Guidelines on Reporting Duties of Financial Service Providers

1 Reporting Duties of Financial Services Providers Guidelines FINANCIAL SERVICES AUTHORITY Bois De Rose Avenue P.O. Box 991 Victoria Mahé République of Seychelles Tel: +248 4380800 Fax: +248 4380888 Website: www.fsaseychelles.sc Email: enquries@fsaseychelles.sc Version: 15th May 2025

2 Table of Contents

1. INTRODUCTION.....................................................................................................................................3
2. SCOPE....................................................................................................................................................4
3. CONTENT OF THE BI-ANNUAL REPORT.................................................................................................5
4. FORM OF BI-ANNUAL REPORT..............................................................................................................9
5. DECLARATION .......................................................................................................................................9
6. REQUEST FOR INFORMATION...............................................................................................................9 ANNEX 1..............................................................................................................................................10

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1. INTRODUCTION 1.1 The Financial Services Authority, (“FSA”) as the Competent Authority in respect of entities specified in Part B of the Schedule of the Financial Consumer Protection Act 2022 (“the Act”), is issuing these guidelines to provide guidance to regulated or licensed financial service providers in submitting their bi-annual report to the FSA in accordance with section 8 of the Act. As per the Act, section 8(1) Every financial services provider shall submit a bi-annual report, approved by its Board of Directors where applicable, to the Competent Authority on the policies adopted with respect to financial consumer protection, including- (a) the measures taken to monitor compliance with policies; (b) financial education activities; (c) information on the number, type and conclusion of disputes of the financial consumers handled internally; (d) the activities of agents or third parties acting on behalf of the financial services provider; and (e) any monitoring activity undertaken over such entities. 1.2 Financial services and financial products have a significant impact on a country’s financial system, and whose existence is dependent on the interaction between consumers and financial service providers, thereby, making financial consumer protection an important factor in the regulation of the financial services industry. 1.3 The main challenges faced by consumers within the financial services industry include but are not limited to: (a) Lack of adequate and appropriate information to allow consumers to make an informed decision and prevent misselling of products; (b) Use of aggressive practices which are used to target vulnerable consumers; (c) Lack of unbiased advice for investors; (d) Lack of thorough due diligence on third party providers; (e) Aggressive charging models and fee structures; (f) Technology-driven risks to consumer protection; (g) The impact of shifting business models. (h) Lack of consumer awareness of FSPs’ use of third party or agents; (i) Lack of agent/third party proper training on consumer service; (j) Unfair contract terms; (k) Language barriers depending on the targeted audience; (l) Lack of information on the fees and charges related to each product on offer. 1.4 Reporting on consumer protection issues will therefore assist the FSA as a Competent Authority to understand the policies and practices that financial service providers are

4 implementing to ensure compliance with the Act, eliminate any flawed practices and promote good consumer protection principles within their business, therefore maintaining the integrity and promoting healthy business practices within the industry. 2. SCOPE 2.2 These guidelines aim to provide some guidance as to the contents of the report which financial service providers are required to submit to the FSA under the Act. 2.3 The report for the first half of the year shall be submitted by 15th July of each year and that for the second half of the year shall be submitted the by 15th January of the succeeding year. 2.4 These guidelines are applicable to the following financial service providers: (a) Licensees under the Insurance Act, 2008; (b) Licensees under the Mutual Fund and Hedge Fund Act, 2007; (c) Licensees under the Securities Act, 2008; (d) Licensees under the Hire Purchase and Credit Sales Act, 2014. (e) Licensees under the Virtual Asset Service Providers Act, 2024 2.5 Financial service providers are hereby cautioned that failure to effectively provide the report to the Authority, by or before the due date, will render the financial service provider liable to an administrative penalty not exceeding SCR10,000 and an additional penalty of SCR1,000 for each day or part thereof during which the contravention continues, which shall be imposed by the Authority. Note that a report will not be deemed completed if it does not contain the above information. Failing to either submit a report or submission of an incomplete report provider will amount to a contravention of the Act for which the Authority shall reserve the right to enforce the administrative penalty. Note that a report will not be deemed completed if it does not contain the information required under section 3 of these guidelines. Should the report be deemed incomplete or should the content of the report be considered unsatisfactory by the Authority, the financial service provider will be seen as being in contravention of the Act and the Authority shall enforce the administrative penalty. 2.6 The format of the report shall remain at the discretion of the financial service provider in consideration of the requirements of the Act and these guidelines. 2.7 The report will differ from one business to another depending on the size, nature of the activities, type of financial consumers that services are being offered to and structure of the business, however, the minimum contents, as specified in the Act and depicted in these guidelines, should be addressed within the report.

5 THE FSA EMPHASIZES THAT THE CONTENTS OF THIS GUIDELINES ARE PROVIDED AS GUIDANCE AND IS NOT INTENDED TO, NOR SHOULD BE CONSTRUED AS, AN EXHAUSTIVE TREATMENT OF THE SUBJECT. 3. CONTENT OF THE BI-ANNUAL REPORT 3.1 Introduction 3.1.1 The introductory part of the report should contain an executive summary providing the following information: (a) The type of licence held by the financial service provider; (b) The customer base of the financial service provider, for example, the financial service provider should state whether their clients are individuals or companies and whether they are direct or indirect clients; (c) The jurisdiction with which the financial service provider operates; (d) an overview of the products and services offered by the financial service provider; a brief description of each type of product should be included. (e) its vision, mission and core values. 3.2 Policies adopted with respect to financial consumer protection 3.2.1 Consumer protection is beneficial for both the consumers and the market as a whole. Consumers need to be able to obtain adequate and accurate information about the products and services they purchase. Having clear and concise policies orientated towards consumer protection is crucial to enable consumers to make the most informed decision when opting for a product or service. 3.2.2 The report should provide an overview and description of any internal policy that a financial service provider would have in place to ensure effective consumer protection within its business. 3.2.3 Other than any general or specialist policies that the financial service provider should have in place, the report should include the following mandatory policies as per the Act: (a) Confidentiality Policy - to ensure protection of non-public consumer information, more specifically to provide for the expectation as to the manner in which a financial service provider, its employees, agents or other relevant parties acting on its behalf, holds, treats and uses information received from actual or potential clients whom intend to or partake in the products or services offered; (b) Conflict of interest Policy – to ensure that there is no collusion or unfair practices in terms of arrangements;

6 (c) Sales and remuneration policy - to ensure that any incentives to staff, management, agents or third-party service providers discourage unethical consumer treatment or over-indebtedness; (d) Privacy Policy - in terms of disclosure of any consumer information received from consumers as part of any contractual arrangement that a consumer intends to enter into or enters into with a financial service provider. 3.2.4 Where a financial service provider does not have any of these policies in place, the necessary should be done to formulate and adopt such policies to ensure compliance with the Act. In such cases, financial service providers should indicate within the written report measures being taken to develop and implement these policies. 3.2.5 In the event that a financial service provider has any other policy which contains or consolidates the above polices, the financial service provider should indicate in their report the existence of that policy. 3.2.6 The financial service provider shall submit a copy of these policies along with the written report. If the financial service provider has previously submitted these policies to the FSA, it need not resubmit unless there has been any revision to these policies, or a new policy has been developed and implemented. This also needs to be indicated in the report. 3.3. The measures taken to monitor compliance with policies 3.3.1 The financial service provider should develop adequate monitoring tools and resources to monitor the effectiveness of any policy adopted with respect to financial consumer protection. 3.3.2 Any consumer protection policies in place should be reviewed periodically, in order to ensure that they conform where possible to the requirements of the Act and are practicable, responsive, and suitable for the company and the product and/or services which the financial service provider offers. 3.3.3 The report should therefore contain a description of the steps and processes that a financial service provider has taken or would put into place to ensure that the company’s policies and procedures relating to consumer protection are being monitored. The following information should therefore be included in the report: (a) details of the monitoring programme; (b) Performance indicators of the monitoring programme;

7 (c) person(s) responsible for implementation of the monitoring programme; (d) frequency of testing or review; (e) steps for remediation of any issues identified during the monitoring programme. 3.4 Financial education activities 3.4.1 The report should include a description of the financial education activities undertaken by the financial service provider, both internally to its employees, agents or third parties as well as the general public, actual, or potential consumers about its products or services, where appropriate. 3.4.2 Where the financial service provider offers any trainings on financial education and consumer protection to its employees, agents or third parties the report shall provide details on the training provided and to who the training was provided. 3.4.3 The report should include any financial education initiatives or financial literacy programmes embarked upon by the financial service provider, where appropriate. 3.4.4 The report should also contain a schedule of the financial education activities or trainings the financial service provider intends to undertake for that particular year. 3.5 Information on the number, type and conclusion of disputes of the financial consumers handled internally 3.5.1 One of the main considerations of the Act is the manner in which financial disputes are handled. The Act requires all financial service providers to have an effective complaints handling mechanism in place to ensure that financial consumer disputes are effectively redressed. 3.5.2 As such, the report should contain the following information: (a) the number of complaints received -for the report due on the 15th July, the number of complaints shall be for the period of 1st January to 30th June, whereas the report due on the 15th January shall provide the number of total complaints for the period of 1st July to 31st December; (b) the type of dispute- this would be the nature of the complaint for example some common types of disputes would include access to payment accounts, unfair claim outcomes, dissatisfaction with customers service, unauthorised transactions, investment fraud, use of ‘boiler room’ tactics, dissatisfaction with claimssettlements, System breakdown, loss of communication or communication breakdown between customer and Agent or third party etc.

8 (c) conclusion of the disputes- this would require a brief explanation of the outcome of the complaint and any remedy or action undertaken by the financial service provider. 3.5.3 This would require a description of the disputes or complaints received. 3.5.4 Where the financial services provider keeps a complaints log or register, an extract of the complaint log or register may be provided, so long as it sufficiently captures the above information. 3.6 The activities of agents or third parties acting on behalf of the financial services providers 3.6.1 The Act captures the activities of any agent or third parties acting on behalf of the financial services provider through agency and/or outsourced service provider agreements. Agents and third parties interacting either directly or indirectly with consumers can have an important impact on consumer protection. The report should therefore provide for the extent and limits of activities of any agent or third party acting on behalf of the financial service provider. 3.7 Any monitoring activity over such agents/third parties 3.7.1 Section 7 of the Act provides that a financial services provider shall ensure that its agents or a third party acting on its behalf complies with the provisions of the Act and shall put in place adequate monitoring mechanisms to oversee the implementation of the Act by its agent or a third party acting on its behalf. 3.7.2 For the purposes of the Act, agents or third parties would include any person to which the financial services provider has transferred one or more of its services to, or parts thereof. 3.7.3 In general, the same standards of quality, disclosure, fairness applicable to services delivered directly by the financial service provider should apply when services are delivered by its agents or any third party. The report therefore should contain a description as to the manner in which the financial service provider ensures that it has in place adequate monitoring tools and resources in place to monitor and ensure that the activities of its agents and any third party does not exceed that which it is permitted to do so. 3.7.4 It is therefore important to ensure that: (a) Agents or other third parties are adequately trained and qualified to perform any consumer-interaction functions agreed in the agency or third party agreement. (b) Agents or other third parties do not charge unauthorized fees to consumers.

9 (c) Agents or third parties do not engage in activities that could harm consumers (for example, creating fake transactions to withdraw cash from a consumers’ accounts, asking for a consumer’s PIN or password). (d) The financial or other incentives offered to agents or third parties do not encourage behaviour that goes against the principles of product suitability and fair treatment (such as encouraging consumers to acquire a product or service that generates higher fees for the agent but is not in the consumer’s best interest). (e) Disclosure requirements are complied with (posting of charges and fees at the agent establishment, disclosing different providers of bundled services). (f) Internal dispute resolution mechanisms should not be hindered where agents or third parties are utilized. (g) Agents or third parties do not misuse customer data and information and comply with the confidentiality and data protection policies of the Financial Service Provider and that the data should be accessible to the financial service provider at all times. (h) Financial service providers should duly notify their customers of any changes with regards to agents or third parties acting on their behalf. (i) Agents or third parties disclose at the outset of any client interaction that they act on and are duly authorised to act on behalf of the Financial Service Provider. 4. FORM OF BI-ANNUAL REPORT Annex 1 to these guidelines provides the template for the bi-annual report, which all financial service providers must complete to provide the required information. 5. DECLARATION A person duly authorised to act on behalf of the financial service provider shall sign and date the report. 6. REQUEST FOR INFORMATION The FSA may request any additional information from the financial service provider with regards to its report submitted to the Authority. Should the financial service provider fail to respond to the Authority’s request under section 9 of the Act, the financial service provider shall be liable to an administrative penalty provided for under the Act or subject to further enforcement action by the Competent Authority in accordance with the Act.

10 ANNEX 1 [NAME OF FINANICAL SERVICE PROVIDER] [TYPE OF LICENSE) BI-ANNUAL REPORT UNDER THE FINANCIAL CONSUMER PROTECTION ACT [PERIOD OF SUBMISSION] Proposed structure and content of the report

1. TABLE OF CONTENTS
2. INTRODUCTION/EXECUTIVE SUMMARY – refer to point 3 of the guidelines.
3. POLICIES ADOPTED WITH RESPECT TO CONSUMER PROTECTION
4. CUSTOMER BASE OF THE FINANCIAL SERVICE PROVIDER (details of customer base provided)
5. THE JURISDICTION WITH WHICH THE FINANCIAL SERVICE PROVIDER OPERATES
6. OVERVIEW OF THE PRODUCTS AND SERVICES OFFERED BY THE FINANCIAL SERVICE PROVIDER
7. MEASURES TAKEN TO MONITOR COMPLIANCE WITH POLICIES
8. FINANCIAL EDUCATION ACTIVITIES (internal and external trainings provided)
9. DISPUTES
10. ACTIVITIES OF AGENTS OT THIRD PARTIES (e.g. agents/sub-agents)
11. MONITORING OF AGENTS OR THIRD PARTIES ACTING ON BEHALF OF THE FINANCIAL SERVICES PROVIDERS
12. CONCLUSION
13. DECLARATION AND SIGNATURE PAGE