Evidence Required to Prove Compliance

Evidence Required to Prove Compliance

Fit and Proper Requirements

• Qualifications: Certified copies of RE examinations (RE 1, RE 5, etc.) and relevant qualifications
• CPD (Continuing Professional Development): Annual CPD certificates showing required hours completed
• Criminal & credit checks: SAPS clearance certificates, credit bureau reports
• Employment history: CVs and references for key individuals
• Evidence checked through: FSCA license applications, renewal processes, and on-site inspections

Annual Compliance Reviews

• Compliance report: Formal written report by a compliance officer (internal or external) covering all FAIS requirements
• Board minutes: Documentation showing board review and sign-off on compliance status
• Action plans: Evidence of remedial actions for identified deficiencies
• Evidence checked through: Submission to FSCA (when requested), and during on-site inspections

Record Keeping (5-year retention)

• Client files: Needs analysis forms, financial plans, risk profiles, product comparisons
• Advice records: Record of Advice (ROA) documents for each client interaction
• Mandate agreements: Signed client mandates and service agreements
• Communication records: Emails, meeting notes, file notes
• Product supplier documentation: Product provider agreements, commission statements
• Evidence checked through: On-site FSCA inspections, ombud investigations, audits

Compliance Checking Mechanisms

1. On-Site Inspections by FSCA

• Announced or unannounced visits to FSP premises
• Physical review of client files (random sampling)
• Interviews with compliance officers, representatives, and management
• Systems and process walkthroughs
• Frequency: Risk-based approach; high-risk firms inspected more frequently

2. Off-Site Monitoring

• Regulatory returns: Annual financial statements, statutory returns
• Complaint data: Analysis of complaints lodged with ombud schemes
• Market conduct analysis: Pattern analysis across industry sectors
• Evidence required: Timely submission of prescribed regulatory returns

3. Compliance Officer Reports

• Quarterly/annual reports to the board and FSCA (when requested)
• Must document: Compliance breaches, remedial actions, training completed, complaints handled
• Evidence: Signed compliance certificates, detailed compliance registers

4. External Audits

• Financial audits: Annual audited financial statements (for certain FSP categories)
• Compliance audits: Independent verification of FAIS compliance
• Evidence required: Audit reports, management letters, audit work papers

5. Professional Indemnity Insurance

• Policy certificates: Current valid insurance certificates
• Coverage confirmation: Letters from insurers confirming adequate coverage
• Claims history: Record of claims made and settled
• Evidence checked through: Annual submission to FSCA, renewal verifications

Treating Customers Fairly (TCF) Evidence

Product Design & Distribution

• Product selection criteria and rationale
• Suitability assessments for products offered
• Target market definitions

Client Outcomes Monitoring

• Client satisfaction surveys and results
• Complaint analysis and resolution rates
• Lapse and persistency statistics
• Portfolio performance reviews

Evidence checked through: TCF self-assessments, FSP annual reports, thematic reviews by FSCA

Disclosure Requirements Evidence

Fee Disclosure

• Fee schedules and pricing structures
• Client-signed fee disclosure forms
• Commission statements from product providers
• Proof of fee disclosures in ROA documents

Conflict of Interest Management

• Conflict of Interest Policy document
• Conflict register (updated regularly)
• Evidence of disclosure to clients where conflicts exist
• Ownership and financial interest declarations

Evidence checked through: Client file reviews, policy documentation audits

Advice Standards Evidence

Needs Analysis

• Completed needs analysis questionnaires
• Client fact-finds (financial position, goals, risk tolerance)
• Supporting documentation (payslips, bank statements, existing policies)

Suitability Assessment

• Product comparison documents (showing why recommended product was chosen)
• Record of Advice clearly linking needs to recommendations
• Signed client acknowledgments

Ongoing Review

• Annual review meeting notes
• Updated needs analysis
• Portfolio rebalancing documentation

Evidence checked through: File sampling during inspections, ombud complaint investigations

Complaints Management Evidence

• Complaints register: Log of all complaints received with dates, nature, and resolution
• Complaint resolution documentation: Letters to clients, internal investigation notes
• Root cause analysis: Evidence of systemic issue identification and correction
• Ombud reporting: Records of complaints escalated to FAIS Ombud
• Evidence checked through: FSCA inspections, ombud data sharing, annual compliance reviews

Training and Competence Evidence

Initial Training

• Induction programs for new representatives
• Product training completion certificates
• Systems and process training records

Ongoing Training

• CPD certificates (minimum 30 hours annually for most categories)
• Training attendance registers
• Internal training materials and assessments
• Evidence checked through: CPD records verification, representative interviews

Practical Compliance Checking Process

When the FSCA conducts an inspection, they typically:

1. Request documentation in advance: Compliance manuals, policies, organizational charts, representative lists
2. Sample client files: Random selection (often 20-30 files) to verify advice quality
3. Interview key personnel: Test knowledge and understanding of compliance obligations
4. Review systems: Check CRM systems, compliance software, document management
5. Test processes: Walk through typical client journey from lead to advice to implementation
6. Issue findings: Preliminary findings discussed, formal report issued with required remedial actions
7. Follow-up: Requirement to submit proof of corrective actions within specified timeframes

Consequence of inadequate evidence: If you cannot produce required evidence during an inspection, the FSCA may assume non-compliance, which can trigger enforcement actions even if you were actually compliant but simply failed to document it properly.

The golden rule: If it isn’t documented, it didn’t happen from a regulatory perspective.