The need to comply with qualification, regulatory examination (RE) and experience requirements is not new to FSPs, Key Individuals (KIs) and Representatives (Reps).
In this article we focus on the changes to qualification, RE and experience requirements as well as some of the admin requirements that compel FSPs to establish training plans, maintain competence registers and implement policies and controls to ensure the responsibilities and functions of the FSP are performed appropriately.
As part of demonstrating competency, the general rule is that all FSPs, KIs and Reps must have a qualification. We know that:
- New entrants into the industry (i.e. joining after 1 January 2010) need to obtain a full qualification which is acceptable to the Registrar. They must complete their qualification by 30 June after expiry of 72 months from their date of first appointment (DOFA) and until they do, they need to work under supervision.
- Individuals approved prior to 1 January 2010, are deemed to meet the requirements but only in respect of the areas for which they were authorised or appointed to perform financial services.
Any changes or additions to a licence of an FSP, KI or appointment of a Rep, after the commencement date of 1 April 2018, the new requirements will have to be met.
When reviewing acceptable qualifications, the Registrar will determine if the qualification provides the relevant knowledge and skills necessary for the KI and Rep to fulfil the responsibilities under the Act.
There are two instances where these qualification requirements do not apply:
- Where FSPs, KIs and Reps render financial services only iro Long-term Insurance subcategory A and/or Friendly Society Benefits, and/or
- Where Reps are appointed to perform “execution of sales” only. In this case, Reps must meet a minimum qualification of Grade 12 National Certificate or equivalent.
In addition to needing an acceptable qualification, a KI and Rep must pass the Regulatory Examination before such person can be approved or appointed.
The Board Notice includes a table that sets out which exams must be written for each Category of FSP (see Table A below). According to this, KIs need to write both the Rep and the KI exam, as it is a requirement for a KI to have adequate experience to manage or oversee the rendering of a particular financial service for which it is approved. However, there appears to be contradictory views in the industry. We checked with the FSB and they confirmed that where a KI is also an appointed Rep, then such person will have to successfully pass both RE1 and RE5 exams.
The exemption that applies in respect of qualifications (as set out above) also applies to RE exams. So, where a Category I FSP renders financial services only in respect of Long-term Insurance Subcategory A and/or Friendly Society Benefits and/or the Rep performs execution of sales only, they do not need to write the RE exams.
The fit and proper requirements stipulate that FSPs and Reps need adequate experience in respect of the particular financial product and category of FSP in which they provide a service and for which they are authorised. The minimum experience requirements for products range from six months to three years.
To view the full list of minimum experience requirements for Reps rendering advice and intermediary services click here. This requirement essentially says that anyone without the minimum experience, must spend time under supervision in an FSP in order to gain that minimum required experience. There is no exception.
This minimum experience requirement also extends to KIs, who must have at least one years’ experience in the management and oversight of the specific category before they can be appointed in that role.
Although not a ‘new’ concept, the Registrar has specifically included a section dealing with when the experience of an FSP, KI and Rep will lapse. If an FSP or Rep has not rendered the particular financial service iro a particular financial product relevant to a particular category of FSP for a period of 5 consecutive years, the experience will lapse. This means a person will have to obtain the experience again in order to meet the fit and proper requirement. Similarly, the experience of a KI will lapse if the KI has not managed or overseen a specific financial service relating to a particular category of FSP for a period of 5 consecutive years. It will, therefore, be important for FSPs to be able to show the required ongoing experience gained which is defined as, “continuous practical working experience that entails the active and on-going gaining of knowledge, skills and expertise …”.
It is important that FSPs maintain a competence register in order to track compliance with the relevant requirements and to provide proof to the Registrar, if requested to do so.
Click here to read the Board Notice 194 of 2017, setting out the determination of the Fit and Proper Requirements for Financial Service Providers.