Are you FIM Bill fit?
Sybil Somaes, MD of Compli-Serve Namibia
The financial services sector is anticipating the enactment of the Financial Institutions and Markets (FIM) Bill any day now, and with it, new compliance requirements. This article serves as the first in a miniseries, unpacking specifics to consider within sub-sectors of the industry, including asset management and unit trust companies, insurance, retirement funds and intermediaries.
Know what to watch out for
The FIM Bill (or FIMA once it is official) is a complex piece of legislation that spans some 400 pages, so is a mammoth amount of information to take in, and to follow to the letter. The Bill prescribes general and cross-cutting requirements for all entities it regulates, with sector specific obligations.
Preparing properly for FIMA implementation will depend on the sector you are in, and considering how ready you are as soon as possible, is crucial as D-day no doubt, draws closer. Understanding your obligations as an asset manager will be the first focus, and the theme of this article.
A is for Asset Management
While this sector has specific compliance considerations, re-capping some of the general requirements upfront (relevant to all sectors) remains the place to start.
New registration requirements will apply, so in the case of asset management, all investment managers that were approved prior to the commencement date of the FIMA are deemed to be registered under it. These entities will have a period of 12 months from the commencement date to re-register under the Act, which is the standard procedure.
The registration of certain persons/list applicants and new requirements around board composition and independence, as well as the roles and responsibilities of boards and committees will change too. Investment managers may apply for registration of certain employees as Portfolio Managers. Existing Portfolio Managers are deemed to be registered on the commencement date of FIMA, however, they must be re-registered within six months of the commencement date.
Follow the code
Every financial institution and intermediary must have a code of conduct in place, appoint fit and proper boards and management, and follow specific requirements for authorised and designated representatives. The Bill requires each investment manager’s code of conduct to be binding on the investment manager; its board; principal officer and other officers, as well as other employees and their clients. The Bill further provides the specific principles that need to be incorporated in the code of conduct of an investment manager. Examples include a conflict- of-interest policy, workplace practices and a communication policy for stakeholders.
The Bill further requires investment managers to use plain language in their correspondence with clients. This means that client correspondence should be tailored to be understandable for the client and not necessarily written for the asset manager. The Bill also provides specific requirements for investment mandates and requires parties to exercise discretion in assessing the appropriateness and adequacy of the mandate for the relevant investment circumstances.
Enhanced governance at the core
A general theme within FIMA compliance is that governance matters are enhanced, with a focus on consumer protection. Firms therefore need to be more transparent in their engagements with customers. An example impacting asset management is that disclosures must be made to investors at inception as to who the authorised and registered representatives are, in accordance with FIM, as these are the individuals who clients will be dealing with.
FIMA comprises of 11 chapters corresponding to industry sub-sectors; chapter 3 outlines the specific requirements for Investment Managers and chapter 4, those applicable to Collective Investment Schemes. An understanding of these as well as the Bill overall is important for compliance.
Why does compliance matter?
Failing to comply with FIMA obligations can lead to firms being fined by the regulator or worse, losing their license to operate. Keeping up with obligations can be made easier (and more cost-effective) through using outsourced compliance services. This course of action negates the need to have an internal compliance resource, which is often more expensive as they are appointed on a fulltime basis and require training (the opposite to outsourcing).
Sneak peek into the next series’ instalment
Insurers have different ‘re-registration’ requirements for FIMA compliance and have more onerous obligations with regard to the fair treatment of clients, so it’s worth knowing the differences per sector.