Blue Chip Issue 90

BLUE
CHIP
FINANCIAL PLANNING | Legislation
Best practice: I believe that every key person would agree that
possessing the necessary skills, knowledge, and expertise, as
well as having appropriate resources to fulfil their functions,
and perform those functions properly are basic requirements
for any firm to be successful over the long term.
(c) Provide for mechanisms to identify and, where appropriate,
remove practices that, or persons whose, conduct materially
increases the risk of the financial institution not complying with
Part 1;
Best practice: I firmly believe that the reasonable key person,
who understands the principle of accountability to his/her firm,
would want to reduce or eliminate risk to the business and its
stakeholders. From a best practice point of view, to identify and,
where appropriate, remove practices that, or persons whose,
conduct materially increases the risk of the financial institution
not complying, would be a basic part of the job description.
(d) Be proportionate to the nature, size, scale and complexity of
the conduct risks or business model of, and activities performed
by, the financial institution;
Best practice: Respectfully, the principle of proportionality
is something that makes absolute sense, and looks good on
paper, but it remains to be seen how exactly the regulator is
going to apply it in practice. This aspect will be addressed in
a future article.
(e) Provide for management processes and responsibilities and
the establishment, implementation and management of control
functions within the financial institution;
Best practice: Many respected and bestselling authors on
business have made the point that bad systems will trump good
people every time. It is a fundamental fact that sound systems
and processes create effectiveness and efficiencies in the
business that can be applied consistently. It is simple – sound
policies and procedures in any business are good for business.
(f) Deal with internal and external remuneration and
compensation practices in a manner that promotes compliance
with Part 1;
Best practice: Best practice remuneration and compensation
policies will establish an attractive employment value
proposition and will ensure the sustainability of the business.
(g) Demonstrate how the licensed financial institution will comply
with this Act; and
Best practice: Sound, written policies, procedures and
oversight have many advantages for the business, as already
highlighted above.
(h) Address and provide for any additional matters relating to
governance arrangements required by this Act.
Best practice: Leading key persons will go beyond the
obvious to ensure that they can create a very competitive and
sustainable business.
There is no question in my mind that leading financial services
providers will excel in corporate governance, not because they
have to, but because they want to.
1
Mervyn King, The Corporate Citizen, page ix
2
Mervyn King, The Corporate Citizen, page 12
3
Mervyn King, The Corporate Citizen, page 19
4
Conduct of Financial Institutions Bill
5
The Conduct of Financial Institutions Act, read with the Financial Sector Regulation Act.
6
Conduct of Financial Institutions Bill
Anton Swanepoel, Founder, Trusted Advisor
78 www.bluechipdigital.co.za