Regulator takes steps to cool the exam pressure cooker!

14 July 2011 Gareth Stokes
Gareth Stokes, FAnews Online Editor

Gareth Stokes, FAnews Online Editor

On 12 July 2011 the Financial Services Board (FSB) issued FAIS Circular 7/2011 to advise industry stakeholders of a number of developments relating to the oft-debated regulatory examinations. The letter also attempts to explain away some of the concerns raised by financial intermediaries who have sat the RE I exam to date.

An impossible implementation deadline

The best news for all those industry realists out there is the softening of the 31 December 2011 exam deadline. “Insofar as the implementation of the regulatory examination is concerned, and the possible impact of the 31 December 2011 deadline on industry, [we] are in active and ongoing consultation, not only with industry representative bodies but also with other relevant industry players,” writes the FSB, before dropping an exam statistic bombshell. Their records show that only 11% of the candidates required to sit the RE I exam had done so by 30 June 2011, never mind the pass rate! (We’ve heard rumours as few as one in three have made the grade so far, though the regulator will only publish the pass rate once 25% of potential candidates have completed the exam).

The 11% completion rate was considered strong enough evidence that the entire financial services community would not funnel through the exam ‘goalposts’ within the proposed timeframes. The solution was to shift the goalposts, but only by the slightest margin (see table):

New Regulatory Examination deadlines, as published by the FSB in Circular 7/2011

Level I Regulatory Exam

New Deadline

Re-write Deadline

RE1 (key individual for category I, II, IIA, III, and IV)

30 June 2012

30 September 2012

RE3 (key Individual for Category II and IIA)

30 September 2012

31 December 2012

RE4 (key individual for Category III)

30 September 2012

31 December 2012

RE5 (representatives of Categories I, II, IIA, III and IV excluding representatives for subcategories 1.1 and 1.19)

30 June 2012

30 September 2012

In addition to the above, the FSB states that the deadline for the REII Level I regulatory examination for sole proprietors and key individuals (for subcategories 1.1 and 1.19) is 31 December 2013. Representatives for sub-categories 1.1 and 1.19 are not required to write the Level I regulatory examination! The above deadlines also apply to any persons who have failed the examination to date.

“Despite the above concessions, affected persons are urged not to delay their enrolment for the examination as this will result in candidates being placed under unnecessary time constraints and ultimately being unable to write the examination on a preferred date and at a preferred venue,” says the FSB. They would prefer all industry stakeholders to make the necessary arrangement to sit the exam as soon as possible.

A motivational flyer that misses the point...

The FSB dedicates a couple of paragraphs in FAIS Circular 7/2011 (available at to motivating individuals who have not yet sat the RE I exam. “Anyone can pass,” trumpets one of their sub-heads, as they congratulate Mr Clive Archer, who at 81 years of age became the oldest person to successfully complete the examination to date. He scored 74%, an achievement which certainly warrants a round of applause. For those who stumbled at their first attempt the regulator offers these thoughts: don’t despair because it’s attitude and preparation that determine success!

“The early statistics suggest that the main cause for candidates failing the examination is lack of proper preparation,” continues the FSB. Sure – lack of preparation guarantees poor results. But the hundreds of candidates we’ve spoken to remain unimpressed with a number of exam issues, including ambiguously worded and “none shall pass” type questions. A financial intermediary I spoke to earlier this week says a group of his colleagues – with many years experience – couldn’t come up with answers to certain questions in a post-exam post-mortem. And many feel sections of the exams have been set by ‘intellectuals’ who are out of touch with the industry. The FSB is aware of this issue but seems reluctant to find a solution. Why?

“Simply put,” they say, “one candidate may find a particular question ambiguous, but whether that question can in fact be classified as such can only be determined from a statistical perspective once the particular question has been posed (and answered) in at least 50 examination papers…” Ok… So what if 1,000 or more individuals indicate that the questions seem ambiguous? Since candidates aren’t allowed to take papers home with them we doubt many question-specific complaints will crop up. Incidentally, we’ve heard that individuals are made to sign a pre-exam waiver which precludes them from lodging complaints (about the exam and related processes) at a later stage!

You cannot take the paper home with you, because...

On this issue the regulator says: “To [provide exam questions] is not possible due to the structure of the examination process. The individual question papers are generated from an item bank of a large but limited number of questions. If these questions were to be made available they would have to be replaced with new questions on a continuous basis to ensure the effectiveness of the examination…” Our initial response – how small is this question database? The FSB also dismisses out of hand (and with reasons) requests to consider open book exams and to lower the pass rate from the current 65%. It seems, once again, that the regulator is taking a “my way or the highway” approach on critical issues affecting the industry. And it will require continued pressure from industry stakeholders to get concessions on a point by point basis.

The FSB acknowledges that difficulties have been experienced since the inception of the examination process. But they will engage with industry representatives and the four examination bodies on an on-going basis to address these difficulties. “Any new system requires continuous improvement and through continuous dialogue between [us] and industry stakeholders there is no doubt that this will be achieved,” they say.

Editor’s thoughts: There is plenty of additional information in FAIS Circular 7/2011, and we suggest you download the document from the FSB website ( The RE I exam deadline relaxation seemed inevitable… Now the question is whether six additional months is a long enough period to get everyone in the industry through the process? Please add your comment below, or send it to


Added by GregS, 15 Jul 2011
Agreed Jo.Have passed both myself early this year and previously commented before I wrote the RE1 and RE5 that we need to embrace the regulation if we really want to assist the FSB in professionalizing our industry.Of 16 exams written by my staff 14 have passed.The 2 that failed are both Bcom grads and strangely enough were the only 2 that missed our in office training from time to time.Both the other KI's I employ have also passed there KI exams because they prepared appropriately.I'm sure the FSB has valid reasons for extending the deadline but it is disappointing to see how few people are registering to write the exams.Some exam venues in Durban which are facilitating 3 times a day,only have as many 4 people registering when they have capacity for up to 40 to write per session.
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Added by jo, 14 Jul 2011
And for those smucks like me that wrote the Key Person and Re RE1 exams and passed? What do we get for having complied. Nada as usual! Standards get lowered to suit the lagards.
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Added by Dirk, 14 Jul 2011
We can't plead professionalism in the financial industry without regulatory exams, if we are not prepared to adapt we will "die"! Becoming broker and broker (excuse the pun) because clients don't trust our actions! Just because one has been in the industry for MANY years does not mean you have been looking out for the client's interest at all times. I can drive a motor car, because I have been doing it for 35 years, but will I be able to pass the required K53 test to obtain a license to drive my car? Your statement about signing waivers is incorrect. Any student has the right to appeal 3 questions when writing the exam - I have done so and received a response within a week. This process helps to clarify ambiguous questions and makes it easier for those that follow. Challenging a question means you have to KNOW the learning material (Acts) and this is perhaps where candidates lack self-confidence, because “quick fixes” and moaning are not the answer to preparation.
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Added by Johan, 14 Jul 2011
Die meeste mense hoop altyd iets gaan oorwaai of sommer weggaan en wag tot op die laaste nippertjie. Glo my, diegene wat mingepla is, sal nou weer niks doen nie en eers wakker skrik in April 2012. Die FSB gaan dan geen genade hê nie. Ek het sonder enige kursus, CD of leiding die RE1 en RE5 eksamen geslaag, maar dit het maande se voorbereiding gekos. Ek is alleen in die besigheid en het nie die voorreg waar 'n groot werknemwer mens help nie. As mens self vir iets betaal doen mens dalk net ekstra moeite. Sterkte en lees maar die vrae stadig deur en gebruik die volle tyd.
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Added by MS, 14 Jul 2011
I dont have a problem with RE exams, and have already completed mine with distinction. RE 1 is about FAIS and related statutes. studies of LAW is about acquiring factual knowledge, applying this factual knowledge, and sticking to the facts 7 definitions, nothing else. Study with people knowledgeable on the subject, not speculative wiseguys that only prove their ignorance and incompetence, best of all do it yourself. you have a lot to prove, get out there and do it. dropping standards is in nobody's interest, neither is moaning about RE either. I think all exam questions were fair, and battled with a couple myself! Nothing good in life comes cheap and you will gain valuable knowledge to apply in your trade.
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Added by Nic, 14 Jul 2011
Today I am pleasantly confused. By the way, I wrote in October 2010 and passed with 76% (first attempt). Sure I did prepare but not as much as I should have. But that's not my point today. A group of 24 from our company wrote and received their results this morning. It looks like 18 or 19 of the 24 passed, which must be an industry record. One got 92%, one 88%, a few 82%'s, and so on down to 52% which was our worst performer. Have the standards all of a sudden be lowered, or are we just such a bright bunch. It shows you what attitude coupled with preparation can do, because the group, with support from the company, really spent quite a lot of time preparing. I hope this will inspire the "draadsitters" to now take it more seriously.
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Added by Andre Kruger, 14 Jul 2011
Jo, I take exception to your remark. You are completely full of yourself..... what a pity. I suppose people like you will always be around. Would be interesting to know what your background is?
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Added by Jean, 14 Jul 2011
Hear - Hear to all of you except Andre Kruger. Now to the question. The industry now have a further 12 months (15 months if you registered before 30 June 2012 and need to re-write) to see this through. I believe it can be done. The people that do not do pass by then do not really want to be a professional in this industry.
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