Compliance Reports and Financial Statements 12 May 2011
Agenda Verify contact details electronic process Approval and resignation of compliance officers Qualifications of compliance officers Compliance Reports Financial Statements Regulatory examinations update
Verifying Contact Details Contact details can be verified at log in The process is available when you log in for submitting electronic reports Alternatively: Change to information submitted FSP1 of application form or contact detail in FSP3,4,5,10A,10B or 11 or change of contact details of key individuals Submit a letter informing Registrar of information that have changed
Change of compliance officer or appointment of a compliance officer FSP 6 form FSP 14A Fee of R580 for change of the external compliance practice or internal compliance officer or for the appointment of a compliance officer is applicable Fee of R175 for the change of external compliance officer where the compliance practice remains the same Please note that if a compliance officer resigns a letter of resignation must be send to the Registrar by the compliance officer stating the reasons for the resignation. The FSP must immediately apply for the appointment of a new compliance officer. Please note that before a compliance officer can be approved to act for a specific FSP the compliance officer must first be approved (Contact the call centre to obtain a compliance officer number)
COMPLIANCE OFFICERS Adding a new compliance officer to a practice Submit a FSP13 form Fee of R1060 Removing a compliance officer from a compliance practice Submit a letter requesting the removal of the compliance officer from the practice Please note that a fee of R175 is payable to allocate a new compliance officer to FSPs and new compliance officer must submit a FSP6 formfor every FSP Where applicable a copy of the Handover report to be submitted to FAIS Supervision Change compliance officer status (external/internal) Please submit a letter requesting change in status and For a change to external compliance officer submit proof of qualifications and experience if was not submit in the original application
Transitional arrangements for compliance officers Compliance officers approved by the Registrar before or on the date of commencement of this Notice- (a) do not have to comply with paragraph 3(1)(a); 3(1)(a) hold a qualification on the list of recognised compliance qualifications (b) who do not meet a requirement of paragraph 3(1)(b) and (e), have three years (ending 31 December of the third year) to comply with the requirement from the date of publication of this Notice in the Gazette. 3(1)(b) regulatory examinations 3(1)(e) 1 year relevant experience irospecific product category/ subcategory BN 127 of 2010
Submitting compliance reports Electronically & hard copy
Reporting and submission dates Type of FSP Reporting Date Submission Date Category I FSP without Compliance Officer 31 December 2011 28 February 2012 Category I FSP with Compliance Officer 31 May 2011 15 August 2011 Category II and Forex Authorised FSPs 31 August 2011 31 October 2011 Category IIA FSP(Annual) 31 May 2011 30 June 2011 Interim compliance report for Category 31 August 2011 IIA FSPs 30 November 2011 28 February 2012 30 September 2011 31 January 2011 30 March 2012 Category III FSPs (Bi-Annual report) 30 June 2011 31 July 2011 31 January 2012 Category IV FSPs 31 August 2011 31 October 2011 Foreign FSPs 31 August 2011 31 October 2011 Handover report One month after the FSP was informed of resignation ; or One month after a compliance officer was appointed by a FSP without a CO
Submitting hard copy reports Hardcopy reports are only accepted if posted or hand delivered. Submit the report 3 weeks in advance to ensure that you can make any changes where required. Please note that hardcopy reports that are incorrectly completed or that are sent for the incorrect reporting date, will be returnedand regarded as not submitted. The same validations are used for the hardcopy and the online submission reports, so if the online submission report does not validate, do not send in the hard copy as it will be rejected, please make the necessary changes and resubmit. We do not accept hardcopy reports in any other format than the report printed in the government gazette.
ONLINE REPORTING SYSTEM
What can you do with the online system? Submit financial statements Submit compliance reports Apply for an extension for the submission of financial statements Update contact details Obtain copies of previous compliance reports that have already been submitted View what details the FSB has on record for a FSP NOTE: User guides for both the submission of compliance reports and financial statements are available on FSP website
Submitting electronically There is a user guide available on the website: Supervision Department FAIS Guides for small FSPs Financial Statements and Audit Requirements Compliance Reports Online submissions compliance reports and financial statements FAIS Compliance report online user guide Financial Statement online user guide
Common problems experienced
Problems: No attachments but indicated there will be attachments Send screen prints instead of completing the actual compliance reports as published in the government gazette 2010 reports statistics page left out or incorrectly completed If reports don t validate don t correct it
Type of insurance cover
Advice & record of advice
Health service benefits
Questions incorrectly answered:
New Developments Regarding Compliance Reports 2011
Changes on 2011 reports: No major changes from 2010 compliance reports Questions have been included on all new subordinate legislation published since the publication of 2010 compliance reports Category III report is now a Bi-annual report (no interim report) Introduction of a handover compliance report for FSPs / sole proprietors appointing a compliance officer where they did not previously have a compliance officer A two months submission period has been introduced for the Interim Hedge Fund Report with the reporting date of 30 November i.e. the report is now due by 31 January and not 31 December.
Handover Compliance Reports Published in 2009 and 2010 as Compliance Report for FSPs changing or appointing Compliance Officers In past the same report was completed by both key individuals and compliance officers In 2011 two reports will be published: 1. Report to be completed by sole proprietor / key individual where a FSP who didn t have a compliance officer appoints a compliance officer; and 2. Report to be completed by resigning compliance officer where a FSP has a compliance officer and there is a change in compliance officers. Copy of report must be submitted to the FSB In some instances the handover report will replace the requirement for the submission of an annual compliance report e.g. Where FSP without a CO appoints a CO in July
Frequency of monitoring: External CO Cat I & IV Conduct regular visits to the business premises, business units and/or branches of the provider -once a quarter Representatives: twice a year Cat II, IIA & III Conduct regular visits to the business premises, business units and branches of the provider and any representative Once a month
Frequency of monitoring: Internal CO Cat I & IV Conduct regular visits to the business premises, business units and/or branches of the provider and any representative- once a year Cat II, IIA & III Conduct regular visits to the business premises, business units and branches of the provider and any representative Once a quarter
Handover compliance reports Must be completed if: FSP did own compliance and now appoints a CO, or Approved CO resigns
Extensions financial statements
Applying for extensions Apply online turnaround time 1 week Apply via e-mail 1 to 2 weeks Must apply before the submission date late applications may not be considered Maximum extension granted cannot exceed 2 months, and valid reasons must be furnished Extensions will not be granted where there are compliance reports or previous years financials outstanding for the FSP
Financial statements
Monthly accounting records FSPs must maintain accounting records which are updated at least monthly Accounting records relate to business expense if you are a sole proprietor all personal expenses will go to your personal drawings account Must monitor compliance with section 9 of Fit and proper financial soundness requirements
Section 19.1 requirements Prepare an annual set of financial which will include: Balance sheet Income statement Cash flow statement Notes to the financial statements
Section 19.2 report audit of financial statements This section applies to: category I FSPs subject to any exemptions granted category II, IIA, III, IV FSPs This section requires that the financial statements which include balance sheet, income statement, cash flow statement and notes to be audited and reported by an external auditor Section 19(2)(b)(i): prepare financial statements in conformity with generally accepted accounting practice Section 19(2)(b)(ii) the audited financial statements must fairly represent the state of affairs of FSP s business Section 19(2)(b)(iii) disclose any material matter which has affected or is likely to affect the financial affairs of the FSP The Audit report must be submitted with the financial statements within four months after the financial year end of the provider It must be signed off by the auditor It must consist of scope and a clear expression of audit opinion on the financial statements taken as a whole
Section 19(3)(a),(b) and (c) -Audit of Separate Account Applies to any FSP required to open a separate account as specified in terms of Paragraph 10 of the General Code of Conduct. The auditor is required to report on the money and assets held by the FSP. This report is prepared in accordance with the agreed-upon procedures as stated in the Guidance Note for Accounting and Auditors. Separate accounts i.e. bank accounts opened in the name of the FSP to hold money on behalf of clients should not be disclosed on the balance sheet of the FSP as assets.
Paragraph 10 of the General Code of Conduct - Custody of financial products and funds It applies to Category I, II, IIA, III and IV FSPs that are involved in the collection of clients funds or hold assets on behalf of clients A separate banking account should be opened and maintained The records relating to separate accounts are subject to an audit in terms of section 19(3) of the Act Excludes short-term insurance brokers with an IGF guarantee
Section 19(4)(a),(b) ) and (c) of the Act- Material Irregularity report If an auditor believes that material irregularity has taken place or is likely to take place or is taking place he/ she should notify the Registrar. Must report even if: Management has fixed or is willing to fix The irregularities need not to be a proven occurrence; it can be a suspected irregularity as long as it is in the auditor s opinion material and significant enough to be reported.
Financial Soundness requirements An FSP must not be an: unrehabilitated insolvent or under liquidation or in provisional liquidation. An FSP that is authorised for multiple financial An FSP that is authorised for multiple financial categories, must comply with the most onerous financial soundness requirements as it applies to the multiple categories.
Financial soundness All FSPs must comply with solvency requirement Assets excluding: Goodwill Other intangible assets Investments in related parties Must exceed Liabilities Excluding subordinated loans
Financial soundness Maintain current assets that is sufficient to meet current liabilities All Category I FSPs that do not hold clients assets or receive premiums
Category I FSPs that hold clients assets or receive money or premiums Assets exceed liabilities; and maintain current assets which are at least sufficient to meet current liabilities; and Liquid assets equal to 4 weeks annual expenditure
Preparation of financial statements Type of FSP Category I FSP that does not receive client funds or premium Category I FSP receive client funds or premium Category I FSP receive premium in relation to longterm insurance category A (assistance business policies) only Preparation of Financial Statements Not in accordance with South African Generally Accepted Accounting Practices ( GAAP ) or International Financial Reporting Standards ( IFRS ) In accordance with SA GAAP or IFRS Not in accordance with SA GAAP or IFRS Audit reports No audit required, exempted in terms of Board Notice 96 of 2003. Audit report in terms of section 19(2)(a) and 19(3) of Act. No audit is required, exempted in terms of Board Notice 85 of 2004, provided that an accounting officers report must be submitted. (Section 19(3) report to also be prepared by an accounting officer)
Income Statement - example INCOME COMMISION RECEIVED FEES RECEIVED INTEREST RECEIVED EXPENSES ADVERTISING BANK CHARGES CELLPHONE COMMISSIONS PAID TO PROFIT / LOSS BEFORE TAX
Balance Sheet - example ASSETS NON CURRENT ASSETS MOTOR VEHICLES INVESTMENTS OFFICE EQUIPMENT CURRENT ASSETS BANK TOTAL ASSETS EQIUTY AND LIABILITIES OWNERS EQUITY NON CURRENT LIABILITIES MORTGAGE BOND LONG TERM LOAN CURRENT LIABILITIES CREDITORS BANK OVERDRAFT TOTAL EQUITY AND LIABILITIES
Cat II and IV: assets exceed liabilities maintain current assets which are at least sufficient to meet current liabilities; and maintain liquid assets equal to or greater than 8/52 weeks of annual expenditure.
Cat IIA and III: assets exceed liabilities maintain current assets which are at least sufficient to meet current liabilities; and maintain liquid assets equal to or greater than 13/52 weeks of annual expenditure.
Representative examination (RE5) Currently there are 134 621 registered representatives 5155 people registered for the examinations 70 people no-shows - 5085 wrote the examinations 5085 = 3.77% of the industry Oldest successful person: Male -72 years old. The youngest persons that have completed the RE 5 successfully are 20 years old.
Key Individual examination (RE1) Currently there are 13 284 approved key individuals 787 people registered for the examinations 17 no-shows = 770 people wrote the exam. 770 = 5.79% Oldest successful candidate: Male -73 years old. The youngest successful candidate: Female -23 years old.
Current activities Trials for level 2 examinations: Your chance to influence the standard and quality of the questions Trial participants preference for pilots if successful, keep results You must prepare! INSETA Survey Give feedback regarding the INSETA training material for the level 1 examinations INSETA will make improvements to their material based on the feedback received.
Important e-mail addresses for FAIS: Fit and Proper related queries Applications for recognition of qualifications Profile changes Requests to lapse licenses Requests for financial statements extensions Financialstatements queries for Category I FSPs Financial statements queries for Category II FSPs Financial statements queries for Category IIA FSPs Financial statements queries for Category III & IV FSPs Compliance report queries for Category I FSPs Compliance report queries for Category II FSPs Compliance report queries for Category IIA FSPs Compliance report queries for Category III & IV FSPs E-mail address Fitandproper@fsb.co.za Fitandproper@fsb.co.za Faispfc@fsb.co.za Faispfc@fsb.co.za Faisfins2@fsb.co.za Faisfins1@fsb.co.za Faisfins2@fsb.co.za Faisfins3@fsb.co.za Faisfins4@fsb.co.za Faiscomp1@fsb.co.za Faiscomp2@fsb.co.za Faiscomp3@fsb.co.za Faiscomp4@fsb.co.za