Draft amendments to the FAIS General Code of Conduct and Short Term Deposits Code of Conduct

The Financial Sector Conduct Authority (“FSCA”) published for public comment proposed amendments to the General Code of Conduct for Authorised Financial Services Providers and Representatives, 2003 (“General Code”) and the Specific Code of Conduct for Authorised Financial Services Providers and Representatives conducting Short-term Deposit Business, 2004 (“ST Deposits Code”).

The proposed amendments follow (and do not deviate materially from) the amendments initially proposed by the FSCA to the General Code and the ST Deposits Code on 1 November 2017, and are primarily aimed at promoting the fair treatment and protection of financial customers.

The amendments to the ST Deposit Code are in line with the initial amendments proposed by the FSCA on 1 November 2017.

Regarding the General Code, the initial proposals of the FSCA pertaining to, among other things, (i) the disclosure and approval requirements regarding fees for rendering financial services, (ii) requirements relating to the advertisement of financial products and services by providers, and (iii) requirements relating to the establishment and operation of a complaints management framework, have been retained.

New noteworthy proposed amendments to the General Code include the following:

• A “financial interest” will be expanded to include a qualifying enterprise development contribution to a qualifying beneficiary entity by a provider that is a measured entity (as such terms are defined in the Financial Sector Code “FSC”) published in terms of section 9(1) of the Broad Based Black Economic Empowerment Act, 53 of 2003). The FSCA has jettisoned the initial proposed references to “recognised qualifying enterprise development contribution” and “qualified beneficiaries”, which are not so defined in the FSC.
• The FSCA previously proposed that a provider be prohibited from referring to its authorisation in any advertisement relating to products or services that are not financial products or financial services in respect of which it is authorised, in such a manner as to create the impression that its authorisation extends to such products or services. This prohibition has now been extended to prohibit a provider from referencing the FSCA as the provider’s regulator in any advertisement relating to products or services that are not financial products of financial services in respect of which such provider is authorised, in such a manner as to create the impression that the provision of products or services is regulated by the FSCA.
• The proposed amendments have augmented the circumstances in which a provider may not describe itself or the financial services it renders as being “independent”. These now include, among others –

(a) if the provider or its associate is a significant owner of any product supplier or its associate, in respect of whose products the provider renders financial services; or if any product supplier in respect of whose products the provider renders financial services or an associate of such product supplier is a significant owner of the provider or its associate; and

(b ) if a provider directly or indirectly receives or is eligible for any financial interest from a product supplier in respect of whose products the provider renders financial services, other than a financial interest contemplated in terms of section 3A of the General Code.

The proposed amendments to the General Code make provision for transitional periods.

The proposed amendments to the General Code and the ST Deposit Code have now been submitted to Parliament and will be published as final amendments to the General Code and the ST Deposit Code once 30 days following such parliamentary submission have elapsed, in accordance with the Financial Sector Regulation Act, 9 of 2017.

A copy of the proposed amendments to the General Code and the ST Deposit Code can be accessed here:

• Copy of Amendment Notice
• Statement supporting the proposed amendments to the General Code and the ST Deposit Code
• Initial proposals by the FSCA dated 1 November 2017
• Consultation report