Question 1 (10 marks)

Read the scenario below and answer the questions that follow:

MX Pty Ltd Financial Services is a licensed financial services provider (FSP). MX provides financial advice and intermediary services focusing on the investment market segment. The majority of their client base is retired and receives annuity income from an investment.

The staff comprises two key individuals and four representatives, of which two are under supervision. The compliance function is outsourced to a compliance practice and two MX administrative staff members. One administrative staff member is paired with two representatives to work as a team (i.e. a ratio of two to one).

The key individuals have to meet the fit and proper requirements and attend regular compliance workshops to ensure that they are up to date with the latest regulatory practices and changes in legislation.

According to the interim feedback report, the key individual has completed supervision and during the year added another class of business to the license, health services. He has completed only six continued professional development hours (CPD). The four representatives have yet to meet the fit and proper requirements. One of the representatives is only registered for one class of business and a sub-class; this representative also has not met CPD requirements. The other representative has been employed for more than five years, and he complies, according to the report, with the CPD requirement, class of business, and RE5.

The two representatives under supervision have not met the minimum experience requirements under various business class categories, and have been employed for 20 months. They have both successfully completed their RE5 exam and product-specific training with providers MX has contractual agreements with.

All staff members receive mandatory training with regard to the Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001) (FIC Act), as per their signed employment contracts.

Identify what FSP licence category MX Pty Ltd Financial Services falls into, in accordance with the Financial Sector Conduct Authority (FSCA).
(1)

Review the compliance information and identify the outstanding fit and proper compliance requirements the key individuals still have to meet in relation to MX Pty Ltd Financial Services. (2)

Explain (CPD) hours that the representatives of MX Pty Ltd Financial Services have to do in order to adhere to according to legislation. (3)

Explain what is required for the under-supervision representatives at MX Pty Ltd Financial Services to become fit and proper. (2)

Identify two other Acts that MX Pty Ltd Financial Services needs to comply with, besides the FAIS Act, when entering into or establishing a business relationship with a client. (2)

Question 2 (10 marks)

Read the scenario below and answer the questions that follow:

Customer A complains that he has suffered a great financial loss as a result of the advice given to him by a representative. He has decided to contact the Ombud to hear his case and did not inform the representative of the FSP of his complaint.

Customer A claims that the damages amount to R3 950 000. He believes that he is entitled to this amount and will not settle for anything less. Customer A has instituted court proceedings with regard to his complaint.

Discuss whether this claim will be considered by the Ombud and substantiate your answer, taking into consideration that the client has also instituted court proceedings. (3)

Consider the monetary value of R3 950 000 claim and discuss whether or not this claim will be accepted by the Ombud. (3)

The complaint by Customer A seems to result from a personal dispute between the customer and the representative, and not due to an action by the representative that led to the financial loss. Discuss whether there would be any costs payable by Customer A for submitting this complaint to the Ombud. (2)

Question 3 (5 marks)

Mr B was widowed a few years ago. He recently passed away without leaving a Will and is survived by the following family members:

• his mother (aged 82)
• his aunt who is taking care of his mother
• his sister
• eight-year-old nephew, the son of his predeceased brother.

(Mr B has been taking care of his nephew since his parents died in a car accident five years ago.)

The net value of Mr B’s estate is worth R1 800 000.

Indicate how Mr B’s estate will be divided. If any family member is excluded, please provide reasons.

Note: Show all your calculations.

Question 4 (10 marks)

Read each of the scenarios below and explain why the statement is incorrect in terms of the legislation applicable.

In the event of a client being declared insolvent, R50 000 of his long- term insurance policies is protected against creditors, provided that the policies in question have been in force for at least five years. (2)

A spouse married in community of property must at all times obtain the written consent of their spouse to acquire or dispose of furniture for their household within the joint estate. (2)

A third-year student at university was upset that the financial advisor did not allow him to take up the discounted premium offer on his life insurance policy without the written consent of his parents. (2)

A client received a call from a call centre representative who contacted him five months ago. He then decided to invest R30 000 after the agent had reassured him that their investment product outperformed the competition’s products. To date, he has received no correspondence from the FSP. He was told that the recording of the telephone call is, in fact, the verbal contract and no further disclosures are required. (4)

Question 5 (5 marks)

A long-standing client has a sum of money overseas, which he has not declared to tax authorities in South Africa. The representative got the impression that the client was evasive about the origins of the money. In rands, it equates to R200 000. The client transferred these funds into a South African investment on 15 March 2025, without bringing this to the attention of SARS and the Reserve Bank.

Advise the representative how they should treat this transaction ito applicable legislation. Refer to relevant legislation in your answer.

SECTION B (10 MARKS) – RESEARCH QUESTION

Read the case study below and answer the questions that follow:

Ombud for Financial Services Providers

The complainant and her husband had a credit life policy with the respondent to cover their outstanding bond, the life policy incepted on 6 April 2018. After the complainant’s husband was diagnosed with Stage 4 brain cancer during October 2021, the complainant submitted a claim in respect of the dread disease benefit of the policy. After numerous follow-ups, the complainant was informed that the claim was denied as it was related to a pre-existing condition. The complainants submitted that when they had applied for the bond with the respondent, they were advised to apply for the credit life policy, based on the husband’s medical history. The respondent’s representative was aware of her husband’s previous and existing medical conditions. Her understanding was that pre-existing conditions are covered after a period of 12 months.

In response to the complaint, the respondent confirmed that the policy was a Home Loan Protection Plan Policy, which provided both the complainant and her husband with cover in respect of death, temporary disability, retrenchment and dread disease. The policy had incepted on 6 April 2018, upon receipt of the first premium, and the complainants were sent a new business schedule inclusive of the Obligatory Disclosures Terms and Conditions. The dread disease claim was reported on 31 January 2022 and repudiated due to the event occurring prior to the policy inception. The cancer was first diagnosed in 2014 and has been spreading ever since.

The Office posed various questions to the respondent. Clause 4.2 of the Obligatory Disclosure Document provides that no claim relating to any pre- existing condition (which includes any medical condition, inclusive of cancer, where one has consulted a medical doctor, or treatment is being received) would be paid in the first 24 months after the start of cover. Section 7 (1)(c)(vii) of the General Code of Conduct, provides that a financial services provider must provide concise details of any special terms or conditions, exclusion of liability, waiting period, loadings, penalties, excesses, restrictions, or circumstances in which benefits will not be paid.

Having been aware of the complainant’s medical condition in 2018, and in view of the 24-month exclusionary clause for pre-existing conditions, the respondent had a duty to advise the complainant of possible difficulties he could experience in claiming.

The respondent subsequently confirmed that it had paid the claim of R323 462 in full and final settlement.
Source: https://www.faisombud.co.za/wp-content/uploads/2023/11/FAIS-Ombud-Annual-Report-2022- 2023-web.pdf

Question 1 (2 marks)

According to Copilot, “the Ombud likely heard this case because it falls within their mandate to resolve disputes related to financial services, such as insurance claims. The Ombud for Financial Services Providers (FAIS Ombud) in South Africa handles complaints where consumers believe they have been treated unfairly by financial service providers.

In this case, the complainant felt that the insurance company did not provide clear information about the policy terms, specifically regarding the coverage of pre-existing conditions. This aligns with the Ombud’s role in ensuring that financial services providers treat customers fairly and provide clear, accurate information.

The Ombud’s involvement helps to provide an accessible, cost-effective means of resolving disputes without the need for lengthy and expensive court proceedings.” (Copilot, personal communication, 28 July 2024)

Assess whether the artificial intelligence source, Copilot has taken in all information into consideration by drafting a response to the question:
Explain the reason this case was considered by the Ombud based on the definition of a complaint.

Question 2 (8 marks)

According to Copilot, “it appears that Outcome 3 of TCF may have been breached in the following ways:

1. Lack of clear information: The complainant believed that pre-existing conditions would be covered after 12 months, but this was not the case. This indicates that the information provided at the point of sale may not have been clear or comprehensive enough.
2. Inadequate communication: The complainant had to follow up numerous times before being informed that the claim was denied due to a pre- existing condition. This suggests that the respondent did not keep the complainant appropriately informed during the claims process.

These points highlight potential failures in ensuring that the complainant was fully aware of the policy terms and conditions, and in maintaining transparent communication throughout the policy lifecycle.” (Copilot, personal communication, 28 July 2024)

Identify two other TCF outcomes that have been breached. Explain your answer. TOTAL MARKS: 50

Answers to Above Questions on Financial Planning

Answer 1

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