Image
Icon

Directory

IconAccounting & Tax
IconAccreditation Bodies
IconActuaries
IconAssociations and Institutes
IconAuditors
IconBBBEE Consulting and Verification Agencies
IconBusiness Process Management
IconBusiness Process Outsourcing
IconCompany Secretarial Services
IconCompare Medical Scheme Benefits
IconCompliance
IconConsumer Protection
IconCorporate Governance
IconCredit Bureaus
IconDebit Order Collection Facilities
IconEducation and Training
IconEmergency Medical Rescue
IconExpatriate Cover
IconFAIS
IconHealthcare Consultants
IconHuman Resources
IconInformation Technology and Software Partners
IconLegal
IconManaged Healthcare Service Providers
IconMedical Aid Administrators
IconMedical Aid Schemes
IconMedical Schemes Trustees Liability Insurance
IconMedical Service Providers
IconOmbud
IconPolicy Administration
IconPublications
IconRegulatory Authorities
IconSurveys & Research
IconTraining Courses & Workshops
IconWellness Programs
Image
  Subscribe To »

Financial Soundness – at all times

Published

2017

Mon

20

Mar

 

By Alan Holton

At a recent meeting between senior officials of the FAIS Division of the FSB and a committee of industry members, Ms Lorraine van Deventer expressed the concern that many FSPs still do not fully appreciate the financial soundness requirements that were imposed in the Fit and Proper Requirements contained in Board Notice 106 of 2008.

In terms of S 9 of this Board Notice, the assets of every FSP must exceed such FSPs liabilities. The problem arises in that the specific requirement expressly excludes certain assets and certain liabilities from the calculation.

In calculating the effect of this requirement, all goodwill, intangible assets, investments in and loans to related parties and investments with, or loans to, persons to whom the FSP renders financial services, must be excluded from the total assets. Liabilities may be reduced by excluding any loans due by the FSP but have been subordinated in favour of other creditors.

Accountants who are required to certify the solvency of an entity often are not aware of these particular exclusions and hence do not take the exclusions into account. And so, as happens fairly frequently, accountants of FSPs who are unaware of these specific requirements, provide their clients with technically incorrect confirmation concerning their financial soundness as required by Board Notice 106 of 2008.

There is another requirement regarding financial soundness that is also often overlooked.

Any Category I FSP that holds client assets or receive premiums or money and every Category II and Category IV FSP must comply with these requirements at all times. This specific requirement has not expressly been imposed on Category I FSP who do not hold client assets or receive premiums or money. The implications are that FSPs that fall within this definition must have procedures in place to ensure that these requirements are met at all times.

All FSPs are, in terms of s 19 (1)(a) of the FAIS Act, 2002 required to maintain full and proper accounting records on a continual basis, brought up to date monthly. It would seem appropriate therefore, for Category I FSP that holds client assets or receive premiums or money and all Category II and Category IV FSP’s to actually record in writing their calculations, based on the monthly accounts, proving their ongoing compliance with this requirement.

These particular FSPs are also required to hold liquid assets equal to varying percentages of annual expenditure. Again, when recording compliance with this requirement, it was recommended by the FAIS officials that the type and nature of the liquid assets held by the FSP be recorded so as to be able to demonstrate at all times that this requirement had been met. In this regard, special attention must be given to the definition of “liquid assets” in Board Notice 106 of 2008.

Once the proposed Revised Fit and Proper Requirements are finalised and
Board Notice 106 of 2008 repealed, these requirements will still apply. There will however be additional requirements that have to be met and these new requirements will be dealt with once the revised Fit and Proper Requirements have become effective.

Alan Holton is a director of Compliance Monitoring Systems cc and an associate of Moonstone Compliance.

 
Source: Paul Kruger: Moonstone Compliance (Pty) Ltd
 
« Back to previous page Print this page » |
 

Breaking News »

GTC Medical Aid Survey 2017

Results reveal that small medical aids also offer good value, and highlights that consumers may be unaware of their own medical aid plans and the benefits contained therein. Smaller medical schemes perform well ...
Read More »

  

Council for Medical Schemes to address Undesirable Practices

The Council for Medical Schemes published Circular 39 of 2017, calling for industry input on its intention to declare certain practices irregular or undesirable. Regulation 8 of the Medical Schemes Act entitles ...
Read More »

  

Diabetes is the most potentially devastating – and fastest-growing – health crisis of our time

There may be as many as 4. 6 million people in South Africa living with diabetes, and possibly the same number at risk of developing type 2 diabetes. Those diagnosed face the risk of life-changing and life-limiting ...
Read More »

  

FSP’s and reporting to the Financial Sector Charter Council

The Financial Sector Charter Council recently approached a number of people in the industry requesting that they register and submit their 2016 B-BBEE report. One reader actually submitted the form, together with ...
Read More »

 

More News »

Image

Investment »

Image

Life »

Image

Retirement »

Image

Short-term »

Advertise Here
Image
Image
Image
Image
Advertise Here

From The Glossary »

Icon

Flexibility:

Unitised products allow varying contributions from many investors. The investors are usually allowed to purchase or sell units at their own discretion and even switch between a range of unitised products.
More Definitions »

 
 
By using this website you agree to the Terms of Use.
Copyright © Stoker Risk & ICT (Pty) Ltd 2004 - 2017.
All Rights Reserved.
Icon

Advertise

  Icon

eZine

  Icon

Contact IG

Icon

Media Pack

  Icon

RSS Feeds