Learn everything you need to know about the FAIS Act South Africa for your RE5 exam. Simple explanations, examples, and key definitions to help you pass the RE5.
If you’re preparing for the RE5 exam, one of the most important topics you’ll need to master is the FAIS Act (Financial Advisory and Intermediary Services Act).
It may sound intimidating at first — but once you understand why the Act exists and how it’s applied in the financial services industry, it becomes much easier to remember for your exam (and to apply in real life as a financial advisor).
This guide breaks down the FAIS Act in simple language, exactly how you’d want it explained before walking into your RE5 exam.
Want everything explained in one place? Get the complete RE5 Study Pack from RE Exam Buddy — includes summaries, mock exams, and study notes.
1. What Is the FAIS Act?
The Financial Advisory and Intermediary Services (FAIS) Act regulates how financial advice and intermediary services are given to clients in South Africa.
It was enacted in November 2002 and came into effect on 30 September 2004.
The purpose of the FAIS Act is simple but powerful:
- Protect clients from poor or misleading advice.
- Build public trust in the financial services industry.
- Promote stability and professionalism in the sector.
If you work in financial services, the FAIS Act ensures that you — and everyone else giving financial advice — is competent, licensed, and accountable.
2. What Is a Financial Service Under the FAIS Act?
The Act recognises two main types of financial services:
- Advice
- Intermediary services
A person can only give these services if they are licensed as a Financial Services Provider (FSP) or represent a licensed FSP.
Let’s look at each one in plain English.
2.1 What Counts as “Advice”?
Under the FAIS Act, advice means any recommendation, guidance, or proposal of a financial nature made to a client — by any means — in relation to a financial product.
This includes advice about:
- Buying or investing in a financial product
- Changing or cancelling a policy
- Replacing one product with another
- Taking on a financial obligation or benefit
Even if your advice doesn’t lead to an actual transaction, it’s still considered advice under the FAIS Act.
What Is NOT Advice
- Describing how a financial product works
- Answering admin-related questions
- Sharing product information without making a recommendation
Automated vs Non-Automated Advice
- Automated advice = digital or algorithm-based (e.g., robo-advisors).
- Non-automated advice = given directly by a person.
2.2 What Counts as “Intermediary Services”?
An intermediary service means performing an act on behalf of a client or a product supplier in relation to a financial product.
Examples include:
- Collecting premiums from clients
- Submitting or processing claims
- Administering a product on behalf of a supplier
Intermediary services can be:
- Scripted execution of sales (acting on a client’s instruction), or
- Other intermediary services (admin-type functions).
Note: Banks collecting premiums purely as banks are not intermediaries under FAIS.
2.3 Direct Marketing
Financial services can be offered face-to-face or through direct marketing — such as via:
- Telephone
- Internet
- Media inserts
- Direct mail
A direct marketer mainly provides financial services through these channels.
3. Financial Products Under the FAIS Act
The FAIS Act covers a wide range of financial products, including:
- Securities and instruments (shares, bonds, warrants, etc.)
- Collective investment schemes (unit trusts)
- Insurance policies (short-term and long-term)
- Pension and provident fund benefits
- Friendly Society benefits (like stokvels)
- Foreign currency investments
- Crypto assets
Crypto Assets – A New Addition
Crypto assets are digital representations of value that:
- Are not issued by a central bank
- Can be traded or stored electronically
- Use cryptographic and distributed ledger technology
The FSCA allows people who applied for a crypto license between 1 June 2023 and 30 November 2023 to continue operating until their license is approved or declined.
4. Who Is a Client Under the FAIS Act?
A client is any person or group of persons (excluding the public) to whom a financial service is intentionally rendered.
This includes:
- The person receiving advice or service
- The beneficiary of that service
- A successor in title
5. Categories of Financial Services Providers (FSPs)
The FAIS Act divides Financial Services Providers into categories, based on the type of services and products they can offer.
| Category | Description |
|---|---|
| Category I | Ordinary FSP – can only act on client instruction. Can provide advice and/or intermediary services. |
| Category II | Discretionary FSP – offers discretionary intermediary services (e.g., asset managers). |
| Category IIA | Hedge Fund FSP – manages hedge funds or fund-of-funds. |
| Category III | Administrative FSP – performs intermediary services through bulking (e.g., LISPs). |
| Category IV | Assistance Business FSP – administers assistance policies like funeral cover. |
Each category has subcategories depending on the financial products offered — like life insurance, pensions, deposits, or investments.
For a full breakdown of all FAIS product categories and how they appear in the RE5 exam, download the RE5 Study Pack here.
6. Tier 1 vs Tier 2 Products
Financial products are divided into Tier 1 and Tier 2:
- Tier 1 products are complex — they need more experience and training (e.g., life insurance, pension benefits, investments).
- Tier 2 products are simpler — often low-risk or limited-underwriting products (e.g., funeral policies, basic deposits).
Understanding this distinction is crucial for the RE5 exam.
7. Role Players in the FAIS Act
The FAIS Act outlines the key players in South Africa’s financial services regulation:
7.1 The Financial Sector Conduct Authority (FSCA)
The FSCA is the main body responsible for regulating financial services providers. It replaced the Financial Services Board (FSB) in 2018.
Main functions:
- Register FSPs and check fit and proper requirements
- Supervise and monitor FSPs
- Enforce compliance with FAIS
- Take action against non-compliant providers
The FSCA operates through several departments:
- Registration: Handles new licenses, key individual approvals, and profile changes.
- Supervision: Conducts risk assessments, inspections, and liaises with industry bodies.
- Compliance: Deals with complaints and regulatory actions.
- Enforcement: Manages license withdrawals, debarments, and referrals from the Ombud.
7.2 The Commissioner
The Commissioner is the individual appointed to oversee the FSCA’s operations — ensuring client protection and market integrity.
7.3 Professional Bodies
These are organisations that uphold ethical and professional standards, such as:
- ASISA – Association for Savings and Investment South Africa
- FPI – Financial Planning Institute
- SAIA – South African Insurance Association
- CISA – Compliance Institute Southern Africa
- IOBSA – Institute of Banking South Africa
7.4 The Financial Services Tribunal
If an FSP or person is unhappy with a decision by the FSCA (like a debarment), they can appeal to the Financial Services Tribunal.
It replaced the old FSB Appeal Board in 2018.
7.5 The Product Supplier
This is any company that issues a financial product — like an insurance company, a unit trust manager, or a bank.
7.6 The Financial Services Provider (FSP)
An FSP is any person or business that provides financial services as a regular part of their business.
To operate, they must:
- Be licensed by the FSCA, and
- Meet fit and proper requirements
7.7 Key Individual (KI)
Every FSP must have at least one Key Individual, who manages or oversees the rendering of financial services.
Key duties include:
- Managing representatives
- Approving and de-barring reps
- Monitoring compliance
- Maintaining internal controls
- Ensuring the FSP is financially sound
Minimum requirements:
- At least 1 year’s relevant management experience
- A recognised qualification
- Competency in the RE1 exam
- Completed class of business training
7.8 Representative
A representative is anyone who provides financial services on behalf of an FSP, under a contract or mandate.
The FSP takes full responsibility for their actions.
A representative cannot act unless:
- They are registered with the FSCA, and
- They meet all fit and proper standards.
A Key Individual can also act as a representative if they personally render financial services.
7.9 Third-Party FSPs
These are other licensed providers that an FSP does business with.
It’s the FSP’s responsibility to verify that these third parties are authorised to operate.
7.10 Compliance Officer
If an FSP has multiple Key Individuals or representatives, they must appoint a compliance officer.
Their job is to:
- Monitor FAIS compliance
- Liaise with the FSCA
- Submit compliance reports
- Make recommendations to improve controls
If the FSP doesn’t have one, the Key Individual must perform the compliance function.
7.11 The FAIS Ombud
The FAIS Ombud resolves client complaints when an FSP’s internal complaints process fails.
If the issue is with a product supplier (like an insurer), it’s referred to the relevant sectoral Ombud.
8. Why the FAIS Act Matters (and Why It’s in Your RE5 Exam)
The FAIS Act is the foundation of South Africa’s financial advice regulation. It ensures that advisors act ethically, competently, and transparently.
In your RE5 exam, you’ll be tested on:
- The definitions of advice and intermediary services
- Categories and subcategories of FSPs
- Roles of the FSCA, KI, representatives, and Ombud
- Understanding the client’s protection framework
To see how these questions appear in the actual exam, download the RE5 Study Pack here.
Frequently Asked Questions (FAQ)
1. What is the purpose of the FAIS Act?
To protect consumers, ensure fair conduct by financial advisors, and maintain stability and trust in South Africa’s financial sector.
2. Who must comply with the FAIS Act?
Anyone giving financial advice or intermediary services related to financial products — including representatives, Key Individuals, and FSPs.
3. When was the FAIS Act implemented?
It was enacted in 2002 and came into effect on 30 September 2004.
4. What is the difference between advice and intermediary services?
Advice is what you recommend; intermediary service is how you carry it out on behalf of a client or product supplier.
5. Is crypto covered under the FAIS Act?
Yes. From 2023, crypto assets are recognised as financial products under FAIS, and crypto service providers must apply for licensing.
Final Thoughts
The FAIS Act South Africa is at the heart of ethical and professional financial advice. For your RE5 exam, understanding this topic is non-negotiable — it’s one of the most heavily tested sections.
Don’t just memorise — understand the logic behind each definition and how they apply to real-life scenarios.
Ready to pass your RE5? Get the RE5 Study Pack from RE Exam Buddy for simplified notes, mock questions, and summaries that make studying stress-free.