Business Continuity Plan ( BCP)
Introduction
The Financial Services and Intermediary Act, (FAIS Act) including Sections 11 and 12 of the General Code of Conduct for Authorised Financial Services Providers and their Representatives (“the General Code”) deal with a FSP’s responsibilities in terms of conducting business as well as specifics such as Risk Management. In terms of research carried out, it stands to reason that Business Continuity or a (BCP) should form part of a FSP’s Risk Management Policy. These requirements are reinforced by guides published by the FSB under:
FAIS – Guides for small FSPs
· FAIS Understanding the practicalities – guide for financial services providers
· FAIS Risk Management guide for financial services providers
A. The FAIS Act
The necessity to have a (BCP) stems from the events listed under the Act that deals with the: Lapsing of a license
1) A licence lapses –
a) where the licensee, being a natural person –
i) becomes permanently incapable of carrying on any business due to physical or mental disease or serious injury;
ii) is finally sequestrated; or
iii) dies;
b) where the licensee, being any other person, is finally liquidated or dissolved;
c) where the business of the licensee has become dormant; and
d) in any other case, where the licensee voluntarily and finally surrenders the licence to the registrar.
2) The registrar must be advised in writing by the licensee, any key individual of the licensee, or another person in control of the affairs of the licensee, as the case may be, of the lapsing of a licence and the reasons there for and the registrar may make known any such lapsing of a licence by notice in the Gazette and, if necessary, by means of any other appropriate public media announcement.
B. Section 11 of the General Code deals with the control measures required and provides that:
“ A provider must at all times have and effectively employ the resources, procedures and appropriate technological systems that can reasonably be expected to eliminate as far as reasonably possible, the risk that clients, product suppliers and other providers or representatives will suffer financial loss through theft, fraud, other dishonest acts, poor administration, negligence, professional misconduct or culpable omissions.”
Note: The failure of not having a Business Continuity Plan (BCP) could result in the FSP, failing to meet these requirements in that:
1) Risk to parties quoted could be attributed to poor administration, negligence, professional misconduct or culpable omissions, if one views this in the light of the legal requirements of the ACT and or sound basic business principles. It could be likened to one not having a Last Will and Testament, a Buy and Sell Agreement or Shareholders Agreement.
C. Section 12 of the General Code relates to the specific control measures required and provides that:
“A provider, excluding a representative, must, without limiting the generality of section 11, structure the internal control procedures concerned so as to provide reasonable assurance that-
the relevant business can be carried on in an orderly and efficient manner;
(a) financial and other information used or provided by the provider will be reliable; and
(b) all applicable laws are complied with.”
Note: The omission of a( BCP) could further result in the FSP failing to meet these requirements in that in terms of the Act the license would lapse as the business could not carry on without a proper (BCP) as the law requires it (refer to lapsing of license)
From the abovementioned sections of the General Code it is evident that it is a necessity for a FSP to develop a Risk Management Plan which should include a (BCP).
D. THE REGULATORS GUIDELINES
Information from the FSB: The following is extracts from publications on the FSB website dealing with Business Continuity and other, for the purpose of this report only those sections dealing with (BCP) have been included, but the full guides have been included for information purpose.
FAIS – Guides for small FSPs
“BUSINESS CONTINUITY
It is important to take note of the following in case of the passing away or any other limiting factor of a key individual:
5.1. Sole Proprietors (Natural Persons)
The sole proprietorship is attached to the key individual. If the key individual passes away or any situation occurs that will lead to the key individual not being able to perform his/her duties in terms of the FAIS Act, the license will be lapsed and the business will cease to exist.
The FSB needs to be informed of the above situation or of the passing away of the key individual. The license cannot be transferred to another person. The license can therefore not be inherited by anyone.
The sole proprietor can make an arrangement with another FSP to take over the client book in the case of the above circumstances occurring and clients must be notified of this transfer.
5.2. Close Corporations and Companies
A close corporation is a legal entity. The business is therefore not attached to the key individual. In a close corporation with more than one key individual the passing away or occurrence of any situation that will lead to the key individual not being able to perform his/her duties in terms of the FAIS Act will not have any effect on the status of the FSP.
Where the close corporation only has one key individual and one of the above circumstances occurs the business will continue to exist. For this business to continue as an authorised FSP, a new key individual will have to be appointed and authorised as such by the FSB. It is important to take note that the FSP is not allowed to perform any regulated function until such time as the new key individual is approved by the FSB.
The same principle applies to companies.
5.3. Partnerships
In the case of a partnership if a partner in the partnership passes away then the partnership would dissolve and the license would need to be lapsed.”
Note: From the above it is thus imperative that all FSP’s either have more than one Key Individual or that there is a formal agreement similar to that of a Buy and Sell agreement laying out the terms and conditions of the (BCP). A draft agreement will be draw up and I will approach Advocate Davey to review the terms in line with the prevailing legislation prior to getting the FSB to comment on the matter.
E. Conclusion
Despite Sole Proprietor members of the FPI being at the highest Risk, re Business Continuity, it is safe to say that any FSP, who does not have a written (BCP), is at Risk of having their client base left in a precarious position.
Risk management should and a (BCP)
• create value for your FSP;
• be an integral part of your FSPs processes;
• be part of decision making within your FSP;
ANNEXURES
1 FAIS GUIDE
2 RISK MANAGEMENT GUIDE
3 RISK MANAGEMENT POLICIES – AN EXAMPLE
4 ANNEXURES TO RISK MANAMGEMENT POLICY [Namely the succession planning explanatory note]
Disclaimer: Please note that this document, and all annexures, serves as a mere guide and should not be used as the definite and only source of information in implementing any procedures in your business and for advising clients. Your due diligence must be done.