task 4 talks about adhering to the specific codes of conduct [Music] task 4 has 14 qualifying criteria let's look at task 4 qualifying criteria 3 define the requirements and impact of the disclosure rules on the fsp disclosure by the fsp can be split into two sections being disclosures to the client and disclosures to the general public section 4 5 and 7 of the code of conduct relate to disclosure to the client and section 14 of the code of conduct relates to disclosure to the general public firstly let's take a look at section 4. here we have a financial service provider fsp for short the fsp has a product supplier or also known as the product provider the product supplier or product provider provides the financial products which the fsp gives advice on to his or her clients the product supplier or product provider can be a third party as shown but can also be the fsp itself so in summary an fsp could have an external product supplier or product suppliers as well as also being a product supplier to itself the fsp gives advice to clients on different products from different product suppliers based on the needs of the client the fsp therefore must notify the client in writing about relevant information about the product suppliers or product providers within 30 days so we need to understand what an fsp needs to inform its client about in order to comply with section 4 of the code of conduct so we need to make sure our clients know who the product supplier is and their contact details therefore we must provide the client with one the product supplier's name two the product supplier's physical address three the product suppliers postal address and four the product supplies telephone number this may seem basic but it is important that it's done so the client has all the information he or she needs to know and providing this information can easily be overlooked next it is important that the fsp informs the client of the contractual agreement and relationship with the product supplier this is so the client is aware of the fsp and the product suppliers relationship we need to provide the names and contact details of the product suppliers compliance departments an fsp must communicate to its client any conditions or restrictions that have been imposed by the product supplier with regards to the type of financial products or services that they as the fsp have rendered all these are important as they provide the client with an understanding of the relationship between the fsp and the product supplier so that the client can make an informed decision knowing that the fsp and the product suppliers have a relationship and an agreement with each other here we see that when there is a financial interest held by the fsp with the product supplier the fsp must communicate and disclose this fact to the client if the fsp holds more than 10 percent of the product supplier shares directly or indirectly so when we say directly that would mean the fsp holds the shares in the product supplier when we say indirectly it would mean that we hold the shares in some other way either through another company or person it is also important to see that the code of conduct extends this to also say or equivalent substantial financial interest so basically saying that it does not have to be through holding off shares but if there is a financial interest that is equivalent to holding 10 percent of the product suppliers shares the consideration of financial interest also states that if over the past 12 months the fsp has received more than 30 percent of its total remuneration from product supplier these sections are basically there to ensure that the client knows that the fsp has some sort of significant financial interest in the product supplier so they can at least be aware of that fact when making their decisions here is where things can get a bit complicated let's role play this now say we are an fsp as well as a product supplier and as a product supplier we also have other fsps selling our products through some sort of contractual relationship and or agreement then it only stands to reason that we as the product supplier would need to provide all the information we have talked about to this contracted fsp so they can communicate it to their client here we can see that we can have multiple fsps that are also product suppliers and have insurance companies that are only product suppliers an fsp can be giving advice to their clients on products and services from some or all the product suppliers based on the client's needs an fsp can provide and or render financial services in respect of a choice of financial product suppliers the fsp must exercise judgment objectively in the interest of the client concerned this is very important as we can see from this section we as the fsp want to inform and notify the client of the fsp's relationships with product suppliers in order to ensure objectivity is maintained and that the interest of the client is always maintained it is important that the fsp does not make unfair comparisons so the code states that the fsp may not compare different financial products product suppliers product providers fsps and or representatives unless the different characteristics are clearly made it is important to note that if any comparisons are made then they cannot and must not be inaccurate unfair or unsubstantiated criticism next we will take a look at section 5. section 5 of the code of conduct covers what the fsp must provide and disclose to the client about itself when rendering a financial service each of the paragraphs of section 5 cover the information an fsp must provide and disclose to the client when rendering a financial service the fsp is to provide the client with four particulars of the information we are going to discuss if this information is provided verbally then the fsp must provide it in writing within 30 days the fsp is to disclose to the client it's full business names and trade names its registration number its postal and physical address its telephone numbers its internet and email address the names and details of contact persons and the names and contact details of its compliance officer the fsp is to provide details of its legal and contractual status and its relationships and agreement with product suppliers this is to make sure that the fsp makes it clear to the client as to who accepts responsibility of the actions of the fsp and or representatives in rendering financial services and the extent to which the client must take responsibility the fsp is to provide names and contact details of its compliance officer and details of its compliance department and for representatives the names and contact details of the fsp that the representative is contracted to the fsp is to provide details of the financial services and financial products it is authorized to render and provide in terms of its license and any conditions or restrictions the fsp is to disclose if it holds and or hasn't placed guarantees professional indemnity or fidelity insurance cover or not the fsp is to disclose whether representative is providing and or rendering financial services under supervision as defined by the definition of fit and proper requirements any exemption provided by the authority also referred to as the registrar or commissioner allowing the fsp not to disclose any of this information must be disclosed to the client by the fsp next we will look at section 7.
we have covered this section in previous videos but we will run through it again to ensure you have a complete picture and understanding of the concept this section deals with the information that an fsp must provide the client with regards to the financial service they are rendering when an fsp gives advice to the client the fsp must disclose and provide certain information relating to the financial services being rendered the fsp must inform the client of their responsibility in terms of providing accurate information it is important to remember that the client provides the fsp with certain information in order for the fsp to provide and or render financial service therefore it is important that the information received from the client is accurate as well otherwise the fsp cannot give the correct advice or financial service it is also important to note that an fsp may not request the client to sign any written or printed documents unless all the required information has been included or sign a blank document so here we can see that this sets up the relationship between the parties the client must give accurate information and the fsp cannot ask the client to sign anything unless the fsp has provided all the required information per section 7. the fsp must at the request of the client provide a statement of account in connection with the financial service rendered to the client the fsp must provide a client with a statement of identifying and listing financial products still in existence at least annually these statements must include specific information we will explore this information a bit later let's start with when the fsp gives advice to the client they must provide certain information relating to the rendering of the financial service provider we can divide this information into three categories one general explanations two material information three specific disclosure in terms of general explanations the fsp is to provide the client with reasonable and appropriate general explanations of the nature and material terms of the contract and the transaction the fsp is to provide full frank and honest disclosure of information that is reasonably expected to be disclosed to enable the client to make an informed decision in terms of material information the fsp is to provide the client with material contractual information facts illustrations projections or forecasts that they have in terms of specific disclosure section 7 of the code of conduct goes into detail as to what needs to be disclosed section 7 paragraph 1c states the following information must be disclosed at the earliest reasonable opportunity and time one the name class or type of financial product two the benefits of the financial product and how they are calculated accrued and paid out three the specific information for financial products marked as an investment product or has an investment component 4. the obligation to the product provider nature extent and frequency of monetary obligation and escalation increases or additions 5.
the obligation to the fsp nature extent and frequency of monetary obligation 6. any special terms and or exclusions 7. any guaranteed minimum benefits 8.
how accessible will the funds be nine any early termination consequences ten tax implications eleven the cooling-off period 12. the nature extent and frequency of payment of commission fees and or brokerage fees 13. any and all risks associated with the product 14.
the amount of the increase in premiums over the first five years then the basis of the increase over years 6 to 20 years not exceeding 20 years section 7 paragraph 1c subsection 3 states that specific information for financial products marked as an investment product or has an investment component needs to be provided and disclosed therefore when a financial product has an element of an investment then there is additional disclosure requirements that need to be provided to the client about the financial product let's go through these disclosures firstly the fees being levied in terms of one the amount and frequency of the fees two who receives the fees three the services or purpose of the fees four fees based on performance then we must include the frequency performance measure period and or other criteria and five with the structure of the investment has other underlying financial products then we must include the manner in which the client can determine the net value of the investment next we need to disclose how the value of the investment is calculated and the details of the underlying assets of other financial instruments we need to disclose the details on the post performance of the investment as well one on request of the client two over intervals that are reasonable for the type of product and three include a warning that post performance is not an indicator of future performance we also need to disclose the details of any rebates on fees passed to the clients lastly any platform fees that are being charged to the client so now we have covered all the elements relating to when the fsp gives advice to the client what information the fsp must provide and disclose when rendering the financial service in terms of specific disclosure section 7 of the code of conduct goes into detail as to what needs to be disclosed we will now cover facts that the fsp must tell and inform the clients of their the client's responsibility in terms of providing accurate information it is the client's responsibility to ensure all facts disclosed are accurate and complete any information completed and submitted by the fsp the client must ensure it's accurate and complete the fsp must inform the client of possible consequences of misrepresentation or non-disclosure simply put the results of giving incorrect and incomplete information the fsp must supply the client on request a copy or record of any transaction requirements within reasonable time so we have seen that the client needs to ensure that they provide the fsp with accurate information and that any information that is used by the fsp is accurate because any misrepresentation or non-disclosure could have an adverse effect on the advice given and or provided next we cover the fact that an fsp must provide a client with the statements of identifying listing and mentioning products that are still in existence against annually these statements must include specific information this specific information is obligations the ongoing monetary obligations of the client benefits the main benefits provided by the product value of the investment if any where a product has been identified as an investment or has an investment component then the net value of that investment to the client must be disclosed commissions and fees any ongoing incentives commissions fees and brokerage fees payable to the provider must be disclosed this statement need not be provided where the client is away or should be a way that the fsp does not render or has stopped rendering ongoing financial services in respect of the products concerned we have now covered all of section 7 dealing with the information that the fsp must provide the client with regards to the rendering of the financial service note that this section is long with a lot of details so make sure you go through it and understand all the requirements laid out lastly we will have a look at section 14. this covers what the fsp must disclose to the general public the fsp advertises to the public however needs to take into consideration certain actions and requirements as laid out in section 14 of the code of conduct advertising by the fsp must not contain any information that is fraudulent and true or misleading any information relating to the performance data awards or rankings must include reference to source data in other words where the information was obtained where illustrations and hypothetical data included in the fsp's advertising the following must be included one the basic assumptions used with reasonable prospects of being made under current conditions two it must be clear that the starter is only given for illustrative purposes and there is no guarantee of it being met three where returns or benefits are based on the performance of underlying assets or other market factors then they must be clear indication of such dependency if the advertisement includes information about post performance then the advertisement must also include a warning that past performance is not necessary indicative of future performance advertising by the fsp must include a warning statement about risks involved in buying or selling financial products this warning must be prominent in other words not hidden in the small print if the investment's net value of the financial product is not guaranteed the advert must contain a warning that no guarantees are provided when advertising via the phone also known as direct marketing the fsp must specifically also do the following 1. record the communication if no financial service was rendered then the fsp doesn't need to keep a record after 45 days 2.
the record of communication must be provided on request of client or the authority also referred to as the registrar or commissioner within seven days three if the fsp ends up providing financial service to the client telephonically then the fsp must provide all detailed information known as the record of advice in writing within 30 days when advertising by public radio then the fsp must specifically state the business name of the fsp in the advertisement we have covered the requirements and impact on disclosure rules of the fsp let's take a look at a few questions to test what you've just learned question 1 becky calls clients advertising financial products what must be kept as proof of a client's acceptance of the transaction choose the correct statement a there is no proof necessary as becky will know what happened b a contract signed before commissioner of oaths c a record of the telephone call between the client and becky must be maintained d a record of the telephone call and the signed contract pause the video here for a second and read the question and the answers remember we are looking for the correct statement the correct answer is option c a record of the telephone conversation or call between becky and the client must be maintained as evidence of the clients accepting the contract the reason why d is not a better option is because not always will there be a signed written contract especially when it comes to advertising by telephone that turns into a sale question two abc insurance and fsp is selling a product for xyz product supplier who needs to make the necessary disclosures about the product supplier a no disclosure is needed b both parties c abc insurance d x y z product supplier you can pause the video here if you need a few seconds to think about the answer the correct answer is option c abc insurance as the fsp would need to do the necessary disclosure to the client question three how many shares must an fsp have in a product supplier which would require note disclosure a any amount of shares b six percent c twelve point 12.
