Moonstone Monitor 8 November 2018
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Moonstone Monitor -  8 November 2018
In This Week's Newsletter
From the Crow's Nest
Fairness a vital prerequisite in debarment procedures
Your Practice Made Perfect
Underwriting at claims stage – National Treasury raises concerns
FAIS Ombud Settlements – Learn from compliance mistakes made by FSPs
New round of KI Workshops - Book early and qualify for 20% discount
Technologically Speaking
Technology makes financial services more affordable
Regulatory Examinations
Why the Preparation Guide is so important
Schedule for 2019
Careers Platform
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In Lighter Wyn
Conversations with the elderly
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From the Crow's Nest
From the Crow's Nest
Fairness in Debarment Procedures
by Alan Holton
In a recent (5 October 2018) matter heard before the Financial Services Tribunal, the applicant, Ms X, applied for a reconsideration of a decision taken by the respondent, Y (the FSP). The FSP had taken the decision to debar the applicant based on the recommendation of the chairperson who presided at the debarment hearing.

The application was premised, inter alia, on two important grounds, these being:
  • The procedure followed by the respondent was unlawful, unreasonable and procedurally unfair; and

  • The chairperson and the respondent erred in finding that the applicant had failed to comply with the honesty and integrity requirements as referred to in Section 13(2)(a) of the FAIS Act, 2002.

This article will deal with the first ground. The second ground will be discussed in the next edition of this newsletter.

What does legislation say about debarment?

The original S 14 of the FAIS Act was substituted by S. 290 read with Sch. 4 of the Financial Sector Regulation Act, 2017 (FSRA) with effect from 1 April 2018.

The repealed S 14 was notably vague on debarment procedures. The amended S 14(3) now provides for specific procedures that must be followed by the FSP before debarring any person.

The FSP must, inter alia, give adequate notice in writing to the person stating its intention to debar the person. The notice must include the grounds and reasons for the debarment. The person must be given a reasonable opportunity to make a submission in response to the grounds upon which the FSP intends debarring that person.

Procedure followed

The FSP issued a notice to the applicant on the 1st June 2018 (a Friday) and, in terms of that notice, called on the applicant to respond by the 6th June (the following Wednesday) – a mere 4 days. This can hardly be considered a reasonable opportunity to respond.

The essence of this part of the determination is that the S 14(3) notice from the FSP must set out all the grounds upon which the debarment will be based and the reasons for the debarment.

However, in this matter, it would seem that subsequent to the original notice issued in terms of S 14(3), the FSP made additional submissions that introduced further grounds and evidence in support of these grounds. The applicant was not afforded the opportunity to respond to these additional grounds or evidence.

The Tribunal’s finding and lessons learnt

The Tribunal, after some deliberation, was unequivocal in asserting that the applicant did not have an opportunity to respond to the allegations set out in the respondent's submission.

Although the term “reasonable opportunity” is not defined, it may be worth considering the provisions contained in S 154 of the FSRA which deals with debarments by the Authority. This section provides that, before making a debarment order in respect of a natural person, the responsible authority must, inter alia, give a draft of the debarment order to the person, along with reasons for the proposed debarment and must invite the person to make submissions on the matter, and give the person a reasonable period to do so.

S 154(2) provides that the “reasonable period” referred to must be at least one month.

FSPs who intend debarring representatives will have to ensure that the provisions of S 14 – and in particular S 14(3) are closely observed and followed in such matters. This includes a genuinely fair and reasonable opportunity to make the required submissions. Some guidance, it is submitted, can be found in S 154(2) of the FSR Act, 2017.

Unless debarment procedures are fair, reasonable and lawful, decisions taken to debar persons can be, and will be, overturned on technical grounds following an application to the Tribunal to reconsider any such decision.

Click here to download the detailed Financial Services Tribunal case.

Alan Holton is an independent compliance officer who consults to Moonstone Compliance on a regular basis.
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Your Practice Made Perfect
Your Practice
Underwriting at claims stage – National Treasury raises concerns
When it comes to insurance, the payment of claims is top of mind for most clients. Ultimately risk cover is there to protect a policyholder when the unexpected happens.

It is therefore concerning to note that the second highest cause for complaints, based on the Ombudsman for Short-Term Insurance (OSTI)’s annual report for 2017, was claims that were rejected based on a policyholder’s alleged misrepresentation of underwriting details at the sales stage.

Examples of these cases include misrepresentations about regular driver details, previous insurance and claims history, credit history, security devices and whether the vehicle would be used for personal or business use.

The National Treasury recently raised concerns regarding the practice by insurers of verifying only at claims stage information provided by policyholders at the underwriting stage.

The South African Insurance Association (SAIA) reported that it is acceptable industry practice to test the policy terms and conditions applicable and verify information provided by the policyholder at claims stage. However, the concern arises when insurers, although they are able to verify policy and claims information at the underwriting or sales stage, choose to do so only at claims stage.

Underwriting at claims stage is a practice where insurers only obtain or check information material to their willingness to enter into an insurance contract, or which may influence the cost of the insurance, at the time when a claim arises. Underwriting at claims stage can take the form of conducting credit checks and finding previous insurance cancellations not disclosed or misrepresented. Poor underwriting at the sales stage promotes this practice.

SAIA re-emphasized its Code of Conduct that states that all material information must be obtained by the member at the time of underwriting and not at claims stage.

Failure to do so is also contrary to the Treating Customers Fairly provisions. It is important to remember that TCF is not a tick-box item; you have to be able to demonstrate that it is part of your business’s culture, and one of the most important criteria for assessment of this will be how you handle claims.
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FAIS Ombud Settlements – Learn from compliance mistakes made by FSPs
An FSP’s interaction with clients must at all times meet the standards set out in the General Code of Conduct. The FAIS Ombud’s Annual report highlighted a few settlements that particularly challenged the adherence to two such standards.

The first settlement relates to Section 7 of the Code that stipulates that “a provider other than a direct marketer, must in particular, at the earliest reasonable opportunity, provide, where applicable, full and appropriate information of the following:
  • concise details of any special terms or conditions, exclusions of liability, waiting periods, loadings, penalties, excesses, restrictions or circumstances in which benefits will not be provided”
In the case of T vs A the complainant had a vehicle insurance policy with the respondent from January 2016. On 21 September 2017, the complainant was involved in an accident whilst on his way to a business meeting and the car was written off. He lodged a claim, which was rejected on the basis that he had been using the car for business purposes. The respondent revised its initial decision after the Ombud’s office pointed out that the complainant had not been correctly advised of ‘business use’.

The second settlement highlights Section 3 (1) (d) of the Code that requires that the financial service be actioned in accordance with the reasonable requests and/or instructions of the client.

In the case of DG vs L, the complainant requested their broker to specify certain items on their policy. During June 2017, the complainants’ main house was consumed by the Knysna fires and he submitted a claim. However, the complainant was informed that the items had not been listed or specified on the policy and, as a result, they were under-insured. As there was sufficient documentation to support the policy update and as the respondent failed to action the request, there was overwhelming evidence to settle the matter in full with the complainant.

Click here to read more detail as published in the FAIS Ombud’s Annual Report.
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KI Workshop - book early and qualify for 20% discount
“A very useful workshop, definitely worth presenting more.”

“I highly recommend it to all KIs.”

“Thank you for an excellent course - it should be compulsory for all KIs to attend.”

A few of the comments received after the recent Moonstone Key Individual Workshops.

Good news - the next round of KI workshops has been scheduled and we are offering an early bird special - save 20% if you register today.

More about the workshop

The Moonstone workshops focus on all the new requirements applicable to KIs introduced in Board Notice 194 of 2017, the Fit and Proper Board Notice. The aim is to familiarise attendees with the new concepts and the practical implications thereof.

This practical workshop is intended for:
  • key individuals

  • those aspiring to become COs; and

  • compliance officers

Venues & Dates for 2018/19
Johannesburg 21 November 2018
Cape Town 27 November 2018
Durban 4 December 2018
Johannesburg 22 January 2019
Cape Town 29 January 2019
Durban 31 January 2019

Click here for more information.

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Technologically Speaking
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Moonstone Information Refinery
Technology makes financial services more affordable
In a recent IT-online article Sebastian Commin, specialist: digital enablement at Alexander Forbes Retail describes how technology is changing the way we live. He writes that this phenomenon has a great impact on the products that are built to meet this new lifestyle.

According to Commin, digital experiences are becoming personalised to the extent that all content and recommendations can be specific to each person’s unique situation. “Internet of Things devices are allowing us to interact with technology in ways we only dreamt of in science-fiction, from watches that can alert emergency services in critical situations to speakers which can control your entire house,” he shares.

He further discusses how these new perspectives and enhancements are reducing the cost of creating products while packing them full of new features. The impact of Artificial Intelligence, Big Data, Internet of Things devices and many more technologies have yet to be unpacked and fully experimented.

Click here to read how companies in the financial services industry are taking advantage of new digital technologies and changing the historic financial services mould.
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Regulatory Examinations
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Chapter 2: Tips on writing the Regulatory Exams
Study the Preparation Guide

It is important to distinguish between the two most common REs, as registration for the wrong one can have costly implications. Papers are printed in accordance with what candidates have registered for. We are unable to make changes, due to very strict confidentiality regulations. If you have registered for the wrong exam, you will have to re-register and pay again.

The Level 1 RE 1 is for key individuals.

The Level 1 RE 5 is for representatives.

Begin at the beginning

Make sure that you first read and understand the information contained in the FSCA’s Preparation Guide. Candidates who do so have a significantly better chance of passing, as they know what to expect when they walk into the exam centre.

The Prep guide consists of two sections:

Page 2 to 15 is a neat summary of what you can expect, including information about the format of the exam, reference material, the different types of questions, how to study, what to expect when writing the exam as well as frequently asked questions.

Pages 16 to 43 contain very important information regarding the actual “syllabus” of the regulatory exams. This section is divided in two:
  • Pages 16 to 35 contain the 16 Tasks that key individuals will be tested on while

  • Pages 36 to 43 contain those relating to representatives

If you are a representative, you only need to concern yourself with the last ones, while key individuals wishing to write the RE 1 only need to use the first set of tasks.

The Tasks

Each task is broken down into various Qualifying Criteria which explains in more detail what you need to know and do under that specific task, and where to find the information required in the relevant legislation.

For example, Task 1 under the RE 5 looks like this:

Task 1: Demonstrate understanding of the FAIS Act as a regulatory framework
Qualifying Criteria Motivations
1 Describe the FAIS Act and subordinate legislation GCOC — Definition of Direct Marketing
FAIS Act - Sec 1 Definitions
FAIS Act - Sec 14
FAIS Act - Preamble
2 Provide an overview of the financial services and different types of financial products a Representative can deal with. FAIS Act - Sec 1 Definition of Financial Product
FAIS Act - Sec 1 Definition of Intermediary Services
FAIS Act - Sec 1 Definition of Advice
3 Apply knowledge of the financial products within the financial services environment. FAIS Act - Sec 1 Definition of Financial Product
FAIS Act - Sec 7(3)
Long-term Insurance Act - Sec 1 Definition of Long Term Policy
4 Describe the role and function of a Compliance Officer. FAIS Act - Sec 17
FAIS Act - Sec 17(1)
FAIS Act - Sec 17(1)(c)
FAIS Act - Sec 17(4)
FAIS Act - Sec 18
FAIS Act - Sec 18(d)
FAIS Regulations - Reg 5
FAIS Regulations - Reg 5(1)
FAIS Regulations - Reg 5(3)
GCOC - Sec 3(1)

The Qualifying Criteria describes WHAT you need to know, while the column on the right tells you WHERE to find the information.

We very strongly recommend that you download and read through the Preparation Guide before attempting to study for the exams. Page 8, for instance, provides a 6 step process to prepare effectively, using the Guide.

In Chapter 3 we will discuss the actual exam paper in more detail.

Please click here to download the 5 November 2018 Preparation Guide.

The Moonstone website, contains a wealth of regulatory examination information, including tips on writing the exams. Please feel free to browse there to your heart’s content.

Our registration call centre is available weekdays during business hours (08h00 – 16h00). Contact 021 883 8000 / 888 9796 or e-mail

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Schedule for 2019

Please note
: Registration cut-off is 11 working days before date of exam.
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  • Insurance Sales Team Manager: mrpmoney, Durban - We are looking for a self-motivated, passionate Insurance Sales Team Manager to join our fast-paced team.  Read More

  • Short Term Insurance Representative: JFA Short Term Brokers, Milnerton - The candidate will be responsible for all  client services tasks (primarily personal lines but not limited to this) in a short term insurance practice.  Read More

  • Financial Advisors: Multivest Financial Planning, several areas - We are looking for candidates with at least 3 years experience in selling Life Assurance and Investments.  Read More

  • Wealth Account Manager: Old Mutual, Durban - If you have an applicable tertiary qualification and a proven track record at a top end Investment Practice, we would like to hear from you.  Read More

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In Lighter Wyn
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