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Unit Standard No.12164Page 45

HOW DOES FAIS ADDRESS THE ISSUE THAT THERE ARE DIFFERENT PIECES OF LEGISLATION WHICH APPLY TO DIFFERENT SECTORS OF THE INDUSTRY?

The Act has a FUNCTIONAL and not an INSTITUTIONAL approach in its design.  Since it regulates a FUNCTION, and not an INSTITUTION or group of institutions, it is not restrictive as to what institution it applies to.  

The applicability of the Act to an organisation depends on the following:

If a person performs the function of “advice”; or

Intermediary service

DEFINITION of “ADVICE” AND “INTERMEDIARY SERVICE”

These definitions are broad and all inclusive and apply to a wide range of sectors within the industry.

Advice is defined as any recommendation, guidance or proposal of a financial nature furnished, by any means or medium, to a client or group of clients in respect of the purchase or investment in any financial product, the conclusion of any other transaction aimed at incurring any right or benefit or liability in respect of any financial product (this includes a loan or cession), or the variation, replacement or termination of any financial product.

“Intermediary Service” means any activity other than the furnishing of advice that is performed by a person for or on behalf of a client or product supplier.

(For full definitions from the Act, refer to the Glossary table in this manual)

In addition, in each instance, the “advice” or “intermediary service” must relate to a “financial product” which has a wide implication in terms of its definition (see section on Financial products).  

It is refreshing to note that FAIS has flexibility in its application which allows unintended consequences to be rectified and to result in a practical application of the law.

INSMAT final materials31/10/03

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