Deciding to employ a Representative under supervision can be both a rewarding and fulfilling experience for a financial service provider (FSP). On the other hand, due to its complexity relating to procedural requirements and recordkeeping, it can also feel like a daunting undertaking. But fear not – in this article, we unravel its intricacies by answering your frequently asked questions.
Congratulations on your decision to supervise a Representative! Whether you’re expanding your business horizons by employing more staff or you want to nurture talent within your team, an FSP can benefit greatly from this endeavour. Even so, trying to navigate this task can leave you feeling overwhelmed.
Here, we cut through the confusion by answering some of your FAQs regarding Representatives under supervision.
Q: When should a Representative be placed under supervision?
A: If you appoint someone as a Representative who doesn’t fully meet the Fit and Proper requirements outlined in Board Notice 194 of 2017, they’ll need to operate under supervision until all requirements are fulfilled. These include:
- Holding a recognised qualification listed on the Financial Sector Conduct Authority’s (FSCA) register.
- Passing the Regulatory Exam for Representatives (RE 5).
- Completing relevant Class of Business (COB) training.
- The supervisee must have the relevant experience in the category of financial products they are registered for.
Q: What is required to place a Representative under supervision? Do I need a written agreement?
A: Yes – before a Representative can start working under supervision, there needs to be a written supervision agreement between the FSP and the supervisee. This agreement, as outlined in Section 1 of Condition 3 of the FSCA FAIS Notice 86 of 2018, may be part of another relevant agreement or the FSP’s performance management process. Additionally, as stated in Section 2 of Condition 3, the supervision agreement must, among other things, clearly identify the supervisor and other relevant supervision information like product categories that are being supervised and the duties and responsibilities of the supervisor and supervised Representative.
Q: How intense should this supervision process be? Do I have to supervise the individual’s every move, or can I take a more hands-off approach?
A: Here, there’s no one-size-fits-all answer. The intensity of supervision varies depending on factors such as:
- The nature, scale and complexity of the financial services and products involved.
- The assessed competency level of the supervisee.
- The risks to clients and the FSP.
Taking these factors into account, the FSP must determine the supervision arrangement and the level of supervision intensity. Supervisors should regularly review the supervision arrangement. Is the agreement still effective and adequate? It’s essential to establish criteria and procedures to assess whether a supervised Representative can work under reduced supervision.
Q: Who can fulfil the role of a supervisor?
A: Individuals eligible to fulfil the role of a supervisor include:
- An approved Key Individual of the FSP, approved for the relevant Classes of Business.
- A Representative who has met the Fit and Proper requirements. This individual must also be approved to provide advice and intermediary services for the specific category and subcategory of products for which the supervised Representative is to be placed under supervision for.
Q: What are the responsibilities of a supervisor?
A: A supervisor plays a crucial role in guiding and overseeing Representatives. Some of their key duties include:
- Ensuring compliance with the supervision agreement.
- Mentoring and coaching in respect of the financial services and financial products.
- Reviewing and assessing the progress of the supervised Representative at regular intervals, recording observations and areas for development.
- Keeping records relating to development and training, supervision activities, assessments and decisions to reduce the intensity of the supervision.
Q: And what about the supervised Representative? What are their responsibilities?
A: They must do the following:
- Adhere to the requirements outlined in the supervision agreement.
- Disclose to clients that they are acting under supervision.
- Actively pursue the completion of outstanding Fit and Proper requirements within the prescribed time limits.
Q: Is there a limit on how long a Representative can work under supervision?
A: Representatives cannot remain under supervision indefinitely. The maximum duration for rendering services under supervision is six years, which starts on the Representative’s date of first appointment (DOFA). During this period, Representatives must fulfil their Fit and Proper requirements and remain listed as a Representative under supervision on the FSP’s register. Each Fit and Proper requirement also has its own deadline based on the Representative’s DOFA, some of which include:
- Class of Business: One year
- RE 5: Two years
- Recognised qualification: Six years
Q: How do I determine someone’s DOFA?
A: You can find this information on the individual’s DOFA (date of first appointment) report, which can be obtained from the FSCA. It’s important to note two things: Firstly, DOFA, or “appointment date”, signifies when a Representative was initially appointed by any FSP to offer financial services within a specific category or sub-category. This date remains consistent even if the individual changes FSPs or temporarily exits the industry. Secondly, you can’t directly request someone’s DOFA from the FSCA. They will only disclose this information to a third party if they have received permission from the individual to do so.
Q: If the Representative holds a recognised qualification and has completed their RE 5, do I still need to place them under supervision?
A: Yes, they must still work under supervision. This is necessary for them to gain the required experience pertaining to the specific licence sub-categories they seek approval for. They must also complete the required Class of Business, if applicable.
Q: How should I determine the appropriate level of supervision for a Representative under supervision?
A: The supervision agreement should outline the criteria and procedures used to assess whether a Representative can work under a reduced level of supervision. Section (2)(e)(iii) of Condition 3 in FSCA FAIS Notice 86 of 2018 states that this process should be clearly defined. Additionally, Condition 7 of the Notice adds that the FSP must determine the appropriate level of supervision intensity for its Representatives. This means the FSP should establish different supervision levels and specify the methods, tools and criteria used to decide when supervision intensity can be reduced. While there is no fixed number of supervision levels required, an FSP should consider at least two levels to allow for a structured approach. Ultimately, the supervision framework should align with the FSP’s business model and risk management approach.
Q: What should I do if the supervised Representative I’ve hired isn’t meeting expectations.
A: A supervisor can start by adjusting the supervision training plan to focus on areas that need improvement. Discussions between the Representative and supervisor should be documented and signed off by both parties. Regular check-in meetings are crucial to monitor progress. What’s more, regular meetings make it easier for both parties to have honest discussions about areas of concerns and find solutions together. Targeted training should be provided to address specific concerns. For instance, if time management is an issue, consider offering a course on the topic.
If a supervisor anticipates a Representative won’t meet a deadline, such as completing a COB, they can be removed from the Representative Register beforehand to avoid debarment. They can be added back once the requirement is met. Alternatively, Representatives can apply for exemptions from the FSCA for qualification or regulatory exams. If an exemption isn’t approved by the deadline, the Representative can be removed from the Register until the requirement is fulfilled or the exemption is granted. They can be added to the Register again thereafter.