Financial services delivery models (Part 3)
Additional regulatory requirements
In part 1 and 2 of our article Financial services delivery models, we looked at what services fall within the ambit of financial services and service delivery methods which included direct marketing, execution of sales and automated advice. In part 3 we shall have a closer look at some additional regulatory requirements applicable to a particular service delivery model.
Direct marketing is not a new concept in the financial industry and financial services providers will be aware of the regulatory requirements mentioned in the General Code of Conduct for FSP for direct marketing. However, the concept of execution of sales and automated advice were introduced in 2018 by Board Notice 194 of 2017 and is thus fairly new.
Section 15 of the General Code of Conduct (see below) stipulates requirements which are applicable for direct marketing:
A direct marketer is required to furnishing the client with information:
(If the direct marketer is a representative the aforementioned information should be that of the appoint FSP.)
A direct marketer is required when providing advice in respect of a product provide clients to do the following:
Prior to the conclusion of a transaction and the conclusion of a contract the direct marketer has to provide the client with the following:
Section 22(ii) of the Board Notice 194 of 2017 deals with the additional requirements for execution of sales according to a script. The representative of a Cat I FSP appointed only to perform the execution of sales of a financial product is not required to comply with the following requirements:
Minimum Qualification requirement;
Regulatory exam requirements;
Class of business training.
To ensure that clients still receive proper service, despite the lower competency level required from representatives delivering the intermediary services, the FSCA requires additional controls be implemented by the FSP in this no-advice model of service delivery.
The following additional requirement is required in terms of Section 22(ii) of Board Notice 194 of 2017:
Automated advice is an advice model in which advice is delivered through an electronic medium without the direct involvement of a natural person acting as a representative. As a result, there are no specific competency requirements applicable, however, to ensure that clients receive proper advice through this electronic medium the FSCA has set strict requirements for the operational ability of the FSP in section 38 of BN 194 of 2017: