Draft amendments to the Fit and Proper Requirements

The Financial Sector Conduct Authority (FSCA) recently proposed amendments to the Determination of Fit and Proper Requirements which is intended to take effect early 2021.

According to the statement supporting the proposed amendments, the main purpose of these amendments is to update the Determination in order to make provision to limit the need for further exemptions, to update incorrect references and to ensure that the Determination is more easily understood and interpreted.

The proposed amendments include –

1. definition of “CPD”: The aim of the amendment is to clarify that this definition has the same meaning as the definition of “continuous professional development” in section 1(1) of the FAIS Act. The further aim is to reiterate that the FAIS Act and the Determination must be read in conjunction with each other.
2. the definition of “CPD activity”: The purpose of the amendment is to update the Determination to incorporate the exemption that was granted to members of foreign professional bodies from the CPD requirements (FSCA FAIS Notice 35 of 2019). The effect of this amendment is therefore to extend this definition which is currently limited to activities accredited by professional bodies that are SAQA recognised to also include CPD activities recognised or approved by a foreign professional body.
3. the definition of “foreign professional body”: This is a consequential amendment of the amendment to the definition of “CPD activity”.
4. section 12A: The provision relating to execution of sales has been removed from section 22(b)(ii) and has been inserted into Part 1 of Chapter 3. This amendment seeks to provide clarification as to the applicability of the relevant competence requirements in circumstances where only execution of sales is performed by representatives. The content of the provision has remained unchanged.
5. deletion of section 13(6): in order to align the requirements of section 13(5) with principle-based supervision, the FSCA has deleted the requirement to prescribe the manner in which a financial services provider must comply with section 13(5).
6. section 22: in accordance with subparagraph (d) above, the provision relating to the performance of execution of sales has been deleted from this section. The requirements set out in section 22(b)(ii)(bb) has been moved to Chapter 5 dealing with Operational Ability.
7. section 24(2)(c) and (d): the FSCA has encountered circumstances where subjects that are included in a qualification have a different name, but are the same as, or similar to, the subjects that appear on the Appropriate Subject List in Table 1 in Annexure Two of the Determination. As it is impossible to list all possible subjects, the amendment seeks to ensure that the FSCA is empowered to recognise qualifications where the subject names differ from those listed in the Appropriate Subject List but are in nature the same or similar to the subjects so listed.
8. the aim of the amendment to sections 25 and 28 is to correct the cross-referencing to the newly inserted section 12A relating to the execution of sales.
9. The aim of the amendment to section 29 is to correct a technical error.
10. section 36A: as per subparagraph (f) above, this section inserts the requirements relating to execution of sales in Chapter 5, as the requirements directly relate to operational ability requirements. The content of the provision has remained unchanged.
11. Correction of a technical error in section 46, the intention was that the provision should refer to both subsections (i) and (ii).
12. sections 52(9) and (11A): The transitional provisions do not make provision for the circumstances as set out in the newly inserted section 11A. This amendment aims to do so.
13. Task 10 of Table 1 in Annexure 5: this amendment seeks to reduce the knowledge required in respect of the FIC Act and Money Laundering and Terrorist Financing control regulations for purposes of the regulatory examinations. The FSCA is of the view that the knowledge, as indicated in the amendment, is sufficient.

According to the FSCA, the impact of these amendments on FSPs and their representatives is expected to be minimal.

Interested parties are invited to submit comments on the draft amendments to the Determination of Fit and Proper Requirements to the FSCA using the Submission Template by 19 February 2021 at FSCA.RFDStandards@fsca.co.za

To read the related articles, click on the links below:

• Draft Amendments to the Determination of Fit and Proper Requirements
• To read the Statement in support of the draft Amendments
• To download the Submission Template