financial services board receives 14,500 applications from advisers
Thousands of financial advisers in South Africa have found themselves in a regulatory no-mans land because of a backlog caused by the deluge of applications for the new mandatory licensing scheme.
The Financial Services Board (FSB) has only processed half of its caseload but to comply with the 2002 Financial Advisory and Intermediary Services Act (FAIS) and to continue to operate, IFAs must have a licence.
The FSB has received around 14,500 licence applications from financial advisers. Of these, the FSB said 7,500 have been processed and considered. Licences have been issued and sent to the successful applicants.
Gerry Anderson, deputy executive officer in charge of market conduct and consumer education at the FSB, said most of the 7,000 applications outstanding have not been processed because the applications were incomplete. He said: "Recently, a lot of effort has gone into getting the required information from the applicants. The ball is now in the applicants' court.
"A decision has been taken to decline the licence application if, after several unsuccessful attempts to get the required information, this has not been forthcoming. Those applicants whose applications are declined must cease their FAIS-related activities forthwith."
This decision was implemented from 15 March 2005 and applies to any advisers contacted at least twice by the FSB. Anderson added that legal action will be taken if advisers conduct unauthorised business.
Of the outstanding 5,500 applications that were submitted directly to the FSB, it has outsourced the processing of many of them to PricewaterhouseCoopers and Moonstone Information Refinery to speed up the process. The FSB said a large proportion of these have been analysed and returned.
Anderson added: "However, the remaining outsourced applications as well as over 1,500 applications submitted directly to PricewaterhouseCoopers remain unfinalised and therefore cannot be transmitted to the FSB for approval." Among the reasons for incomplete applications, said Anderson, are:
• A lack of proof of qualifications. In some cases, there were no qualifications mentioned on the application or the information was incorrect and incomplete. In a number of cases, evidence of qualifications had not been submitted.
• Some have been unwilling to disclose financial information about the applicant's business.
• There have been cases of advisers failing to pay the licence fee. It is a requirement that no application will be processed unless it is accompanied by the licence fee.
• Some qualification certificates have not been certified.
The FSB has also revealed that Gordon van der Spuy, a financial broker from Centurion who conducted unregistered investment business, has been convicted on two counts of fraud and sentenced to five years' imprisonment in the Special Commercial Crimes Court. This comes two years after the FSB warned consumers not to do business with van der Spuy as he was not licensed. A client complained to the FSB in October 2003 and he was investigated and arrested shortly afterwards.
• The South African regulator has received 14,500 license applications from financial advisers but only 7,500 have been processed.
• The FSB blames incorrectly filled-in forms for the backlog.
• If the FSB is not satisfied after two requests for more information, the adviser will be denied a license.
• Unlicensed advisers will be taken to court - one adviser has already been jailed for conducting unauthorised business.
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