The changing FAIS Requirement landscape

14 May 2009 Gareth Stokes
Gareth Stokes, FAnews Online Editor

Gareth Stokes, FAnews Online Editor

The financial services industry is continually changing. With effect 31 December 2008 financial services providers, key individuals and representatives have to comply with new Fit and Proper Requirements as introduced by the Financial Services Board (FSB). FAnews Online attended a presentation by the Insurance Institute of South Africa (IISA) to find out how the industry was gearing up to handle the administrative challenges. IISA chief executive, David Harpur, said preparations were well underway for the first batch of FAIS Regulatory Level 1 and FAIS Regulatory Level 2 exams, which would probably be administered from 2010.

The new Fit and Proper Requirements apply to representatives and key individuals employed in regulatory roles. According to IISA training and education manager, Charmaine Kock, the financial service industry faces a stringent FAIS Requirement implementation.

Understanding the new requirements

The core requirement remains a relevant full qualification. In addition, all representatives and key individuals will have to pass the Regulatory Exam Level 1. There are four Level 1 exams. One is applicable to representatives while the rest are specific to key individuals based on their categories: 1, 2 or 3. “This exam covers your responsibility as a representative or a key individual in the ambit of the FAIS act,” said Kock. The Regulatory Exam Level 1 deals with making sure a company is compliant, that compliance officers report on time and that anti money laundering and FICA requirements are met.

Where necessary, employees with a regulatory role would also have to complete the Regulatory Exam Level 2. There are a number of exams in this area, including papers covering every possible long-term product category. In the short-term insurance area there are two papers – one for personal lines and one for commercial lines. Kock says the short-term insurance papers cover the short-term insurance process. “Our focus was on what everybody needs to know,” said Kock. The requirement of Continuing Professional Development (CPD) still applies. This ensures that representatives and key individuals stay up to date with what is happening in their industry, particularly in the fields in which they are licensed.

The deadlines are looming

Representatives and key individuals already employed in the industry – and who have been licensed since 2004 – have to complete their 30/60 credits by 31 December 2009. Alternatively they need a full qualification by the end of this year. Regulatory Level 1 will have to be completed by everyone in a regulatory role whether as representative or key individual. Those who have been in the industry since 2004 must complete this exam by 31 December 2011 and, where required, the Regulatory Level 2 by 31 December 2013. CPD points are calculated on a three year cycle from the date of completion of all Fit and Proper requirements, always ending on 31 December of a particular year.

New entrants to a regulatory role have to complete Regulatory Level 1 within two years of appointment to the role. Counting from first date of employment (or appointment) they must complete a full qualification within five years. Where required the Regulatory Level 2 exam must be completed within six years. CPD begins once all other requirements are met. These new employees (appointees) must work under supervision until such time as all regulatory requirements are met too. Kock says these functions would occur in the normal operations of a business – but recommended that companies “document [the supervision processes] and have them on record for the FSB.”

As easy as “A,” “B,” “C”

To find out where you are in the process you need to complete three steps. First, establish what qualification you already have. Second, determine for which product categories you are licensed. And finally, have a look at the qualifications and categories to determine what you require in terms of exemptions and exams.

To assist in this regard the FSB publishes a qualifications list via Board Notice 105 of 2008. This list is available for download on the FSB website ( and will be updated on a quarterly basis. Qualifications were split into two categories, generic and specific. To qualify with a generic qualification you must have three relevant subjects, with one taken to third year level. Individuals with specific qualifications can qualify for exemptions from certain FAIS Regulatory Level 2 exams. Kock reminded the audience that such exemptions had to be applied for using an FSB form. She also warned that people could run into problems if they decided to change categories at a future date, having applied for specialist exemptions specific to product categories.

It’s still early days. The FSB is looking at five proposed examining bodies short-listed from industry associations and professional bodies. Kock says the chosen body will be responsible for the setting of exams, implementation functions around the exams and the reporting of the results to the FSB. Provision of study material and other support for learners will be open to free market forces.

Editor’s thoughts:
After listening to the speakers invited by the IISA we felt a bit overwhelmed by the complexity of Fit and Proper Requirements compliance. Making sure that your staff ‘qualifications’ are in order looks like a full time job! Do you understand the new Fit and Proper Requirements as they apply to representatives and key individuals with regulatory roles? Add your comments below, or send them to [email protected]


Added by D, 18 May 2009
I fully understand the negativity displayed amongst so many that have been 'ripped off' by so called training providers - but if you do your homework there are some genuine people out there willing to make the road to 'fit and proper' not only a pleasant experience but a great learning curve.
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Added by J, 14 May 2009
""Do you understand the new Fit and Proper Requirements as they apply to representatives and key individuals with regulatory roles?... "" Sorry to say but most of these previous Exams and questions tell me nothing about my work I do and the field I do my bussiness in, its a money making and time wasting scheme...??,
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Added by Fedup, 14 May 2009
Agreed J. I would like to see a regulatory body that can actually add value and not just create jobs for people because our government doesn't know how to create jobs in any constructive way. Regulations are tabled and enforced by individuals who have never worked with clients in the industry or have lost touch with reality. They merely provide obstacles and cost to do business and barriers to entry. Why not think tank with a cross section of the top guys in the field and structure something realistic that we can all call our own and actualy implement realistically. Work smarter...not harder. Come on guys, nobody is happy with this offering, get our buy in on something worth while and you will get our support...!!!
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