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Update on the Retail Distribution Review

General status update as at December 2019

Posted by LeRoux van Wyk on 2020-01-21 in Financial Services

In November 2014 the then Financial Services Board published the initial Retail Distribution Review (RDR) discussion document which contained several proposals on regulatory review. The aim of RDR is to ensure that customers are treated fairly in line with the TCF principles.


The proposals contained in the discussion document are implemented in a phased manner. The RDR - General status update as at December 2019 which was published by the FSCA provides the current status of all the regulatory proposals. According to the aforementioned RDR update, final regulatory instruments were published and is in operation in relation to the proposals indicated in the table below.  The status of the remainder of the proposals varies from little progress being made to the regulatory instrument being in the final stages.


Status update

Initial proposal

Sub-element of Proposal

Final regulatory instrument published

D. Standards for sales

execution 

  • Defining sales execution (amended FAIS Fit & Proper standards)

  • Fit and proper standards for sales execution (amended FAIS Fit & Proper standards)

E. Standards for ongoing

product servicing

  • Servicing by Insurers ( Insurance PPRs) 

F. Insurance premium

collection to be limited to

qualifying intermediaries 

  • Governance and operational standards for premium collection(amendments to the LTIA and STIA Regulations)

J. Outsourced services on behalf of product suppliers to be more clearly identified and regulated

  • Insurance binder arrangements(Regulations and Policyholder Protection Rules, 2017 under the Longterm Insurance and Short-term Insurance Acts,)

  • General outsourcing standards(amended FAIS Fit & Proper standards)

V. Insurer tied advisers may no longer provide advice or services in relation to another insurer’s products

  • See the amended definition of

“representative” in the LTIA Regulations

BB. Product supplier responsibility for tied advisers

  • Specific responsibilities for insurers ( LTIA and STIA PPRs)

FF. General product supplier responsibilities in relation to receiving and providing customer-related data 

  • Standards in the Insurance sector ( LTIA and STIA PPRs)

OO. Product supplier commission prohibited on replacement life risk policies

  • Interim measure: Insurers to monitor the quality of replacement disclosures ( LTIA PPRs)

PP. Commission regulation anomalies on “legacy” insurance policies to be addressed

  • Regulation 3.10(1)(b) and definition of “variable premium increase”

RR. Equivalence of reward to be reviewed

  • Strengthening the regulator’s powers to determine what constitutes “Equivalence” (Regulations 3.2(4A) and (5) and 3.11(2) of the LTIA Regulations)

TT. Special remuneration dispensation for the low-income market

  • Dispensation for life risk products (commission regulations LTIA )

  • “Section 8(5) fees” ( STIA PPR)

VV. Conditions for short-term insurance cover cancellations (Restated: Conditions for insurance cover cancellations.)

  • See Rule 19 of the STIA PPRs and Rule 20 of the LTIA PPR

ZZ. Binder fees to multi-tied intermediaries to be capped (Restated: Binder fees to financial advisers to be capped)

  • Part 3C of the LTIA Regulations and Part 5B of the STIA Regulations

AAA. Commission cap for credit life schemes with “administrative work” to be removed

  •  Revised commission caps for credit schemes in the commission Table (Annexure 1) of the LTIA Regulations


During December the FSCA also published the following discussion documents:


  • RDR paper on Intermediary Activity Segmentation and Related Matters

  • RDR Position Paper on Equivalence of Reward (Proposal RR)

  • RDR Second Discussion Document on Investment Related Matters

  • RDR Discussion Document on Adviser Categorisation and Related Matter

  • RDR Discussion Document on a Remuneration Dispensation for Savings and Investment Products for the Low Income Market (Proposal TT)


The aim om these discussion documents is to provide an update on the particular matter, give an update of the progress made, in certain circumstances, invite stakeholders to comment and provide their view on the subject and in general to relay the FSCA’s “thinking” on the topic and practical implications. 

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