FAIS (Financial Advisory and Intermediary Services Act)

The Financial Advisory and Intermediary Services Act 37 of 2002, commonly known by its acronym FAIS, is a South African law designed to regulate financial service providers and protect consumers who receive financial advice or intermediary services. It aims to ensure that financial advisors operating in South Africa are properly qualified, appropriately licensed, and required to act ethically and in their clients' interests.

FAIS requires financial advisors and the firms employing them to be formally licensed by the regulator, maintain ongoing competency and continuing education standards, and adhere to codes of conduct governing how they interact with and advise clients.

Before giving someone financial advice for a fee or commission in South Africa, FAIS says you generally need to be properly licensed and demonstrably qualified to do so — the law exists specifically to stop unqualified or unscrupulous advisors from selling financial products without the knowledge or accountability a client is entitled to expect.

A client dealing with a FAIS-licensed advisor has access to defined complaint and redress mechanisms if the advice given turns out to have been inappropriate or conflicted.

FAIS requires financial service providers to register with the regulator, meet "fit and proper" standards covering competency, honesty and financial soundness, disclose relevant information including fees and conflicts of interest to clients, and provide advice that is appropriate to the client's actual needs and circumstances.

FAIS compliance is supervised by South Africa's Financial Sector Conduct Authority, which can investigate complaints, impose penalties, and suspend or withdraw a provider's license for serious or repeated violations of the Act's requirements.

By formalizing licensing and conduct standards for an industry where information asymmetry between advisor and client is often significant, FAIS gives South African consumers a clearer basis to trust, or challenge, the financial advice they receive, and a defined regulatory path for recourse when that trust is broken.

To qualify as fit and proper under FAIS, a financial advisor generally must meet defined standards covering honesty and integrity, operational ability, relevant qualifications, and continuing professional development, with the regulator empowered to suspend or withdraw a license from any advisor who no longer meets these ongoing requirements.

A client who believes a FAIS-licensed advisor gave inappropriate or negligent advice can lodge a complaint with South Africa's dedicated Ombud for Financial Services Providers, which can investigate the complaint and make a binding determination requiring the advisor or their firm to compensate the client where appropriate.

FAIS requires financial service providers to keep detailed records of the advice given to each client, including the information gathered about the client's needs and the reasons for recommending a particular product, creating a documented trail regulators and the client themselves can later review if a dispute arises over what was actually advised.

FAIS licenses are issued across different categories corresponding to the specific types of financial products an advisor is authorized to advise on or sell, from relatively simple products such as short-term insurance through to more complex categories covering securities and retirement products, meaning a license holder's authority is generally limited to the specific categories they actually hold.

A client working with a financial advisor can generally verify which categories that advisor is actually licensed for through the regulator's public register, a useful check before accepting advice on a product category the advisor may not be authorized to recommend.