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FAIS Act FAIS Act and Subordinate Legislation
An insurer sells its own policies through salaried consultants who meet clients and recommend which of the insurer's policies to buy. The insurer argues that, as the product supplier, it needs no FSP licence to sell its own products. 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) It needs no licence, because the Act regulates intermediaries and not the suppliers of products.
- b) It needs no licence, provided its consultants recommend only its own products and no others.
- c) It must be licensed as an FSP, because its consultants give advice to clients.Correct
- d) It must be licensed only if the consultants are paid commission rather than a salary.
Why this is the answer
The Act regulates the activity of rendering financial services, whoever performs it. A product supplier whose staff furnish advice or render intermediary services to clients is rendering financial services and must be an authorised FSP, with those staff appointed as representatives. Selling only its own products and paying a salary do not change that.
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