FSB: FAIS Examination exemptions

The Financial Services Board has granted a temporary exemption from having to write the Level 1 regulatory examination by 30 June 2012, to the following categories of Financial Service Providers (FSPs):

a) A representative who is employed or mandated by an authorised financial services provider to render financial services in respect of a policy as defined in paragraph 1 of the Notice only.

b) A financial services provider, its key individuals and representatives who render financial services to or for or on behalf of a private equity fund as defined in paragraph 1 of the Notice only.

c) A financial services provider, its key individuals and representatives who render financial services as an underwriting manager as defined in regulation 6.1 of the Regulations under the Long-term Insurance Act, 1998, and the Regulations under the Short-term Insurance Act, 1998, only.

The purpose of the exemption is to address certain difficulties currently being experienced by the abovementioned persons. It should be noted that certain conditions do apply to the exemption.

· With regards to those FSPs in category (a) above, the Registrar is satisfied that reasonable grounds exist to distinguish between persons that render financial services in respect of basic and easy to understand financial products and persons that render financial services in respect of more complex financial products in order to create an enabling environment for increased access to financial services and to prevent the creation of entry barriers into the industry. These will have to write a specific Level 1 examination that will demonstrate that they have adequate knowledge and understanding of the regulatory environment in which financial services are being rendered. This is because the protection of consumers remains an important consideration for the Registrar when contemplating any special dispensation. This exam will, however, be at a level that will not result in the exclusion and removal from the distribution and advice arena of thousands of representatives who are currently providing an essential service at the lower end of the market, encouraging savings and the purchase of risk protection.

· The exemption also deals with the problem relating to persons rendering financial services in respect of private equity funds only, as mentioned in category (b). Such persons will have to comply with a specific code of conduct that is in the process of being developed. This code of conduct will place more onerous requirements on these representatives when rendering financial services to or on behalf of private equity funds. Due to the fact that those persons will be subject to a specific code of conduct the Registrar intends to develop a specific Level 1 examination to test their knowledge and understanding of the requirements that they must adhere to when rendering financial services to or on behalf of private equity funds.

· Moreover, the exemption addresses the problem relating to persons who render services as underwriting managers. The Registrar is currently investigating the relevance and effectiveness of the requirements currently applicable to underwriting mangers under the Financial Advisory and Intermediary Services Act, 2002 (FAIS Act). Such investigation may result in an amendment to the requirements applicable to underwriting mangers which in turn may necessitate a specific examination.

It is critically important to note that the exemption only applies to specific persons when they render specific financial services in respect of specific financial products for or on behalf of specific clients. FSPs and their representatives should therefore ensure that the exemption does indeed apply to them in order to avoid being in a position that they are not able to render financial services until they have successfully completed the current applicable Level 1 examination.

The FSB will advise, as soon as is practicable, the dates by which persons must write the specific Level 1 examination. The exemption will fall away if FSPs do not successfully complete the specific Level 1 examination by the date determined by the Registrar.

Please note that the exemption is subject to, inter alia, the condition that a person must register for the exemption on or before 30 June 2012 in the form and manner prescribed by the Registrar. The application forms for the exemption are available on the FSB’s website at www.fsb.co.za. The completed application form and annexures must be e-mailed to the following address: [email protected]. The annexures to the application form may not be converted to a PDF or Word format and must be submitted in its original format, namely an Excel spreadsheet.