All RE5 questions
FAIS Act FAIS Act and Subordinate Legislation
A representative gives negligent advice that falls squarely within his mandate, and the client suffers a loss. The FSP argues that it is not responsible because he is an independent contractor paid only by commission. 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 is responsible only if it earned a share of the commission on the transaction in question.
- b) The FSP is responsible, because it accepts responsibility for his activities within the mandate.Correct
- c) The FSP is not responsible, because the Act makes an FSP answerable only for representatives who are its employees.
- d) The FSP is not responsible, because the representative holds his own registration and answers for his own advice.
Why this is the answer
A representative acts for the FSP in terms of an employment contract or any other mandate, and the FSP must accept responsibility for the activities the representative performs within the scope of that contract or mandate. The form of the relationship and how he is paid make no difference, and a representative has no registration independent of the FSP.
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