To summarise events thusfar and to facilitate the presentation of the few remaining issues.
B BRIEF HISTORY
1. The FAIS Bill was gazetted on 10 May 2001 as B52 – 2001.
2. Hearings / deliberations on the Bill took place before the Committee during September, October and November 2001, and during January 2002.
3. All interested parties who wished to do so, were given ample opportunity to debate the merits / demerits of the Bill.
4. On 29 January 2002, the day on which the Bill was expected to be finally approved by the Committee, the hearing was postponed indefinitely.
C AMENDMENTS PROPOSED TO THE GAZETTED VERSION OF THE BILL
1. There has been no material amendment to the essential terms of the Bill. However, during the hearing a number of amendments have been proposed to the gazetted version of the Bill.
2. These lastmentioned proposed amendments were, firstly, reflected in a document styled "Matrix of Amendments" (latest version dated 21 November 2001). This was a consensus document between the FSB and the other parties thereto (LOA, SAIA, The Banking Council and the Association of Health Benefit Advisors).
3. Further amendments were proposed by the FSB either of its own accord or in consequence of counsel’s opinion which exposed possible constitutional defects in the gazetted draft Bill.
4. During the debates, the Committee itself proposed certain amendments to the Bill.
5. An agreement concluded between the FSB and the Registrar of Medical Schemes on 14 February 2002 resulted in two minor additions to the provisions of the Bill.
6. Finally, since the Bill last served before the Committee, the FSB has effected some stylistic and other changes to the Bill which it will propose as amendments. In this category are mainly further amendments aimed at ensuring the institutional independence of the FAIS Ombud.
7. All these amendments are reflected in a document drawn in the correct format and styled "Amendments to the Bill as proposed by the FSB". In order to facilitate matters, there will be made available to members of the Committee the Bill in its amended form, depicting deletions from and additions to the gazetted version.
8. We repeat that these amendments do not detract from the Cabinet approved principles of the Bill. They have all along been published on the FSB website and made known to National Treasury, and the FSB is not aware of any objections to the amendments which are presently being proposed.
D ISSUES WHICH REMAIN FOR RESOLUTION
Only two issues remain for final consideration by the Committee:
• the interaction between the FAIS law and the Policyholder Protection Rules (PPR)
• the position of health brokers.
1. FAIS and the PPR
(a) Committee members are respectfully referred to attachment A dated 22 January 2002 and styled "Resumé of the FAIS Bill and the Policyholder Protection Rules". This sets out how the gazetted Bill proposed to deal with the interaction between FAIS and the PPR, and how the amended version of the Bill (the new clause 44(5)) will deal with this issue.
(b) In a submission dated 28 January 2002 the LOA raised certain concerns over the FSB’s proposal. In its response dated 30 January 2002 (attachment B) the FSB dispelled the LOA’s concerns and pointed out that they had no merit.
(c) The FSB remains of the views expressed in attachments A and B. The proposed amendments will enable the FSB (who administers both FAIS and the PPR) to deal with the interaction between the two laws by means of a ministerial notice. This proposal is also supported by National Treasury. The concerns expressed by the LOA regarding "dual regulation", "uneven playing field" and "uncertainty" are, with respect, not justified.
2. Health Brokers
(a) Already during the consultation of the Bill, the position of health brokers, i.e. whether their market conduct should or should not be regulated under FAIS, gave rise to controversy.
(b) All commentators, excepting the Council for Medical Schemes, were of the opinion that "it does not make regulatory sense that health brokers should be excluded from FAIS". The FSB accordingly proposed an amendment to the Bill which had the effect of including health brokers within the ambit of the Bill. This amendment was vigorously opposed by the Council for Medical Schemes and the Ministry of Health and the final adoption of the Bill was deferred pending Ministerial direction on the issue.
(c) The matter has now been resolved to the satisfaction of both the FSB and the Registrar of Medical Schemes. Attachment C sets out the essential terms of an agreement between the parties concluded on 14 February 2002.
(d) A new sub-clause (7) to clause 8 of FAIS is being proposed to give effect to the agreement. There will also be an amendment to the Medical Schemes Act, 1998, to take effect simultaneously with the promulgation of FAIS.
(e) The FSB suggests that this arrangement is a sensible one. It has resolved an impasse which unfortunately delayed the progression of this very important Bill. Although the accreditation of health brokers will be under the Medical Schemes Act, this will not detract the impact and objective of FAIS. Intermediaries in the medical schemes environment (health brokers) will, like intermediaries in the insurance sector and investment managers, be subject to the common framework provided by FAIS, thereby establishing an integrated approach to market conduct regulation.
E CONCLUSION
1. The main principles of the Bill were conceptualized by the Policy Board for Financial Services and Regulation during extensive workshops and debates involving regulators, government, industry representatives and consumer bodies.
2. The FAIS Bill was thereupon drafted by the FSB. In-depth consultation resulted in only the fifth draft of the Bill being approved by Cabinet and gazetted.
3. Intensive deliberations before the Committee brought about a substantial number of proposed amendments to the Bill which were thoroughly canvassed and debated.
4. Support for the Bill has been expressed by all major industry players, consumer organisations, government and regulators.
5. No contentious issue remains unresolved.
6. The FSB respectfully submits that a sound case has been made out for the adoption of the Bill (as amended) in the interest of consumer protection.