Financial services regulator weighs in with yet another examination deadline

Gareth Stokes, FAnews Online Editor

There has been little news on the Regulatory Examination (RE) front since the regulator issued a no-nonsense 29 June communication reminding industry stakeholders that the 30 June 2012 RE Level I examination deadline was set in stone. On that occasion the

They also warned that tough steps would be taken against those who failed to comply. “We have repeatedly communicated that those who fail to attempt the examinations at least once by the 30 June deadline, face the possibility of not being able to conduct business any further, as per the FAIS Act,” they said. If we draw a line in the sand on 30 June 2012 there are, by our reckoning, four situations an intermediary might find themselves in…

Four regulatory examination “statuses”

The first is that you have sat and passed the level 1 RE prior to the 30 June 2012 deadline. In the second situation you will have unsuccessfully attempted the level 1 RE, but have time until 30 September to rewrite it. The third is the small group of advisers who have not attempted the examination and therefore face FSB censure. We expect many in this category to eventually leave the industry. The fourth and final category includes those individuals who are seeking an exemption from the level 1 RE, whether they have attempted it or not.

The FSB initially made allowance for FSPs and their representatives to apply the exemption (referred to in category four above) by 30 June 2012. But in a last minute announcement they gave affected parties an extra 15 days to apply. “Those that have neither attempted to write, nor applied for the exemption, have until the 15th of July 2012 to come forward and state their case to the registrar who will review each individual case and take a decision on the matter,” they said. “The Registrar will consider each application on its merits and take a decision accordingly”.

One has to be specific when dealing with the term “exemption” from a regulatory examination perspective. The exemption referred to above is covered in the rather obtuse Board Notice 102 of 2012 which identifies certain FSP employees who would be exempt from the exam, but have to write a more appropriate version of it at a later stage. After a couple of attempts at reading and re-reading BN 102 it occurred to us we were nowhere closer to understanding what category of FSP employee it applied to.

Exemption versus rewrite deadline

We asked Ian Middleton, managing director at Masthead Distribution Services, for clarity. “There are no distinguishing ‘job titles’ for the reps that qualify for the exemption, but they are likely to fall mainly under the tied sales forces of product providers, be reps under larger broker operations that specifically service the lower end of the market, or be employed by direct marketers,” he said.

And that brings us to the latest FSB communication on the RE matter, issued on Thursday, 13 February 2012. Their announcement: “We have today decided to extend the deadline by which persons that fall under the exemption previously granted by the FSB under Board Notice 61 of 2012 were required to successfully complete the first level regulatory examinations, from 30September 2012 to 31 March 2013”. The exemption under BN 61 is better explained as a rewrite deadline! In other words – if you attempted the exam before 30 June – you now have until 31 March 2013 to get through your rewrite.

Not a blanket exemption

Key individuals and their representatives should take note that the “exemption” referred to in BN 61 is not a blanket exemption. So the latest announcement is not an opportunity for individuals who made no attempt at the exam prior to the original cut-off date to remedy the situation. The FSB explains: “The extension of the 30 September 2012 deadline only applies to those persons who have already demonstrated their commitment to complete the regulatory examinations – those who have written the examinations at least once before 30June”.

It is not clear how aggressively the FSB will police the industry to prevent key individuals and representatives who did not make a first attempt at the exam before 30 June 2012 from taking a stab at it before the new rewrite deadline. But from a compliance point of view an individual who had not attempted the exam – whether they passed or failed – by 30 June should not be engaged in duties as a key individual or representative!

Editor’s thoughts: By the registrar’s reckoning there are thousands of key individuals and representatives that have not sat the first level regulatory examinations. And there are thousands more who have sat the exam but not passed. From a compliance perspective would you agree that there is a difference between someone who has sat level 1 RE but not passed it compared to someone who has not attempted the exam at all? Please add your comment below, or send it to gareth@fanews.co.za