Icon

Directory

IconAccounting & Tax
IconActuaries
IconAdministrators
IconAppraisers & Valuers
IconArbitration Services
IconASIB
IconAssessors & Loss Adjusters
IconAssist and Lifestyle Benefits
IconAssociations & Institutes
IconAuditors
IconBBBEE Consulting and Verification Agencies
IconBroker Acquisition Financing
IconBrokers for Brokers
IconBusiness Process Management
IconBusiness Process Outsourcing
IconCall Centre Outsourcing & Sales
IconCompany Secretarial Services
IconCompliance
IconConsumer Protection
IconCorporate Governance
IconCredit Bureaus
IconDebit Order Collection Facilities
IconDefensive Driver Training
IconEducation and Training
IconEmergency Medical Rescue
IconFAIS
IconFire, Storm, Flood Damage Specialists
IconHuman Resources
IconIndustrial Cleaners
IconInformation Technology and Software Partners
IconInsurance Companies
IconLegal
IconLightning Damage & Surge Protection Specialists
IconNiche Insurance Products
IconOmbud
IconOutbound Sales
IconOutsourcing Companies
IconPolicy Administration
IconPremium Financing
IconPublic Loss Adjustors
IconPublications
IconRating Agencies
IconReference Books & Material
IconRegulatory Authorities
IconRisk Finance
IconRisk Management
IconRisk Surveyors
IconSalvage Operators
IconSpecialized Claims Investigations & Assessing
IconSurveys and Research
IconTraining Courses & Workshops
IconUnderwriting Managers
IconVehicle Accident Management
IconVehicle and Household Risk Inspection Services
IconVehicle Tracking
IconWellness Programs
IconWholesale Brokers
IconZZZZZZ
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 »

The Competition Commission and the Aftermarket Automative Sector

By: Ahmore Burger-Smidt, Director at Werksmans Attorneys INTRODUCTION Following numerous complaints received by the Competition Commission from participants in the automotive aftermarket, the Commission, ...
Read More »

  

SA Law Society elects new Co-Chairpersons

Caption: David Bekker (left) and Walid Brown, ...
Read More »

  

Associated Compliance Protection of Personal Information Act Series: Part 7

Protection of Personal Information Act (POPIA) – Security Safeguards   Over the last seven months the POPIA articles have dealt with responsibility, processing, purpose, further processing, information ...
Read More »

  

France’s Presidential Election: The Closer We Get, the Less We See

By Coface, the international trade credit insurance company On May 7th 2017, French voters will elect a new President to succeed Francois Hollande. Less than two weeks before the first round, according to ...
Read More »

 

More News »

Image

Healthcare »

Image

Investment »

Image

Life »

Image

Retirement »

Image
Image
Image
Image
Image
Image
Image
Image
Image
Image
Image
Image

From The Glossary »

Icon

Loss:

The liability incurred, or the damage suffered by a claimant. The event of the liability, or loss, is the basis for the amount which the claimant seeks to recover from the insurer. Such terms as ‘losses incurred’ and ‘losses paid’ refer to the aggregate amounts of the losses incurred or paid by an insurer.
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