The long road to full regulatory examination compliance
As 2012 draws to a close the Financial Services Board (FSB) has issued a comprehensive update of the industry’s progress towards full regulatory examination compliance. In an email communication distributed towards the end of October the registrar commend
The latest statistics, to 10 October 2012, show that 81% of the affected key individuals and sole proprietors had made an attempt at RE Level 1 (RE1). An impressive 84% of those who sat the exam passed, with the remaining 16% given until 31 March 2013 to sit a re-write. In addition some 90% of affected representatives have sat RE Level 5 (RE5), with an 85% pass rate…
Determining the impact of non-compliance on the industry
What happens to the 19% of key individuals and sole proprietors and 10% of representatives who, by the registrar’s calculations, have made no attempt at the applicable RE? And how many FSPs are affected? The answer to the first question is direct and to the point: “The Registrar will have no choice but to commence with regulatory action against those persons who are in non-compliance”. And the second question can be answered from the statistics provided with the FSB Information Circular: Level 1 Regulatory Examinations Update, published 24 October.
The publication restates the registrar’s intention to proceed with regulatory actions against FSPs that are no longer compliant with fit and proper requirements (including, obviously, those that have not met the RE1 and RE5 deadlines). “As can be seen from the statistics supplied in item 2.1 and 2.2 above, there are a number of FSPs, key individuals and representatives that have chosen not to make any effort to comply with the RE requirements,” they say.
Turning to tables 2.1 and 2.2 we discovered that 3130 of 16424 key individuals and sole proprietors had made no attempt to sit RE1. The FSB further reduced the number of non-compliant persons in this category to 2592 through exemptions. Industry concerns over massive non-compliance in the representative segment have proven unfounded too, thanks to 19669 individuals being exempted from RE5. There are only 6398 individuals who have failed to sit this exam. It seems therefore that the industry is in good shape to continue with “business as usual” going forward.
An extension of the re-write deadline
For the 2143 and 10636 individuals that must rewrite RE1 and RE5 respectively the FSB has announced another deadline extension. “The Registrar, after due consideration of, inter alia, the examination statistics, decided to extend the 30 September 2012 rewrite deadline to 31 March 2013”. This extension only applies to those persons who have already demonstrated their commitment to complete the RE – more specifically those who had attempted the examinations at least once before 30 June 2012. The Registrar has also extended the date by which foreign providers must write the relevant RE Level 1 from 31 December 2012 to 30 June 2013. (Extensions were published by Board Notice 162 of 2012).
Update regards Afrikaans examinations
The decision to extend the re-write deadline requires that the FSB translate additional questions into Afrikaans. Despite this additional administrative requirement the FSB has now published a list of dates for Afrikaans RE rewrites. The registrar advises that all registrations for the Afrikaans examinations must take place via Moonstone.
Parting shots on the topic of debarment...
What happens to those key individuals, sole proprietors and representatives who are no longer fit and proper? The harshest censure is debarment as set out in Section 14 of the FAIS Act. (Section 14 (A) describes how the Registrar goes about debarring a rep or a key individual when an FSP has not debarred a rep who should have been debarred, or for the debarment of a key individual). It is also possible that the transgressing individual simply be prevented from conducting further business by having their name removed from the reps register.
The latter option seems more sensible… According to Paul Kruger of Moonstone: Instead of having to apply to the FSB, with reasons, for his or her debarment to be lifted, this rep could merely be placed back on the register (and the FSB informed) once the representative in question has sat RE. However, if the rep refuses to write the RE, there is very little else a key individual can do, but go through the disciplinary process, and debar the rep.
Editor’s thoughts: Thanks to generous exemptions granted by the Registrar to representatives the number of individuals who are not “fit and proper” due to non-compliance with regulatory examination requirements totals less than 10000. What do you think should happen to the 2592 key individuals / sole proprietors and 6398 representatives that the FSB believes are no longer fit and proper? Please add your comment or send it to [email protected]
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