“Key individual”, in relation to an authorised financial services provider, or a representative, carrying on business as a corporate or unincorporated body, a trust or a partnership

1. Presenter: JP
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2. Agenda
 Definitions
 Requirements for Application & Registration
 Honesty & Integrity
 Class of Business
 Roles, Responsibilities & Accountability
 Management & Oversight
 Operational ability & Competence
 Segregation of Duties
 Regulatory & Business Risk Management
 Ongoing Statutory Obligations
 Business Continuity
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3. Definition
 “Key individual”, in relation to an authorised financial services provider, or a representative, carrying on business as a
corporate or unincorporated body, a trust or a partnership;
 means “any natural person” responsible for “managing” or “overseeing”, either alone or together with other so
responsible persons, the “activities” of the body, trust or partnership relating to the rendering of any financial
service; or
 A Key Individual must therefore:
 manage or oversee
 alone or with another approved key individual
 the activities of the FSP, which the key individual is appointed for.
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4. Requirements for Application & Registration as Key Individual (KI)
Application and appoint as Key Individual for Financial Institution
• Key Individual Applicant - specific application form (Form FSP4)
• Role description – Summary of what best describes the applicant's (FSPs) role in the organisation.
• Fit and proper requirements
• Honesty, Integrity and Good Standing declaration
• Details about qualifications must be completed and certified copies of qualifications.
• Regulatory Exam – RE1 for Key Individuals
• Employment history, including letters of reference (current, and previous employment)
• A detailed Curriculum Vitae, indicating the experience that the applicant has gained within the last five (5) years.
• Full details of the person’s responsibilities, as evidence of experience as relevant to the category of financial services and subcategory of financial products being
offered/rendered.
• Reference letters from previous employers must be submitted.
• Details of experience for the categories of financial services and the sub-categories of financial products
• in respect of which the sole proprietor will be rendering financial services; and
• the key individual will be managing or overseeing, must be provided.
• Confirmation of operation ability and competence by the FSP
• Written permission or consent for FSP to verify all details
Personal Character
Qualities of
Honesty, Integrity.
Competence and
operational ability
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5. Honesty & Integrity
(a) has not been found guilty in any criminal proceedings or liable
in any civil proceedings by a court of law (whether in the Republic or
elsewhere) of having acted fraudulently, dishonestly, unprofessionally,
dishonourably or in breach of a fiduciary duty;
(b) has not been found guilty by any statutory professional body
or voluntary professional body (whether in the Republic or elsewhere)
recognised by the Board, of an act of dishonesty, negligence,
incompetence or mismanagement, sufficiently serious to impugn the
honesty and integrity of the Financial Services Provider (FSP), KI or
representative;
(c) has not been denied membership of anybody referred to in
subparagraph (b) on account of an act of dishonesty, negligence,
incompetence or mismanagement, sufficiently serious to impugn the
honesty and integrity of the KI
(i) has not been found guilty by any regulatory or supervisory body (whether
in the Republic or elsewhere), recognised by the Board; or
(ii) has not had its authorisation to carry on business refused, suspended or
withdrawn by any such body, on account of an act of dishonesty, negligence,
incompetence or mismanagement sufficiently serious to impugn the honesty and
integrity of the KI;
(d) has not had any license granted to the financial services provider by any
regulatory or supervisory body referred to in subparagraph (d) suspended or
withdrawn by such body on account of an act of dishonesty, negligence,
incompetence or mismanagement, sufficiently serious to impugn the honesty
and integrity of the KI; or
(e) has not at any time been disqualified or prohibited by any court of law
(whether in the Republic or elsewhere) from taking part in the management of
any company or other statutorily created, recognised or regulated body,
irrespective whether such disqualification has since been lifted or not
Furthermore, any material non-compliance with the Act, in a manner which is dishonest and negatively affects the KI's honesty and integrity can also be considered.
For example: When there is a conflict of interest prevalent, the KI has an obligation to mitigate and avoid the conflict of interest. If the conflict is not mitigated or avoided it would
constitute non-compliance with, among others, section 3(1) b and possibly section 3A(1)(b) of the General Code of Conduct.
The result of an honesty and integrity transgression is seen as serious by the Registrar of Financial Services Providers. It could lead to debarment of any KI's and Representatives involved
and a withdrawal of the FSP licence in some cases. In less serious cases of where breach of any section of the Act is prevalent a penalty may be imposed
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6. Class of Business
 Why should I as a key individual (KI) attend Class of Business?
 It is a legislative requirement that if you are registered as a key individual (KI) you must complete the class of business training that relates to the specific classes of business you manage
or oversee. Should you not complete the relevant training, you will not be able to perform the duties of a key individual
1. Short Term Insurance: Personal Lines
1. Personal Lines: Accident and Health Policy
2. Personal Lines: Liability Policy
3. Personal Lines: Miscellaneous Policy
4. Personal Lines: Motor Policy
5. Personal Lines: Property Policy
6. Personal Lines: Transport Policy
7. Personal Lines: Short Term Re-Insurance
Policy
2. Short Term Insurance: Commercial Lines
1. Commercial Lines: Accident and Health
Policy
2. Commercial Lines: Engineering Policy
3. Commercial Lines: Guarantee Policy
4. Commercial Lines: Miscellaneous Policy
5. Commercial Lines: Motor Policy
6. Commercial Lines: Property Policy
7. Commercial Lines: Transportation Policy
8. Commercial Lines: Short Term Re-Insurance
Policy
3. Long Term Insurance
1. Assistance Policy
2. Life risk Policy
3. Life Investment Policy
4. Fund Policy
5. Sinking Fund Policy
6. Long Term Re-Insurance Policy
4. Pension Fund Benefits
5. Short Term and Long Term Deposits
6. Structured Deposits
7. Investments
1.Shares
2.Money Market Instruments
3.Debentures and Securitised Debts
4.Bonds
5.Derivative Instruments, Warrants, Certificates,
and other instruments
6.Securities and Instruments
7.Participatory Interests in a Collective
Investment Scheme
8.Participatory Interest in a Hedge Fund
9.Retail Pension Benefit
8. Forex Investments
9. Health Service Benefits
FSPs are
recommended to
appoint one Key
Individual per Class
of Business (COB)
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7. Role, Responsibilities & Accountability
Section 17(3) of the Act states that an FSP must establish and maintain procedures to be followed by the FSP and its representatives in complying with the Act. The KI is usually tasked, on behalf of the FSP, with
ensuring that such procedures (for example, procedures in respect of the provision of advice, or retaining records of advice) are implemented and maintained.
Management Oversight
Compliance &
Conduct
“managing” means to have executive control or
authority “overseeing” is the function of supervising a person(s)
and their work in an official capacity.
Act with due care, skill and diligence in the execution of
all duties
Business processes and operational ability
(Risk Management)
Act within the standards and rules set by legislation
Rendering of financial services of the FSP and persons
authorised to act on its behalf
Act within the standards and rules set by legislation
Statutory obligations of the FSP
Instil a culture of treating customers fairly in all aspects
of the business
Important Note: Existing Key Individuals should make sure that they fully understand what it means to manage and oversee an FSP and any person who is looking to take on the responsibility of a Key
Individual should do so with clear knowledge of the obligations and duties which they will have to carry out as it will require commitment and time.
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8. Management and Oversight Function
Key Individuals are responsible for the rendering of financial services by those who have been authorised to act as Representatives for the FSP, including organisational risk management as well as adherence to
statutory obligations
MANAGEMENT RESPONSIBILITIES
Ensure FSP remains Fit & Proper
Ensure adherence to licensing conditions
FSP Compliance with Statutory obligations
Ensure Fit & Proper Status of Key Individual
Ensure registration of those persons falling within the definition of
“representative”
Ensure Fit & Proper Status of Juristic Representatives (if
applicable)
Ensure employed representatives remain Fit & Proper
Ensure annual statutory returns are lodged with the FSCA e.g. AFS,
Levy payments etc.
Ensure the FSP has documented policies and procedures to
support the above functions
OVERSIGHT RESPONSIBILITIES
Ensure representatives comply with requirements of the
General Code of Conduct (FAIS)
Oversight of training, knowledge and skill of the representatives
Compliance with Fit & Proper Requirements – Board Notice 194
of 2017
Ensure Fit & Proper Status of Key Individual
Supervision of representatives under supervision. OR
monitoring of the activities of supervisors
Oversight of Advice and Intermediary Services
Review of operational statistics e.g. data relating to complaints
Provide assurance the TCF principles are incorporated into
business processes and procedures
Ensure client interactions are aligned with Client Advisory Policy
and procedures
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9. Operational Ability
 KI applicants are required to prove their operational ability to the FSCA registrar prior to authorisation. Particularly important where KIs are approved on more than one
licence. MUST demonstrate the ability or capacity to fulfil the legal obligations required of a KI.
 At application stage, satisfy the potential ability to stand on more than one FSP license. Further matters will deal with What are the categories of the FSPs? How many
representatives and juristic representatives per category of FSP do you oversee? How many business premises, business units and branches per province or in other countries
do you manage or oversee per FSP and representative? How many do you intend to manage or oversee?
 The FSCA also looks at the nature, scale, range and complexity of the financial service activities of the FSPs that seek to contract with a KI. Example: How will the key individual
be able to operate optimally, efficiently, effectively and with consistency in multiple FSPs? How will the KI split the work between the FSPs (Matrix)? How will the hours be
spent on each FSP? What is the capacity and level of involvement of each FSP?
 In addition, the FSCA requires confirmation signed by an FSP in respect of which approval is sought, as well as the person seeking approval as KI. It must state that the
applicant has the ability, capacity and decision-making power to actively and effectively manage and oversee the FSP’s activities in rendering financial services.
 Based on the answers, the FSCA evaluates applicants’ operational ability to act as KI on more than one licence. The regulator also determines if the applicant KIs have the
resources and time to fulfill their responsibilities for the FSPs that seek their services
“The role of a KI is a critical, key and full-time ‘hands-on’ function with the necessary decision-making powers and authority closely related to or inherent in the management and ownership
structures of the FSP. The KI functions are therefore such that they cannot be performed on an occasional part-time basis.
Competence
Operational
Ability
Compliance Resources
Systems &
Processes
Clients & TCF
Leadership &
Strategy
Financial
Management
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10. Future Conduct of Business Return
1. Omni - CBR workshop _ Banks - https://youtu.be/QBxw18u_Izg
2. Omni - CBR workshop _ C-operative Financial Institutions (CFIs) - https://youtu.be/8AIdbivlAtA
3. Omni - CBR Workshop _ Insurers and Micro-insurers https://youtu.be/jgh56wkMdwI
4. Omni - CBR workshop _ Investment Providers - https://youtu.be/pxycws4PsEM
5. Omni - CBR workshop _ Financial Services Providers (FSPs) (Larger FSP's - Annual Revenue or fund value of _ R5 million - https://youtu.be/b51TL_sN6g4
6. Omni - CBR workshop _ Retirement Funds and Retirement Fund Benefit (13B) - https://youtu.be/b51TL_sN6g4
7. Omni - CBR workshop _ Financial Services Providers (FSPs) (Smaller FSP's - Annual Revenue or fund value of _ R5 million - https://youtu.be/_wuwrszsbCc
8. Omni-CBR workshop: Enabling and customising Macros on MS Excel sheet - https://youtu.be/GNHCvdf0NLs
Competence
Operational
Ability
Compliance Resources
Systems &
Processes
Clients & TCF
Leadership &
Strategy
Financial
Management
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11. Segregation of Duties
Segregation of duties (SODs) is an important concept to internal control frameworks, financial reporting and regulatory compliance
Type Segregation of Duties
Definition
The principle that no single individual is given authority
to execute two conflicting duties
Referred to As
SoD
Separation of Duties
Related Concepts
Risk Control
Risks
Risk Management
Compliance (Removed from operational activities of
the business, impartial)
IT Controls
Conflict of Interest
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12. Regulatory & Business Risk Management
❖ Correct and appropriate processes
❖ Requirements of the legislation
❖ Principles of TCF
❖ FI Conduct Standards
❖ Non-compliance areas to be reported to members/shareholders/directors.
❖ Monitoring of risk to which the FSP may be exposed
❖ Be part of the solution, manage and oversee the implementation of solutions or actions to address the
identified risks.
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13. Ongoing Statutory Obligations
FSPs have statutory obligations which they must meet in order to maintain their licence and it is the direct responsibility of the Key Individuals to ensure that these obligations are met
 Financial Management i.e. financial soundness
 PI Cover
 Submission of the Compliance Report (when next due….)
 Payment of annual levies
 Statutory Annual Returns
 Ensure Financial and Intermediary Services only within the product subcategories for which FSP is Authorised
 Maintenance of FSP Competency register
 Ensure documented operational ability and governance framework
 Avoid Undesirable Business Practices
 Implement & Maintain policies, procedures, systems, methodologies to ensure compliance with regulatory obligations
 Adopt a Risk-based approach
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14. Business Continuity Plan
Recommendations from the FSCA to ensure the Business Continuity arrangements
 It must demonstrate processes that are devised to cater for exceptional risks that, though unlikely, would have catastrophic consequences, for the business.
 It should cover a range of situations including, succession planning, the death of a key person and crisis events that threaten to shut down business operations.
Key elements to focus on when planning for Business Continuity
• Succession – considers current management situation and what would happen in the event of death, permanent disability, retirement of the key
individual and steps that will be taken to ensure the business continues to operate
• Disaster Recovery – considers whether the FSP is prepared for extended service outages (e.g. load shedding) caused by factors beyond your
control (e.g. natural disasters and malicious events). Is there FSP able to restore services in a minimum timeframe?
• Emergency Management – Have set procedures been established to be followed in the vent of an emergency?
• Plan, Review and Maintenance – Changes in business and circumstances over time. This is a plan intended to be a living document, and therefore
requires review and updating at regular intervals
Important Note: The lack of an adequate and documented business continuity plan means that an FSP is not meeting the fit and proper requirements of operational ability and
therefore there are grounds for regulatory action. The plan should be documented and tested for suitability, acceptability and feasibility.
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15. Questions
The Compliance Toolbox
JP
CPrac (SA)
Authorised Compliance Officer
(CO 4073 & CO 7485)
e-mail : jp@ctb.co.za
tel: 011 794 1189 (landline)
011 028 2282 (backup)
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