Formal training is not only necessary to operate as a financial services provider (FSP), key individual or representative, but it should also be documented, as a recent determination has highlighted.
In the determination A J Valjee v FSCA, the Financial Services Tribunal dismissed an application for authorisation as an FSP. This was because the applicant, an accountant with a Certified Financial Planner (CFP) designation, could not provide evidence of relevant experience or training in the financial services industry. This applied for (a) a particular financial product and (b) in the particular category of FSP. He therefore failed to satisfy the requirements of Section 15(1) of Board Notice 194 of 2017.
This Board Notice defines “experience” as including:
The continuous practical working experience that entails the active and on-going gaining of knowledge, skills and expertise relevant to a particular category of FSP, particular financial service and, where applicable, a financial product that was in relation to an FSP and representative, gained through the rendering of a particular financial service in respect of a particular category of FSP and a particular financial product.
It also states that experience will lapse after five years if an FSP, key individual or representative has not rendered or managed the particular financial service in respect of a particular financial product category.
The applicant’s approach was that his qualifications as an accountant and CFP meant he qualified for an FSP licence. He claimed he had experience in rendering advice and intermediary services in an unsupervised capacity to his accounting clients, in consultation with their own independent financial advisors. He provided ongoing verbal communication to his clients, which did not amount to advice as envisaged in the Financial Advisory and Intermediary Services Act, 37 of 2002 (FAIS). For this, he did not receive any fees or commission. He also claimed that he only provided this service to obtain training and experience.
The FSCA requested the applicant to provide a reference letter from one of the independent financial advisors with whom he consulted to confirm his experience. Instead, he provided letters from two clients, which only confirmed that he provided them with ordinary accounting services and financial plans. The letters did not refer to joint consultations with the clients’ financial advisors or confirm experience from the advisors.
When it became clear the applicant could not provide documentary evidence, he relied on his professional qualifications as fulfilling the experience requirements of the FAIS Act.
In the determination, it was also noted that there was no formal agreement for training and supervision to obtain the necessary experience. For all these reasons, the application was declined.
Supervision
In line with Condition 3 of the FSCA’s FAIS Notice 86 of 2018, supervision is a formal process. It requires a contractual agreement between a supervisor and supervisee, whereby the necessary FAIS Act experience is obtained and recorded. The objective is to ensure that representatives and those who become key individuals are competent to provide financial services.
A proper supervision process entails a supervisor overseeing a supervisee’s advice and client transactions. The training received and experience obtained must be recorded. This is important, as the FSCA or other interested party, such as a product provider or other FSP, may request a supervisee’s training records.
In line with Condition 2 of the FAIS Notice, a working relationship should exist between a supervisor and a supervisee, so the supervisor can provide oversight and enable the transfer of skills.
Supervisees must possess a recognised qualification and complete the relevant regulatory examination within two years of being appointed, as well as product specific training and the relevant class of business training for the applicable financial product within 12 months of being appointed.
Supervisors must also meet the minimum prescribed competency requirements and possess the relevant coaching and assessment skills to provide supervision.
Maintaining records of training and experience is critical not just to comply with the FAIS Act, but also to monitor supervisees’ progress. Any recognised gaps in knowledge, skills and competence around financial services and/or financial products can then be addressed.
As supervision is the foundation for growing a career in the financial services industry, it is essential to do it in line with all the regulatory requirements.
If you need guidance as a supervisor or supervisee, please contact your Masthead regional office or compliance officer.