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FAIS Act: To be, or not to be a Representative?

To be, or not to be a Representative? That is a tough question, given the intricacies involved.

L writes:

I recently read in a Moonstone publication that office staff should be aware of all the legislation, fit and proper requirements etcetera, but that they do not have to write the regulatory exams.

I am employed in a short-term brokerage and registered as a representative with the FSB, but I hardly ever see a client, except when they drop by the office to request a change to their contract. Most of my work consists of reacting to instructions via telephone or e-mail.

My function is therefore purely clerical, like asking a client for information that I need to place his car on risk with the insurer.

Do I have to write the RE, in view of the above?

The short answer to your last question is yes. You are registered as a representative with the FSB, and are therefore obliged to write the exam. All reps have to.

The long answer is a little more complicated. In fact, more than a little.

The FSB published a guidance note to clarify the issue to some degree. There are, however, so many variations and personal circumstances that differ from office to office that it is impossible to provide a straight “yes” or “no” to the question.

In L’s case, her full job description and function list will determine whether she should in fact be registered as a representative. Her key individual, though, may decide that it is safer for her to be registered as a rep, in view of the very wide definition given to the terms “advice” and “intermediary service”.

Here are some pointers on deciding what is right for you.

The FSB Guidance note provides the following information:

The Act aims to ensure that every person who renders financial services to a client, meets the necessary fit and proper requirements to discharge this responsibility, whether acting personally or through other persons; and does so in accordance with the Act and its Codes of Conduct.

The Act, in section 1 thereof, provides that financial services include:

• the furnishing of advice; or
• the furnishing of advice and the rendering of an intermediary service; or
• the rendering of an intermediary service.

A representative is defined in the Act as follows –
“representative” means any person, including a person employed or mandated by such first-mentioned person, who renders a financial service to a client for or on behalf of a financial services provider, in terms of conditions of employment or any other mandate, but excludes a person rendering clerical, technical, administrative, legal, accounting or other service in a subsidiary or subordinate capacity, which service-

(a) does not require judgment on the part of the latter person; or
(b) does not lead a client to any specific transaction in respect of a financial product in response to general enquiries.”

In Linda’s case the answer may appear simple, but I can assure you that it is not, which is why her KI probably decided to stay on the safe side.

In the guidance note, The FSB devotes a special section to people in the motor and furniture trade. This provides further clues to the practical implications of what is obviously not an easy definition to implement.

The final section provides the following advice:

Application of the Act
 

1. In judging whether or not a person dealing with the public in a manner postulated by the definition of “intermediary service” is a representative, the Registrar will look at the surrounding circumstances.
2. Where authorised financial services providers claim that the persons rendering financial services on their behalf “do not exercise any judgment”, they must be in a position to substantiate such claims.
3. If in a given situation judgment by such persons is required, as in (but not limited to) the case of furniture or motorcar dealers selling insurance on their floors and having to explain features of the policy to the customer, the persons concerned will be regarded as representatives for purposes of the Act, irrespective of whether or not they also give advice.

In conclusion: Please study the full guidance note from the FSB, then apply the definitions to your particular situation, and make sure that you err on the safe side.

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