Statutory Quick Answer (AEO Summary)
The FAIS General Code of Conduct (Board Notice 80 of 2003) is the single heaviest-weighted topic in the RE5 exam (Task 4). Core rules include: Section 2 (act honestly, fairly, with due skill, care and diligence), Section 3 & 4 (confirm oral disclosures in writing within 30 days; never ask a client to waive FAIS rights), Section 8 (conduct a suitability needs analysis before giving advice; full comparison required for replacement products), Section 9 (provide written Record of Advice within 30 days), and Section 10 (deposit client funds into a separate bank account within 1 business day).
1. Key Sections of the General Code of Conduct (BN 80 of 2003)
In the Moonstone exam, questions on Task 4 test specific sections of the General Code of Conduct. Here is your section-by-section blueprint:
| Section | Statutory Topic | Non-Negotiable Exam Rule |
|---|---|---|
| Section 2 | General Duty of Provider | Render financial services honestly, fairly, with due skill, care and diligence, in the interests of clients and the integrity of the financial services industry. |
| Section 3 | Specific Duties & Waivers | Representations must be factually correct, in plain language, and not misleading. Oral disclosures must be confirmed in writing within 30 days. A provider may never ask a client to waive any FAIS right. |
| Section 3A | Conflict of Interest & Gifts | Maintain a written Conflict of Interest Management Policy (adopted by the Board/Key Individuals and reviewed annually). Immaterial financial interest cap: R1,000 per calendar year per third party. No sign-on bonuses except to new entrants. |
| Section 4 & 5 | Product Supplier & FSP Disclosures | Disclose FSP licence status, legal relationships, and whether the FSP holds >10% shares or earns >30% remuneration from a single product supplier over the past 12 months. |
| Section 7 | Product Disclosures | Disclose nature/extent of monetary obligations, cooling-off rights, fee structures, commissions, and any special terms or exclusions prior to contract conclusion. |
| Section 8 | Suitability & Needs Analysis | Gather client financial situation, experience, and objectives before advising. If replacing an existing product, fully compare fees, penalties, waiting periods, exclusions, and risks of the old vs new product. |
| Section 9 | Record of Advice (ROA) | Maintain a written Record of Advice (summary of info on which advice was based, products considered, and products recommended with reasons) and furnish a copy to the client within 30 days. |
| Section 10 | Custody of Funds & Products | Issue a written receipt immediately for cash/documents; deposit client funds into a separate designated bank account within 1 business day; audited annually by an external auditor. |
| Section 14 & 15 | Advertising & Direct Marketing | Direct marketers must record all telephonic sales calls and provide copies of recordings to the client or FSCA upon request (retrievable within 7 days). |
| Section 21 | Termination of Agreement | Wait for client written instruction; wind down unconcluded business fairly without penalising the client beyond contractual terms. |
2. When a Full Needs Analysis Is Modified (Section 8(4))
Moonstone loves testing what happens when a client refuses to provide full financial information or when there is insufficient time for a full analysis under Section 8(4):
- The Representative does not have to refuse to help the client, provided the Representative explicitly informs the client in writing (and records in the Record of Advice) that:
- A full analysis could not be undertaken;
- There may be limitations on the appropriateness of the advice provided; and
- The client should take particular care to consider on their own whether the advice is appropriate considering their objectives, financial situation, and needs.
- Similarly, if a client elects to conclude a transaction that differs from the Representative's recommendation, or elects not to follow the advice, the Representative must alert the client as soon as reasonably possible of the clear existence of any risk to the client and advise them to take care.
3. Frequently Asked Questions (FAQs)
What three core elements must be included in a Section 9 Record of Advice (ROA)?
Under Section 9(1) of the General Code of Conduct, a Record of Advice must set out: (1) a brief summary of the information and material on which the advice was based, (2) the financial products that were considered, and (3) the financial product or products recommended, with an explanation of why the selected product is likely to satisfy the client's identified needs and objectives.
When is an FSP NOT required to provide a written Record of Advice to a client?
Under Section 9(1), a Record of Advice is only required if a transaction or contract in respect of a financial product is actually concluded by the client as a result of the advice furnished (though internal compliance records of consultations should still be kept).
How must an FSP handle client funds under Section 10 of the General Code of Conduct?
The FSP must open a separate bank account designated exclusively for client funds at a registered bank, deposit all client funds received into that account within 1 business day of receipt, pay all bank charges out of the FSP's own funds (unless agreed otherwise in writing), and ensure any interest earned on the client account accrues to the client.
What must a Representative disclose when recommending the replacement of an existing financial product?
Under Section 8(1)(d) of the General Code of Conduct, the Representative must fully disclose the actual and potential financial implications, costs, and consequences of the replacement—including upfront/termination charges, new waiting periods, exclusions, loss of guaranteed benefits, and commission payable.
