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FAIS Act FAIS Act and Subordinate Legislation
An FSP is licensed for long-term insurance products only. A long-standing client asks for advice on listed shares, and the FSP's representative, who is knowledgeable about shares, advises him. Which statement is correct?
RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.
- a) The FSP acted outside its licence and should first have applied to the Authority to have shares added.Correct
- b) The FSP acted lawfully, because the personal knowledge of the representative covers the gap in the licence.
- c) The FSP acted outside its licence only if it charged the client a fee for the advice on shares.
- d) The FSP acted lawfully, because a licence authorises advice on any financial product to existing clients.
Why this is the answer
A licence authorises financial services only for the product categories stated in it, and a representative may act only for products the FSP is authorised for. To advise on another category the FSP must first apply to amend its licence and show that it meets the requirements for that category. Individual knowledge, the client's history and whether a fee is charged do not extend the licence.
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