Transport operators face R1 million fine!

Transport operators face R1 million fine!

No, this is no April Fool’s joke. South African transport operators could be liable for a fine of up to R1 million and/or imprisonment for up to 10 years!

The fine and imprisonment pertain to the Financial Advisory and Intermediary Services (FAIS) Act. According to the South African Insurance Association (SAIA), a lack of compliance with this Act can result in these crippling – and quite terrifying – penalties.

According to the SAIA, many transport operators are still not complying with the Act, which came into effect in September 2004. Financial providers, who may have gotten away with non-compliance before, will now face hefty fines including the possibility of the withdrawal of the provider’s licence or debarment of a representative.

The purpose of the FAIS Act is to regulate the activities of all financial service providers who give advice, provide intermediary services or offer certain financial products to clients. The Act requires that such providers are licensed and that professional conduct be controlled through specific enforcement measures.

The FAIS Act not only applies to specific financial service providers. Anybody that offers financial advice or provides an intermediary service to a client on any transaction that has to do with a financial product falls under the umbrella of compliance – including, of course, transport operators.

It’s common practice for freight operators to pass on additional insurance to customers. The operator collects the insurance premium from his customer and remits this premium to the broker or insurer.

According to the SAIA, the transport operator is therefore acting as an intermediary and would need to register as a financial services provider. These operators have to comply with the FAIS Act and failure to do so will result in the heavy penalties.

The Road Freight Association (RFA) would like to point out that operators are actually allowed to recover their costs from customers as they can claim a “bailee’s” fee or administrative fee for their increased liability.

You can still limit your liability and charge accordingly but it’s recommended that you amend your contacts for that reason. However, the RFA warns that, if you are not a registered financial services provider, this additional amount cannot be displayed on invoices to customers or referred to in contracts as insurance.

In the meantime, the RFA has urged providers to contact insurance brokers for more information and guidance on how to comply. The RFA also intends applying for exemptions for operators – but, for the time being, transport operators definitely need to comply or face the possibility of the R1 million fine and 10 years in jail.

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Focus on Transport

FOCUS on Transport and Logistics is the oldest and most respected transport and logistics publication in southern Africa.
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