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General Code of Conduct |
(here's my notes on the General Code of Conduct - leaves out details & entire sections - e.g. direct marketing)
Section 16 of the FAIS Act requires a Code of Conduct to be drafted to ensure inter alia that those being rendered financial services:
will be able to make informed decisions
will have their (financial) needs appropriately satisfied
To this end FSPs are required inter alia to:
seek from clients information regarding their financial situations, financial product experience & objectives in connection with the financial service required.
Make adequate disclosures of material info (in plain language), including actual or potential conflicts of interest.
maintain records for a period of 5 years
A provider must supply the client with the following info in writing:
Name, physical location, & postal & telephone contact details of the product supplier
Contractual relationship with the product supplier & whether the provider has contractual relationships with other product suppliers
Names & contact details of the relevant compliance & complaints departments of the product supplier
Any restrictions imposed by the product supplier with regard to the types of financial products or services that may be provided or rendered by the provider
Whether the provider holds more than 10% of the relevant supplier's shares (or equivalent)
Whether the provider received more than 30% of total remuneration from a product supplier during the preceding 12 month period
The provider rendering the financial service must provide the following info in writing:
Full business & trade names, registration number, postal & physical addresses, landline, cell number, website & email addresses; in respect of the relevant business carried on, as well as the names & contact details of appropriate contact persons or offices.
Details which make it clear to the client which entity accepts responsibility for the actions of the provider or representative in the rendering of the financial service involved & the extent to which the client will have to accept such responsibility
Names & contact details of the relevant compliance department
Details of the financial services which the provider is authorised to provide in terms of the relevant licence
Whether the provider holds guarantees or professional indemnity or fidelity insurance cover or not
Whether a representative of a provider is rendering services under supervision
A provider must at the commencement of any contact, visit or call initiated by the provider, explain the purpose thereof & at the earliest opportunity supply the information specified in the previous point.
A provider must:
provide an explanation of the nature & terms of the contract/transaction to a client, and make full disclosure of info required to enable the client to make an informed decision
Provide material projections, illustrations & forecasts in the hands of the provider
provide:
name, class & type of financial product
nature & extent of benefits, the manner in which benefits are calculated & the manner in which they accrue or are paid
how the value of the investment is determined, including details of underlying assets or other financial instruments
disclosure of any charges/fees to be levied against the product, including the amount & frequency thereof, to enable the client to determine the net investment amount ultimately invested for the benefit of the client
past investment performance over periods & at intervals which are reasonable with regard to the type of product involved, including a warning that past performances are not necessarily indicative of future performances
Nature & extent of monetary obligations assumed by the client, directly or indirectly, in favour of the product supplier & seperately for the provider, including the manner of payment, the frequency, the consequences of non-compliance & any anticipated or contractual escalations, increases or additions
Nature, extent & frequency of any incentive, remuneration, consideration, commission, fee or brokerages which may become payable to the provider, directly or indirectly by any product supplier or any person other than the client, or for which the provider may become eligible, as a result of rendering of the financial service; as well as the identiy of the product supplier/person providing the consideration. The provider may elect to disclose either the actual amount or the maximum legal amount/rate.
Details of special terms or conditions, exclusions of liability, waiting periods, loadings, penalties, excesses, restrictions or circumstances in which benefits will be provided.
Any guaranteed minimum benefits or other guarantees.
To what extent the product is readily realisable or the funds concerned are accessible.
Any restrictions on or penalties for early terminations of or withdrawal from the product.
Material tax considerations.
Whether cooling off rights are offered, and if so the procedures for the exercise of such rights.
Any material investment or other risks associated with the product
The amount of the increased premium for the first 5 years & thereafter on a 5 year basis, but not exceeding 20 years.
Fully inform a client in regard to the completion or submission of any transaction requirement-
that all material facts must be accurately & properly disclosed & that the accuracy & completeness of all answers, statements or other information provided by or on behalf of the client, are the client's own responsibility
that if the provider completes/submits transaction requirements on behalf of the client, the client should be satisfied as the accuracy & completeness of the details
of the consequences of misrepresentation or non-disclosure or the inclusion of incorrect information
that the client must on requeest be supplied with a copy or written or printed record of any transaction requirement within a reasonable time.
No provider may request a client to sign a document unless all details required to be inserted thereon by the client have already been inserted.
On request, provide a client with a statement of account in connection with any financial service rendered to the client
Seek from the client info about his:
financial situation
financial product experience
objectives
Identify the financial product which is appropriate to the client's risk profile & financial needs.
If the product is to replace an existing product, fully disclose the actual & potential financial implications, costs & consequences, including:
fees & charge in respect of the replacement product
special terms & conditions, exclusions of liability, waiting periods, loadings, penalties, excesses, restrictions or circumstances in which benefits will not be provided
impact of age & health on the premium payable
differences between the tax implications of the replacement product & the terminated product
differences in investment risk
penalties or unrecovered expenses deductible or payable due to termination of the terminated product
to what extent the replacement product is readily realisable compared to the terminated product
vested rights, minimum guaranteed benefits or other guarantees or benefits which will be lost as a result of the replacement.
The provider providing advice must before the transaction notify the issuer of the existing long-term insurance contract of such advice.
If all the info for furnishing advice has not been provided, the provider must ensure that the client clearly understands that a full analysis in respecct of the client could not be undertaken & that there may be limitations on the appropriateness of the advice.
If the client elects to conclude a transaction that differs from that recommended, the adviser must advise the client to take particular care to consider whether any product selected is appropriate to the client's needs, objectives & circumstances.
Summary of info on which advice was based.
Financial products considered.
Financial product recommended, with an explanation of why the prouduct is likely to satisfy the client's identified needs & objectives.
If they contain performance data (including awards & rankings), must include reference to their source & date, and a warning that past performances are not necessarily indicative of future performances.
Illustrations, forecasts or hypothetical data must contain support in the form of clearly stated assumptions (including in respect of performance, returns, costs & charges) with a reasonable prospect of being met under current circumstances. Make it clear that they are not guaranteed and are for illustrative purposes only. Where returns or benefits are dependent on the performance of underlying assets or other variable market factors, this dependence should be made clear.
Readers should be warned of the risk of buying/selling a financial product.
If the investment value mentioned is not guaranteed, a warning should be provided that no guarantees are provided.
Proviers must request that clients lodge complaints in writing, and maintain a record of complaints for 5 years. There are specific obligations on what clients must be informed of.
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