Continuous professional development (CPD) keeps professionals at the cutting edge of development in their industry. The financial advice industry is no exception: Board Notice 194 of 2017 makes CPD a fit and proper requirement for key individuals, sole proprietors and representatives.
CPD is the process of lifelong learning by which you engage in activities that maintain and develop your abilities, skills and knowledge necessary for professional practice. Its objective is to keep one abreast of industry developments in a professional field where the landscape is constantly changing. CPD should therefore be viewed as a badge of professionalism.
Chapter 4 of Board Notice 194 of 2017 outlines the CPD requirements for key individuals, sole proprietors and representatives. FSCA Communication 2 of 2019 (FAIS) provides further guidance and includes frequently asked questions regarding CPD.
To ensure you meet the CPD requirements, it is essential to distinguish between the unofficial terms ‘regulatory CPD’ and ‘professional CPD’.
What qualifies as regulatory CPD?
The South African Qualification Authority (SAQA) recognises certain professional bodies that are authorised to evaluate CPD content and allocate a CPD hour-value to the material. These professional bodies are best placed to evaluate content, as their role is to establish professional standards for their specific industry.
CPD providers must submit their material to an approved body in their industry for evaluation to have an hour-value allocated to it. Regulatory CPD providers must also be accredited by a professional body.
CPD providers can then issue a CPD certificate to people who complete a CPD activity, provided that their attendance and participation can be verified. This certificate usually contains a certification number and can be used as proof of CPD.
The minimum CPD hours required per CPD cycle for FSPs, Key Individuals, and Representatives are[1]:
- 6 hours of CPD activities for a single subclass of business within a single class of business;
- 12 hours of CPD activities for more than one subclass of business within a single class of business; and
- 18 hours of CPD activities for more than one class of business.
What is professional CPD?
Members of recognised professions, such as lawyers, accountants, architects and engineers, have had professional CPD as a requirement for many years. The various professional bodies have traditionally managed this. In the financial planning environment this has also been the case. Members of industry associations such as the FPI, IISA and the actuarial society have had a good standing requirement for members to obtain professional CPD for many years, for example: members of the Financial Planning Institute who carry the Certified Financial Planner designation need 35 CPD hours per annum across a range of topics.
This professional CPD typically comprises verifiable and non-verifiable CPD. Verifiable CPD means attendees have attended a formal learning CPD activity and their identification could be objectively verified, for example through attendance registers. It could also be proved that they completed the CPD activity, for instance through completed assessments. The professional bodies allocate CPD hours for these verifiable CPD activities.
Non-verifiable CPD means an informal learning CPD activity for which no evidence of learning and/or completion exists. An example of this is professional reading. Members would then claim CPD for each hour of reading time.
Verifiable professional CPD only qualifies as regulatory CPD if a SAQA-approved professional body has allocated a CPD hour-value to the content. Not all professional bodies are SAQA-approved. This can be checked with SAQA and the industry body itself. This information is also usually provided on the various industry websites.
How to manage CPD in your FSP
Board Notice 194 of 2017 and FSCA Communication 2 of 2019 (FAIS) give specific and practical advice on managing CPD in your FSP. Specific guidance is given regarding the competence policies and competence registers that must be kept.
It would be difficult to comply with the general competence requirements without having proper policies, procedures, processes, systems and record keeping mechanisms in place. This is fundamental for continuous compliance with the competence requirements. Section 13 of Board Notice 194 of 2017 specifies the key aspects to consider to develop policies, procedures, processes and systems that will be robust and efficient to achieve the desired outcomes.
The consequences of non-compliance
Non-compliance with the CPD requirements can have serious consequences for key individuals, FSPs and representatives. FSCA communication 2 of 2019 (FAIS) provides examples of the consequences of non-compliance.
Board Notice 194 of 2017 states that CPD requirements must be met by the end of the CPD cycle (31 May of each year). Representatives who will clearly be unable to meet this deadline may be removed from the representative register and moved to an administrative role within your FSP. When they have met the requirements, they can be re-instated. Non-compliant representatives must be debarred if the deadline has already passed.
Removing representatives from the register may have consequences, as product providers can stop paying ongoing commissions if there is no alternative representative who can service the clients.
The consequences for a key individual or sole proprietor are more serious. If your FSP has only one key individual, this person cannot be removed from this role if he/she is not compliant, as the FSP must have a key individual at all times. A non-compliant key individual could therefore result in the FSCA suspending the FSP’s licence. In turn, this would affect all the representatives and administration staff of the FSP, as they would not be able to submit new business. Product providers will stop paying ongoing commission to the FSP and this will cause cash flow problems. Another key individual can be appointed, but this can take time. The consequences for a Sole Proprietor FSP are profoundly serious as it cannot appoint another Key Individual and non-compliance can only result in suspension of the license by the FSCA.
Careful management of the CPD requirements is therefore of paramount importance. This can only be effectively done with careful daily management of a competence register. The FSP or key individual is ultimately responsible for managing this requirement.
Reduction in CPD hours
CPD hours may be reduced pro-rata if a representative has been continuously absent from work due to maternity, paternity or adoption leave. This also applies in the case of long term illness or disability or having to care for a family member who has a long-term illness or disability.
The CPD hours can be reduced by using the formula: (X ÷ 12) x (12 – Y) = Z
where:
X = Number of annual required CPD hours
Y = Number of months absent from work in a particular CPD cycle
Z = Required pro rata CPD hours
Based on this formula, a representative who is booked off for six months due to illness only needs to complete half of his/her original CPD requirement.
A representative’s CPD hours may only be reduced for consecutive CPD cycles if the reason for absence commenced in one cycle and continued uninterrupted into the next cycle. This reduction may only be applied for a maximum period of three consecutive CPD cycles.
By engaging in CPD and meeting the deadlines, you remain in good standing and avoid the consequences of non-compliance. You also contribute to the overall professionalism of the financial services industry.
Earn CPD hours with Masthead
Masthead is a recognised CPD Provider and has made a number of seminars, webinars and online learning activities available on our Learning Centre platform. All CPD training completed via the platform will automatically be logged and you can add any of your other training records with the click of a button. Find out more here
Online CPD Package
Our online CPD Package gives access to over 150 CPD-approved online courses, newsletters, articles, podcasts and videos. Once signed up, you will be able to register for any of the CPD online learning activities and work towards achieving your CPD hours as set out in your CPD Training Plan. Get the package here
[1] Note the reduction of the minimum number of CPD hours applicable to the 2020/2021 CPD cycle:
-
4 ½ hours of CPD activities for a single subclass of business within a single class of business
-
9 hours of CPD activities for more than one subclass of business within a single class of business
-
13 ½ hours of CPD activities for more than one class of business.