of a financial institution or financial intermediary; Industry means participants in the financial services and markets sector, other than banking institutions. industry participants or industry participant means the financial institutions and financial intermediaries that are participants in the financial services and markets sector, or any one of them; material information means information that would enable a client or investor to make an informed decision or information that, if not provided, would result in the client or investor not making an informed decision. principal business means the financial service or financial services for which an industry participant is registered under the Act and which are described in its certificate of registration issued under subsection 356(4) of the Act; key person means an employee of a financial institution or financial intermediary with a major decision making role and the responsibility, either alone or with others, for the management of all aspects of rendering a financial service to a client or investor. list applicant means: (a) (b) for the purposes of Chapter 2 of the Act, a registered insurance company, as defined in section 4 and referred to in subsection 55(1) of the Act; for the purposes of Chapter 3 of the Act, the following, as defined in section 75 and referred to in subsections 88(1) to (4) of the Act: (i) (ii) (iii) (iv) a registered exchange a registered investment manager; a registered securities advisor that is a company; and a registered securities dealer that is a company; and (c) for the purposes of Chapter 4 of the Act, a manager, as defined in section 162 and referred to in subsection 173(1) of the Act; listed individual means an individual who is: (a) (b) for the purposes of Chapter 2 of the Act, an insurance agent, as defined in section 53 and referred to in subsection 55(1) of the Act; for the purposes of Chapter 3 of the Act, the following, as defined in section 75 and referred to in subsections 88(1) to (4) of the Act:

5 (i) (ii) (iii) (iv) an authorised user; a portfolio manager; an authorised advisor; and an authorised representative; and (c) for the purposes of Chapter 4 of the Act, an authorised representative, as defined in section 162 and referred to in subsections 173(1) of the Act; listed company means a company that is: (a) for the purposes of Chapter 3 of the Act, an authorised user as defined in section 75 of the Act, and referred to in subsection 88(1) of the Act; (b) for the purposes of Chapter 4 of the Act, an authorised representative as defined in section 162 of the Act, and referred to in subsection 173(1) of the Act; material business activity means the primary business activity or activities of a financial institution or financial intermediary; primary business activity or activities mean the primary business activity or activities for which a financial institution or financial intermediary is registered under the Act and which are described in its certificate of registration issued under subsection 356(4) of the Act; material business function means a business function of an industry participant that, while not the principal business of that industry participant, nevertheless has the potential, if disrupted, for a significant and negative qualitative or quantitative impact on the finances, reputation or operation of the industry participant or on its ability to manage key risks effectively, or on its principal business; 'relevant matters means all input used in facilitating the day to day running of the material business activity of a financial institution or financial intermediary. service provider means a person who provides a business function to an industry participant; outsourcing arrangement means an arrangement whereby a service provider undertakes to provide a business function to an industry participant; Outsourcing Agreement means the agreement, referred to in clause 7, of Standard 9.10 documenting an outsourcing arrangement with respect to a material business function; outsourcing means the process of entering into an outsourcing arrangement; (2) Words and phrases defined in the Act have the same meaning in these Standards, unless the context indicates otherwise, including without limitation, the following:

6 (a) as defined in section 1 of the Act: (i) affiliate; (ii) associate; (iii) board; (iv) client; (v) director; (vi) entity; (vii) financial crime; (viii) financial institution; (ix) financial intermediary; (x) financial service; (xi) foreign entity; (xii) NAMFISA; (xiii) officer; (xiv) person; (xv) principal officer; and (xvi) valuator; (b) control, as defined in section 3 of the Act; (c) as defined in section 75 of the Act: (i) (ii) (iii) (iv) authorised user; exchange; investment management; and investment manager 2. Conflict or inconsistency Where any provision in these Standards is inconsistent or in conflict with a provision of the Act or regulations, the provision of the Act or regulations prevail to the extent of the inconsistency or conflict. 3. Interpretation of Standards These Standards must be read in conjunction with the Act and other standards and regulations as well as relevant guidelines, bulletins, rules and other measures issued under the Act. 4. Citation of Standards These Standards may be cited as the General Standards. 5. Commencement These Standards were issued by NAMFISA on {date} and will come into effect on {date}.

7 PART II STANDARDS 6. Fit and proper requirements for any person registered under this Act, and for directors, members of a board, principal officers, other officers, trustees, custodians, auditors and valuators of financial institutions and financial intermediaries, and for any other person subject to this Act STANDARD GEN 9-2 FIT AND PROPER REQUIREMENTS FOR ANY PERSON REGISTERED UNDER THIS ACT, AND FOR DIRECTORS, MEMBERS OF A BOARD, PRINCIPAL OFFICERS, OTHER OFFICERS, TRUSTEES, CUSTODIANS, AUDITORS AND VALUATORS OF FINANCIAL INSTITUTIONS AND FINANCIAL INTERMEDIARIES, AND FOR ANY OTHER PERSON SUBJECT TO THIS ACT made by NAMFISA under subsection 382(2)(d) of the Financial Institutions and Markets Act, Citation of standard This Standard may be cited as Standard GEN Interpretation of Standard This Standard applies to all persons required to be fit and proper under the Act, including, without limitation: (a) (b) all financial institutions and financial intermediaries registered or applying to be registered or authorised for registration, under the Act; all individuals registered or authorised for registration or applying to be registered or authorised for registration under the Act, including, without limitation: (i) members or proposed members of a board, principal officers, other officers, trustees, custodians, auditors and valuators of financial institutions and financial intermediaries referred to in sub-clause (a); (ii) members of a board of an entity that controls a financial institution or financial intermediary referred to in sub-clause (a); (iii) any other individual or entity exercising oversight function or control over the management or administration of a financial institution or financial intermediary registered under the Act; and (iv) any other person who is or may become subject to the Act. 3. Assessment requirements (1) In assessing the fitness and propriety of an individual, NAMFISA must satisfy itself on reasonable grounds that the appointment or employment of the individual is not likely to have negative implications for the sound and prudent management of the financial institution or financial intermediary, and such assessment will take into account all relevant matters including, but not limited to: (a) education and experience;

8 (b) (c) (d) competence and capability; honesty, integrity, fairness and ethical behaviour; and financial soundness. (2) Subject to an evaluation of the particular circumstances, including those referred to in Schedule 1 attached hereto and forming part hereof, NAMFISA must determine whether an individual meets the fit and proper criteria referred to in sub-clause (1) with reference to the following: (a) Education and experience: An individual meets the education and experience requirement if the individual has met any educational and experience requirements applicable to a specific financial institution or financial intermediary; (b) Competence and capability: In the discretion of NAMFISA and after consultation with the type of Industry concerned, an individual meets the competence and capability requirement if the individual has an appropriate range of skills to understand, operate and manage the activities and financial affairs of the specific financial institution or financial intermediary, and in the case of - (i) an auditor, has the technical knowledge and ability to perform the duties for which the auditor is appointed, and is qualified as an auditor within the meaning of the Act; and (ii) a valuator, has the technical knowledge and ability to perform the duties for which the valuator is appointed, and is qualified as an actuary or other expert within the meaning of the Act; (c) Honesty, integrity, fairness and ethical behaviour: An individual meets the honesty, integrity, fairness and ethical behaviour requirement if that individual has been candid, truthful and accurate in all his or her dealings with any regulatory body, including NAMFISA, and the individual demonstrates substantial efforts to comply with the requirements of the Act and with any other applicable legal, regulatory and professional requirements, and, within the immediately preceding ten years- (i) has not been disqualified from being a director of a company in terms of sections 225 and 226 of the Companies Act; (ii) has not breached a fiduciary duty; (iii) has not perpetrated or participated in grossly negligent, deceitful, or otherwise discreditable business or professional practices; (iv) has not been reprimanded, disqualified or removed by a professional or regulatory body in relation to matters pertaining to the honesty, integrity or business conduct of the individual; (v) has not been involved in the management of a business or entity which has made arrangements with creditors, filed for sequestration or liquidation, been declared bankrupt or had assets repossessed, where any such event has been occasioned in part by deficiencies of honesty, integrity, fairness or ethical behaviour in its management; and (vi) has not been the subject of civil or criminal proceedings or enforcement action in relation to the management of a business or entity, or in relation to commercial or professional activities, where the proceedings or enforcement action were determined adversely to the individual (including the consent of the

9 individual to an order or direction, or the undertaking of the individual not to engage in unlawful or improper conduct), which reflected adversely on the competence, diligence, judgment, honesty or integrity of the individual; (d) Financial Soundness: The financial soundness of an individual must be determined by the following factors in addition to the requirements stated in the Schedule that are applicable to a specific financial institution or financial intermediary: (i) whether there are any indicators that the individual will not be able to meet his or her personal debt obligations as they fall due; (ii) whether the individual meets the relevant solvency requirements; (iii) whether the individual has seriously or persistently failed to manage personal debts or personal financial affairs satisfactorily in circumstances where such failure caused loss to others; (iv) whether the individual has been subject to any judgment, debt or award that remains outstanding or which has not been satisfied within a reasonable period; (v) whether the individual meets any required minimum insurance or bonding requirements, if any; (vi) whether the individual has made arrangements with creditors, filed for sequestration or liquidation or been declared bankrupt or had assets repossessed, providing that a rehabilitated insolvent is not discriminated against in the application of this Standard and the Schedule; and (vii) whether the individual has been able to provide a satisfactory credit reference. (3) An individual must be considered not to meet the fit and proper criteria if the individual has been found guilty of a financial crime in contravention of the Financial Intelligence Act 2012, the Prevention and combating of Terrorist and Proliferation Activities Act, 2014 and the Prevention of Organised Crime Act, 2004 by a court of competent jurisdiction. (4) In assessing the fitness and propriety of an individual to hold office in an entity that is, or upon registration will become, a financial institution or financial intermediary, NAMFISA must take into account any involvement by that individual in any contravention of or non-compliance with, the Financial Intelligence Act, 2012 the Prevention and combating of Terrorist and Proliferation Activities Act, 2014 and the Prevention of Organised Crime Act, 2004 by or any regulation, order, notice, circular, determination or directive made under the Financial Intelligence Acts, and any involvement in- (a) money laundering and organised crime activities; or (b) terrorist or proliferation of terrorism activity or any activity related to the financing of terrorism or proliferation of terrorism. (5) An individual must demonstrate that he or she meets the criteria set out in sub-clauses (1) to (4) and sub-clause (6) upon registration or authorisation for registration and on an on-going basis as determined from time to time by NAMFISA.

10 (6) An individual must comply with any continuing education requirements that may, from time to time, be required by NAMFISA. (7) Failure by an individual to meet any one of the criteria set out in sub-clause (2) may not necessarily lead to a refusal of an application for, or revocation of, registration, to revocation of an exemption or to any other regulatory action by NAMFISA, and the significance and relevance of an individual failing to meet specific criteria will depend on- (a) the seriousness of the circumstances resulting in the failure of the individual to meet the specific criteria. (b) the duties that are being or that will be, performed by the individual and the responsibilities that have been or that will be assumed by the individual; and (c) the length of time during which the individual has failed or has repeatedly failed to meet the specific criteria. (8) Where an individual is required to apply directly to NAMFISA for registration or authorisation for registration, the following documents must be submitted to facilitate the assessment of fitness and propriety: (a) personal questionnaire and declaration form; (b) an up-to-date and signed curriculum vitae; (c) police clearance or, if applicable, a criminal record certificate if available at the time of submitting an application for registration or, in the alternative, proof of application made for police clearance or a criminal record certificate, one of which must be submitted within the six months following registration or authorisation for registration; and (d) any other relevant document that NAMFISA deems necessary. (9) Where an individual who is a listed individual is required to apply for authorisation for registration, the list applicant concerned: (a) must have in place a check-list including an affidavit made by the listed individual as required from time to time by NAMFISA to ensure that the listed individual meets the criteria set out in sub-clauses (1) and (2) and the policy referred to in sub-clause (14); and (b) may request the listed individual to submit the documents required in sub-clause (8) with such changes as the context may require. (10) In assessing the fitness and propriety of an entity, NAMFISA must be reasonably satisfied that the entity has sound and prudent management and that it is not likely to have negative or adverse implications for- (i) the financial soundness and stability of the financial institutions and markets sector; (ii) the protection of consumers of financial services; and (iii) the reduction and deterrence of financial crime. (11) The assessment referred to in sub-clause (10) must take into account all relevant matters including, but not limited to-

11 (a) the fitness and propriety, in accordance with the criteria set out in sub-clauses (2), (3) (4), (5) and (6) of- (i) members of the board, principal officer and key persons, and any trustee or custodian, auditor or valuator of the entity; and (ii) members of the board of any entity that controls the entity; (b)the honesty, integrity, fairness and ethical behaviour of the entity; and (c) the financial soundness of the entity. (12) The assessment referred to in sub-clause (11)(b) must take into account the following provisions (a) whether the entity has been candid and accurate in the application for registration or, where applicable, for authorisation of registration, and has disclosed all relevant facts and information at the disposal of, or which are accessible to, the entity and which are required by or may be relevant to, NAMFISA, in determining the fitness and propriety of the entity; (b) whether the entity has considered the fit and proper requirements for individuals referred to in clause 11(a) at the recruitment stage; (13) In order to meet the requirements of sub-clause (11)(c), the entity must: (a) not be under judicial management or liquidation; (b) maintain in Namibian dollars current assets which are at least sufficient to meet current liabilities; (c) maintain liquid assets equal to at least twenty-five percent of annual expenses or estimated annual expenses, or such greater amount as NAMFISA may, from time to time determine; and (d) have audited financial statements that are satisfactory to NAMFISA. (14) Where an entity that is a listed company is required to make an application to a list applicant for authorisation for registration, the list applicant concerned: (a) must have in place a check-list including an affidavit made by the listed company as required from time to time by NAMFISA to ensure that the listed company meets the criteria set out in clauses 3(1) and 3(2) and the policy referred to in sub-clause (8); and (b) may request the listed company to submit the documents required in sub-clause ()with such changes as the context may require. (15) Every financial institution and financial intermediary that is an entity must have a documented policy relating to fitness and propriety for the individuals referred to in sub-clause (11)(a), which must include compliance with any required criteria for continuing education or professional development issued by NAMFISA, and such policy must be approved by the board or, where applicable, by the board of the entity that controls the financial institution or financial intermediary.

12 (16) Every financial institution and financial intermediary that is an entity must take all reasonable steps to ensure that all individuals to whom its fit and proper policy applies are aware of, and understand, the provisions of that policy. (17) The fit and proper policy referred to in sub-clauses (15) and (16) must form part of the risk management framework of the financial institution or financial intermediary. (18) Where an entity applies to NAMFISA for registration the following documents must be submitted to facilitate the assessment of fitness and propriety: (a) corporate questionnaire and declaration form; (b) copy of the Memorandum of Association and Articles of Association or Articles of Incorporation or Continuance, or other instrument of incorporation and copy of certificate of incorporation, or other foundation documents of the entity and; (c) any other relevant documents that NAMFISA deems necessary for the purpose. SUPPORTING SCHEDULE The following supporting schedule is attached to, and forms part of this Standard: Schedule 1: Fit and Proper Requirements

13 SCHEDULE 1 FIT AND PROPER REQUIREMENTS PART A Individuals An individual is able to demonstrate honesty, fairness, ethical behavior and integrity if that individual: i. is not disqualified from being a director of a company in terms of the Companies Act; and ii. declares under oath and confirms within the immediately preceding ten years he or she: a) has not been disqualified from being a director of a company in terms of sections 225 and 226 of the Companies Act; b) has not breached a fiduciary duty; c) has not perpetrated or participated in grossly negligent, deceitful, or otherwise discreditable business or professional practices; d) has not been reprimanded, disqualified or removed by a professional or regulatory body in relation to matters relating to the individual s honesty, integrity or business conduct; e) has not been involved in the management of a business or entity which has made arrangements with creditors, filed for sequestration or liquidation, been declared bankrupt or has assets repossessed, where any such even has been occasioned in part by deficiencies of honesty, integrity, fairness or ethical behavior in that management; f) has not been the subject of civil or criminal proceedings or enforcement action in relation to the management of a business or entity or in relation to commercial or professional activities, where the proceedings or enforcement action were determined adversely to the individual (including the consent of the individual to an order or direction, or the undertaking of the individual not to engage in unlawful or improper conduct), which reflected adversely on competence, diligence, judgment, honesty or integrity of the individual; g) has not been refused authorisation to carry on business by any regulatory body (whether in Namibia or elsewhere), or has such authorisation suspended or revoked by any such body because of negligence, incompetence or mismanagement; h) did not have or has not had a significant ownership interest in a business or entity referred to in subclause(ii)(e) of this Schedule, where any events described in that sub-clause have been occasioned in part by deficiencies of honesty, integrity, fairness or ethical behavior in that management; or i) has not been found liable under the Financial Intelligence Act (2012) or the Prevention of Organized Crime Act, 2004 (Act No. 29 of 2004), the Prevention and Combating of Financing of Terrorist and Proliferation Activities Act, 2004 ( Act No 4 of 2014), or any other similar legislation in any country; j) is not listed on any credit bureau as a bad creditor; k) has never been involved in the management of or employed by a financial institution or financial intermediary which failed to maintain a l sound financial position or any required capital or solvency. PART B Management Qualifications: i. A business degree (in Finance, Commerce, Accounting, Economics or related business qualification) from an accredited university. ii. Matric or Grade 12 with Commercial or Business related subjects (mathematics, economics, accounting or computer Experience: i. At least three (3) years related experience in the financial services and markets sector. ii. At least ten (10) years related experience in the financial services Duties: i. Ensuring that the operations are managed prudently and in accordance with best practices and ensuring adherence to all applicable legislation and regulations and other subordinate legislation prescribed or issued thereunder. Page 13 of 48

14 science or any other business subject). iii. Registered persons examinations of the South African Institute of Financial Markets. iv. Chartered Financial Analyst. v. Other qualifications to be evaluated by NAMFISA on a case by case basis. and markets sector. iii. At least three (3) years Industry related experience. iv. At least one (1) year related experience in the financial services and markets sector. v. Determined by NAMFISA on a case by case basis. ii. Informing NAMFISA in writing of any matter which may affect the operations. Key person Qualifications: i. A business degree (Finance, Commerce, Accounting, Economics or related business qualification) from an accredited university. ii.grade 12 or BA degree with Commercial or Business related subjects (mathematics, economics, accounting or computer science or any other business subject) and relevant tertiary qualification. iii. Registered person s examinations of the South African Institute of Financial Markets. iv. Chartered Financial Analyst. v. Other qualifications to be evaluated by NAMFISA on a case by case basis. Experience: i. At least three (3) years related experience in the financial services and markets sector. ii. At least ten (10) years related experience in the financial services and markets sector. iii. At least five (5) years related experience in the financial services and markets sector. iv. At least one (1) year related experience in the financial services and markets sector. v. Determined by NAMFISA on a case by case basis Duties: i. demonstrate competency to undertake the relevant financial services, including, where appropriate, detailed knowledge of the structure, purpose and risks of the applicable financial products. ii. demonstrate knowledge and expertise relating to the: a. professional management of the financial institution or financial intermediary concerned; b. applicable laws, products and markets; c. financial or actuarial aspects d. administration,,internal control, information technology and risk management; e. financial accounting and reporting Page 14 of 48

15 PART C Financial soundness: Entity An entity is able to demonstrate financial soundness if: i. in existence and operating for more than one year, and able to provide a copy of its audited financial statements as at its most recent financial year end; ii. able to provide a copy of its budgeted income and expenditure statement (income statement), balance sheet and cash flow statements for a three year period immediately preceding the date of its most recent financial year end, except in the case of an entity that has been in existence and operating for less than three years, in which case the period during which it has been in existence and operating supersedes that three year requirement; iii. able to provide a schedule illustrating its funding provisions for anticipated supervisory responsibilities over the budgetary period; iv. able to provide a written statement by the key person specifying the critical assumptions made in the preparation of the budgets as well as specifying the sources of funding; v. able to provide, where arrangements have been made for funding any temporary shortfall in available cash resources by the entity concerned setting out the extent and terms of its commitment; vi. able to provide a projection on the capital and current expenditure of management and staff required for the period covered by the budgets; vii. able to provide a Business Plan that has been approved by its key person as part of the oversight functions; viii. able to provide details of its compensation plans (professional indemnity and fidelity insurance cover) sufficient to cover the risk of losses due to fraud, dishonesty, negligence or any other dishonest acts or breaches of professional duty of the directors, employees or representatives; ix. able to provide proof of at least one million Namibia dollars as capital employed or the availability of that amount to be employed as capital in the business of the entity; x. there are no indicators that the entity will not be able to meet its obligations as they become due; xi. the key person has not seriously or persistently failed to manage personal debts or personal financial affairs satisfactorily in circumstances where such failure caused loss to others; xii. the key person has not been subject to any judgment debt or award that remains outstanding or has not been satisfied within a reasonable period; xiii. the key person meets required minimum financial and insurance or bonding requirements; xiv. the key person has not made arrangements with creditors, filed for sequestration or liquidation or been adjudged bankrupt or had assets sequestered; and xv. the key person has been able to provide a satisfactory credit reference. Page 15 of 48

16 7. The independence of directors, members of a board, trustees, custodians, auditors and valuators and of any other person required to be independent under the Act Standard GEN 9-8 made by NAMFISA under subsection 382(2)(e) of the Financial Institutions and Markets Act, 2016 THE INDEPENDENCE OF DIRECTORS, MEMBERS OF A BOARD, TRUSTEES, CUSTODIANS, AUDITORS AND VALUATORS AND OF ANY OTHER PERSON REQUIRED TO BE INDEPENDENT UNDER THE ACT 1. Citation of Standard This Standard may be cited as Standard GEN Interpretation of Standard This Standard applies to any individual who is required under the Act to be independent including, without limitation, directors, members of a board, principal officers, trustees, custodians, auditors, and valuators. 3. General Criteria (1) An individual will not be considered independent in respect of an election or appointment to a position with a financial institution or financial intermediary if the individual: (a) is an associate of : (i) (ii) the financial institution or financial intermediary; or an entity that is an affiliate of the financial institution or financial intermediary; or (b) derives any benefit in the provision of a financial service to a client, other than through any contractual relationship with the financial institution or financial intermediary documenting the election or appointment to the position. (2) In relation to a financial institution or financial intermediary, an individual will not be considered independent if, in respect of an election or appointment to a position with that financial institution or financial intermediary, the individual: (a) is employed, or has, within the immediately preceding year, been employed, by the financial institution or financial intermediary concerned, or (b) by an associate or affiliate of that financial institution or financial intermediary; or 4. Specific criteria (1) In addition to the other criteria of this Standard, an auditor will not be considered independent, whether as an individual not associated with a firm of auditors or associated to a firm of auditors if the auditor: Page 16 of 48

17 a. is a key person with respect to the financial institution or financial intermediary concerned or is a key person of an associate or affiliate of that financial institution or financial intermediary; or b. is associated with the valuator of that financial institution or financial intermediary or with the member of the firm of valuators designated pursuant to section 374 (2)(b) and (4) of the Act. (2) In addition to the other criteria of this Standard, a valuator will not be considered independent if the valuator: (a) is a key person with respect to the financial institution or financial intermediary concerned or is a key person of an associate or affiliate of that financial institution or financial intermediary; or (b) is associated with the auditor of that financial institution or financial intermediary or with the member of the firm of auditors designated pursuant to section 373(2) of the Act. 5. Disclosure Where it is contemplated that an individual may be elected or appointed to a position with a financial institution or financial intermediary, that individual must disclose to the financial institution or financial intermediary any matter which relates or may possibly relate to the independence of the individual, both before the election or appointment and on an ongoing basis. Page 17 of 48

18 8. Code of Conduct Standard GEN.S. 9.9 made by NAMFISA under subsections 382(2)(aaa), 382(4)(p) and 382(6)(u) of the Financial Institutions and Markets Act, Citation of standard CODE OF CONDUCT This Standard may be cited as Standard GEN.S Interpretation of standard This Standard applies to all financial institutions and financial intermediaries registered under the Act. 3. General Requirements (1) The board of every financial institution and the board of a financial intermediary must ensure that a Code of Conduct is in place, containing the elements described in clause 4(1) and followed by all board members, directors, principal officer, other officers, trustees, custodians and employees (2) A financial intermediary who is an individual and who is not employed by a financial institution or another financial intermediary that is an entity, must ensure that he or she has a code of conduct in place, containing the elements described in clause 4(1) in so far as applicable and that such Code is followed by all employees. 4. Basic Elements (1) The basic elements of the Code of Conduct are: (a) Code of Conduct Policy: this is a policy statement that defines ethical standards for conduct; (b) Conflicts of Interest: the code must include a definition of conflicts of interest and policy statement on: (i) (ii) conflicts of interest; actions that are required to be taken where conflicts of interest arise or are likely to arise, including disclosure and recusal; and (iii) sanctions for breaches of the Code of Conduct involving conflicts of interest; (c) Legal Compliance: this requires the board, directors, principal officer, other officers, trustees, employees and all employees to abide by the Act and all other applicable laws, including rules, regulations and standards relevant to the financial institution or financial intermediary; Page 18 of 48

19 (d) Company or Individual Information and Assets: the Code of Conduct should include standards relating to the: (i) (ii) (iii) reporting of audited financial statements and other operational information to customers; treatment of confidential information; and fiduciary responsibilities. (e) Workplace Practices: the Code of Conduct should provide for ethical behavior, reporting of dishonest, unethical or illegal activities, and compliance with the Code of Conduct and the Act and other applicable laws, including provisions regarding authorisation to enter into contracts on behalf of the financial institution or financial intermediary and sanctions for such actions taken without such authority; (f) Confidentiality: the Code of Conduct should provide for the maintenance of confidentiality with respect to all information regarding the financial institution or financial intermediary and all stakeholder information, and for oaths of confidentiality by members of the board and management; and (g) Reporting, Enforcement and Sanctions: the Code of Conduct should provide for recording and reporting serious breaches of the Act, other applicable laws, rules, regulations, standards or the Code of Conduct to NAMFISA, provide for procedures for enforcement of the Code of Conduct, including investigations and disciplinary action, and provide for clear, appropriate and proportional sanctions for such breaches. (h) Appropriate sanctions: must be proportional to any breaches of the code of conduct and for the consistent application of such sanctions. The code of conduct should provide, at a minimum, the following: i. procedures for the enforcement of the code of conduct, including investigations and disciplinary action; ii. clear sanctions; iii. oaths of confidentiality by members of the board and management; and (2) records of and reporting on breaches of the code of conduct and sanctions. as the elements of the Code of Conduct are concerned, it is expected that the board and management of a financial institution or financial intermediary and a financial intermediary who is an individual, shall exercise discretion in ensuring that the following principles are taken into account: (a) act in good faith and in the best interest of the financial institution or financial intermediary and customers; (b) act with prudence and reasonable care; (c) act with skill, competence and diligence; (d) maintain independence and objectivity by, among other actions, avoiding conflicts of interest, refraining from self-dealing, and refusing any gift that could reasonably be expected or perceived to affect conduct; Page 19 of 48

20 (e) comply with the Act, all other applicable laws, rules, regulations, standards or other subordinate measures, and constitutive documents and the Codes of Conduct of the financial institution or financial intermediary; (f) deal fairly, objectively, and impartially with all customers; (g) take actions that are consistent with the established objectives of the financial institution or financial intermediary and the policies that support those objectives and to review on a regular basis the efficiency and effectiveness of the financial institution or financial intermediary in meeting its goals, including assessing the performance and actions of its financial service providers; (h) maintain confidentiality of the financial institution or financial intermediary and stakeholder information; and (i) communicate with stakeholders, NAMFISA and other supervisory authorities in a timely, accurate, and transparent manner. Page 20 of 48

21 9. Outsourcing of functions and responsibilities by financial institutions and financial intermediaries Standard GEN made by NAMFISA under subsection 382(2)(x) of the Financial Institutions and Markets Act, 2016 OUTSOURCING OF FUNCTIONS AND RESPONSIBILITIES BY FINANCIAL INSTITUTIONS AND FINANCIAL INTERMEDIARIES 1. Citation of Standard This Standard may be cited as Standard GEN Interpretation of Standard This Standard applies to every industry participant and the material business functions of that industry participant, and to all service providers with respect to the outsourcing of any such material business function. 3. Materiality (3) In determining whether a business function is a material business function, NAMFISA will exercise discretion with regard to such factors as: (a) the financial, operational and reputational impact of a failure of the service provider to perform the business function on the industry participant; (b) the potential impact of outsourcing the business function on the provision of financial services to the clients of the industry participant; (c) the potential losses to the clients of the industry participant on the failure of a service provider; (d) the cost of the outsourcing arrangement; (e) the degree of difficulty, including the time it would take, in finding an alternative service provider or bringing the outsourced activity back in-house; (f) the ability of the industry participant to meet regulatory requirements if there are problems with the service provider; (g) any affiliation or association between the industry participant and the service provider; (h) any potential conflicts of interest that may result through outsourcing to a particular service provider; and (i) the regulatory status of the industry participant and, if applicable, of the service provider. (4) Any business function directly related to the principal business of the registered person is a material business function. Page 21 of 48

22 (5) An industry participant must not enter into an outsourcing arrangement with a service provider with respect to: (a) its principal business; or (b) any business function that is deemed by NAMFISA as likely to inhibit the ability of the industry participant to perform its duties and obligations under the Act. 4. Requirements for outsourcing a material business function In assessing any potential outsourcing arrangements, an industry participant must take into account all relevant matters including, but not limited to, those referred to from sub-clauses 5 to The role of the board and senior management (1) The board and senior management of an industry participant that is an entity, in assessing a potential outsourcing arrangement, must: (a) (b) (c) identify, assess, manage, mitigate and report to NAMFISA on risks associated with the outsourcing arrangement to ensure that the industry participant will remain able to meet its financial and other obligations to its clients and other stakeholders; approve the industry participant s outsourcing policy, which must set out the approach of the industry participant to outsourcing material business activities, including a detailed framework for managing all outsourcing arrangements; ensure that the industry participant has procedures in place to ensure that all of its officers and relevant business units are fully aware of, and comply with, the outsourcing policy; (2) The board and senior management of an industry participant are ultimately responsible for the outsourcing of a material business function by an industry participant, and although the outsourcing arrangement may result in the service provider having day-to-day managerial responsibility for a business function, the industry participant remains responsible for complying with the Act, (3) The board and senior management must ensure that the industry participant s outsourcing risks and controls are taken into account as part of its overall risk management systems.(4) The board and senior management must ensure that the industry participant s outsourcing policy sets out specific requirements in relation to outsourcing material business functions to: (a) subsidiaries, affiliates or associates; and (b) service providers located outside Namibia or conducting the material business activity outside Namibia. 6. Assessment of outsourcing options (1) An industry participant must be able to demonstrate to NAMFISA, as required, that, in assessing the options for outsourcing a material business function, the industry participant has: (a) prepared a business plan for outsourcing the material business function; Page 22 of 48

23 (b) (c) (d) (e) (f) (g) (h) (i) undertaken a tender or other selection process for selecting the service provider; undertaken a due diligence review of the chosen service provider; involved the board, a committee of the board or senior manager and provided delegated authority from the board, in approving the outsourcing agreement; considered all the matters outlined in clause 7(2) that must, at a minimum, be included in the outsourcing agreement; established procedures for monitoring performance under the outsourcing agreement on a continuing basis; addressed the renewal process for the outsourcing agreement and how the renewal will be conducted; developed contingency plans that will enable the outsourced business activity to be provided by an alternative service provider or brought in-house if required; and considered all key risks associated with the outsourcing and the risk mitigation strategies that will be put in place to address these risks. (2) In addition to the factors listed under sub-clause (1), an industry participant must be able to demonstrate to NAMFISA, as required, that in assessing the options for outsourcing to subsidiaries, affiliates or associates of the industry participant or a key person, it has taken into account: (a) (b) (c) (d) the changes to the risk profile of the material business function that arise from outsourcing it to a subsidiary, affiliate or associate of the industry participant or of a key person, and the manner in which this changed risk profile is to be addressed in risk management framework of the industry participant; the cost of the services being provided and that the industry participant has taken steps to ensure that the cost will not be greater than the fair value of like services that could be provided by an arm s-length service provider; the ability of the subsidiary, affiliate or associate in question to conduct the business activity on an ongoing basis; and the monitoring procedures necessary to ensure that the subsidiary, affiliate or associate is performing effectively, and the manner in which any potential inadequate performance will be addressed. 7. The outsourcing agreement (1) All outsourcing arrangements must be in writing, and the agreement, hereinafter the Outsourcing Agreement, must be signed by all parties before the outsourcing arrangement commences. (2) At a minimum, the Outsourcing Agreement must address the following matters: (a) the scope of the outsourcing arrangement and the business functions to be supplied; Page 23 of 48

24 (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) commencement and termination dates; provisions for review; remuneration, pricing and fee structure; service levels and performance requirements; audit and monitoring procedures; business continuity management and disaster recovery management; confidentiality, privacy and security of information; default arrangements and termination provisions; dispute resolution arrangements; liability and indemnity provisions; sub-contracting requirements; (m) insurance; and (n) to the extent applicable, off-shore arrangements (including through sub -contracting agreements). (3) An industry participant that outsources a material business function must ensure that the Outsourcing Agreement includes an indemnity to the effect that in the event of any sub-contract by the service provider to another service provider, the original service provider remains responsible for that other service provider, including liability for any failure on the part of that other service provider. (4) Where an unexpected event results in: (a) the industry participant legally withdrawing from a continuous engagement under an Outsourcing Agreement; or (b) the sudden financial or operational failure of a service provider with whom the industry participant has entered into an Outsourcing Agreement, and it becomes necessary for the industry participant to enter into an Outsourcing Agreement with another service provider, then clauses 5(1) to 7(2) need to be complied with only to the extent that it is reasonably possible to do so, having regard to the nature of the unexpected event, and the industry participant must notify NAMFISA as soon as practicable of any such new Outsourcing Agreement and must fully comply with this Standard within a period not exceeding 90 business days. 8. Right of NAMFISA to access service providers (1) An Outsourcing Agreement must contain provisions that allow NAMFISA access to the service provider, including: Page 24 of 48