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Unit Standard No.12164Page 40

WHY THE NEED FOR THE FAIS LEGISLATION?

The FAIS Act was introduced to regulate the business of all Financial Service Providers who give advice or provide intermediary services to clients, regarding a wide range of financial products.  In terms of the Act, such Financial Services Providers need to be licenced, and professional conduct is controlled through Codes of Conduct and enforcement measures.

The Act aims to achieve the following:

Professional Conduct

Better informed clients, and  

A professional, responsible sector

What is the history behind the legislation?

Historically, there has been no formal system of regulating financial advisors and intermediaries.  Aggrieved clients had very little recourse against dishonest advisors.  Further, processes to protect clients such as Complaints policies and record keeping systems were not formally regulated.  The Board for Financial Services and Regulation was responsible for conceptualizing and designing the basic framework which would become FAIS.  The FAIS Bill (before it was enacted) was drafted on the basis of a framework of specifications (provided by the Policy Board for Financial Services and Regulation), which only covered the furnishing of advice.  Since then, the ambit of the Bill has been extended to all intermediary services rendered in respect of financial products (as defined in the legislation) and now has more far-reaching implications.

During the drafting process which lasted for more than 2 years, several drafts of the Bill were put on the Financial Service’s Board’s (FSB) website, followed by statements in the media, inviting comments.  In addition to this, and given the fact that the Bill attracted interest from all the different industry players within the financial services sector, a number of workshops, as well as several road shows, were hosted by the FSB. These events covered discussions around the contents of the then Bill and its possible impact on the industry.

INSMAT final materials31/10/03

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