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Conflicts of Interest Code of Conduct
To recruit an experienced adviser from a competitor, an FSP offers her a once-off payment of R200 000 for joining and compensation for the commission she will forfeit by moving. How does the General Code treat this offer?
RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.
- a) It is an immaterial financial interest, because it is paid only once and not every year.
- b) It is a prohibited sign-on bonus, because she is not a new entrant to the industry.Correct
- c) It is permitted, provided the payment is disclosed in writing to each client she brings.
- d) It is permitted, because payments between an FSP and its own advisers are not financial interests.
Why this is the answer
The Code prohibits offering a sign-on bonus to any person, other than a new entrant, as an incentive to become a provider or representative that gives advice. Such bonuses encourage advisers to move clients for the adviser's benefit. Disclosure does not legitimise it, and R200 000 is far outside the immaterial financial interest limit.
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