THE OCTOBER 1 implementation of the Financial Advisory and Intermediary Services (FAIS) Act has sent ripples of disquiet through the clearing and forwarding industry as its implications are digested (FTW June 6, 2004).
A spokesman for Alexander Forbes Risk Services offers his perspective.
The Act is principally directed at the financial services industry, and requires financial advisers and intermediary service providers to become registered and licensed.
The primary motivation behind this legislation is the promotion of a new era of professionalism within the industry through the various regulatory provisions and mechanisms of the Act.
By way of illustration, the provisions of the Act require financial advisers and intermediary service
providers to:
l adhere to a code of conduct
l furnish detailed information to their clients about the product supplier or financial service provider.
l furnish information about the financial service
l obtain certain required information from the client prior to providing any advice.
l maintain records for a minimum period of 5 years
l appoint a compliance officer.
l maintain full and proper accounting records.
l submit annual reports to the Financial Services Board
The Act not only applies to your traditional insurers and brokers but may well have application to ordinary stock and service companies where “financial services” are on-sold to third parties.
A financial service provider is defined as ‘any person, other than a representative, who as a regular feature of the business of such person:
l furnishes advice
l furnishes advice and renders an intermediary service or
l renders an intermediary service.
The definition section of the Act defines an intermediary service as including any act in respect of which a prospective client enters into or may enter into a transaction in respect of a financial product. Short term insurance contracts are specifically included in the definition of what constitutes a financial product.
By implication the selling of marine insurance by freight operators will bring them within the ambit of the Act, thus compelling them to become registered and licensed and in addition comply with the requirements pertaining to the registration of any employees deemed to be acting as representatives or key individuals.
Alexander Forbes has set about devising various solutions for their freight forwarding clients which will assist them in dealing with some of the more onerous provisions contained in the Act.
