When can a firm outsource its functions, and what must be ensured?

• A. Whenever a client requests it, regardless of FAIS.
• B. Only for core activities, with no oversight required.
• C. When needed for efficiency; the outsource provider must comply with FAIS and maintain appropriate controls and oversight.
• D. Only if the client pays additional fees.

Answer: (C)

Outsourcing is permissible when it helps the firm operate more efficiently or effectively, but the firm remains fully responsible for ensuring FAIS compliance for the outsourced activities. The outsource provider must itself meet FAIS requirements and the arrangement must include robust governance: appropriate controls, ongoing oversight, clear accountability, and safeguards for clients. This means ensuring proper disclosure of who handles what, solid record-keeping, data security, conflict management, and that the provider has suitable risk management and, where applicable, professional indemnity coverage. The firm cannot delegate its regulatory duties; it must supervise and manage the outsourced function to protect clients’ interests. The other options miss these regulatory safeguards or rely on client demands or fees rather than sound governance and compliance.