Tips to reduce compliance risk

23 Jan 2015

According to my records, this is now my eighth year of dispensing my top compliance tips for the coming year. As with previous years, they are in no particular order of importance, and come with no implied warranties or guarantees, but taking these tips to heart and acting thereupon, will reduce compliance risk in your business. So here goes...

Get professional advice. It never ceases to amaze me how financial services providers (FSPs) pay good money for lawyers and accountants and then ask a relatively inexperienced person to guide them on regulatory compliance. Compliance is a profession and you need professional advice if it is to make any difference in your business. Most professional compliance officers are members of the Compliance Institute of South Africa and this should be one of your first ports of call when looking for compliance professionals to assist you in managing your regulatory risks.
Don't ignore TCF. For those waiting for a Treating Customers Fairly Act before making a move, you'll be waiting a long time. The Financial Services Board (FSB) is on record as saying that there will be no such Act, and indeed they feel they should not be required to legislate fair treatment of customers, an opinion I wholeheartedly agree with! You should start looking at your business and ensuring that you are able to evidence fair treatment of customers and transparency of fees.
Who's scared of RDR? The Retail Distribution Review, as we all know, is under way. Some current remuneration structures will cease to exist or be phased out over an agreed period. Be prepared for these changes. Ignore them at your own peril!
Do not ignore letters from the FSB. Every year, our firm receives a number of calls from individuals who find themselves on the wrong side of the Regulator due to the fact that they have not submitted the required returns. What often transpires is that a number of letters have been sent to the nominated contact person only to be ignored or sent to the wrong address (see next point). I suggest reading ALL correspondence received from the FSB.
Check your details are correct with the FSB. It is incumbent upon FSPs to ensure that they advise the FSB on any change of address. Failure to do this will place you in contravention of Condition 1 of your licence and, more seriously, you will not receive important correspondence including that of levy payments.
Check your licence scope. You must ensure that you are not rendering a financial service on products for which you are not licensed. In most instances, this is simply an oversight from when the licence was originally obtained. If you are rendering services on products that are outside the scope of your licence, this could impact on your professional indemnity cover paying in the event of a claim for such a product type.
Keep your representative registers up-to-date. At the time of year when levy invoices are being posted, we have an inevitable strain of emails from FSPs who wish to know why they are being billed levies for representatives who no longer work for them. Further investigation shows that they did not remove the representatives by the end of August in time for levy cut-off. Please make sure you diarise to check representative numbers at the end of July 2015, and forward notification to the FSB in good time for its deadline at the end of August 2015.