"A SAIPA member, as a professional accountant (SA), plays an integral role in their clients' financial affairs. That intimacy, and their desire to render a value-added service to their clients, can actually bring them into conflict with FAIS," says Faith Ngwenya, Technical and Standards executive at SAIPA.
FAIS is designed to ensure that only properly trained and regulated professionals may offer financial advice. Because the consequences of poor or fraudulent advice can be so severe, the act provides for severe penalties for contravention. Those convicted face a fine of up to R1 million and/or a maximum of 10 years' jail time.
Ngwenya explains that a professional accountant could unwittingly give advice to a client that could stray into the realms of financial advice as outlined in the act. One example might be when a professional accountant completes a client's financial statements; he or she might observe that the client's significant cash balance should not be left in a current account but rather transferred to some sort of investment account. Whilst non-FAIS-registered accountants can caution the client of this, advising the client to invest in a specific investment crosses the line and such advice can only be given if the accountant is registered with the Financial Services Board in terms of FAIS.
Another grey area might be when a professional accountant advises a client that he or she is not taking full advantage of retirement savings for maximum tax efficiency.
"In these and similar cases, the professional accountant might be construed as offering financial advice on which the client acts," Ngwenya points out. "Looking at the definition of 'advice' in the act, it's clear that professional accountants must not go beyond pointing out the opportunity, and should not be tempted to offer advice on the nature of investments or even investment classes."
There is, of course, nothing to stop a professional accountant from registering with the Financial Services Board as a financial advisor - many do so. "But if you're not registered with the Financial Services Board as a financial advisor, don't offer financial or investment advice," Ngwenya concludes.
For more information, go to www.saipa.co.za.
