A few surprises from the May regulatory exam update
The Financial Services Board (FSB) media relations department is working overtime to inform the industry of progress towards the looming Regulatory Examination (RE) deadlines. On 12 April 2012 they issued a media release with exam statistics complete to 1
In this communiqué the FSB reminded financial advisors to register for their examinations at least 10 working days before the 30 June deadline. (The examination bodies require 10 days between exam registration and the exam date). You will therefore have to book your seat by no later than 15 June. “For the RE 1 and RE 5 examinations there are less than five weeks remaining to the deadline,” they warn. We doubt there are any key individuals or representatives in the domestic financial advice space who are not aware of the requirement to sit the examinations. But there is still plenty of confusion as to how many advisors have yet to comply (more on that in a moment).
Setting the facts straight
Aside from the updated statistics and deadline reminder, the FSB also issued a 26 April communication in which it castigated the press for inaccurate reporting on the number of available examination slots and exam pass rates among others. This communication concludes with the following plea: “The FSB urges those in the media to verify their facts before publishing information that may mislead financial service providers and the general public.” This plea is rather rich given the disparities between the FSB’s own RE statistics, published 12 April and 22 May this year.
A FAnews Online reader drew our attention to the alarming FSB statement that 42% of the country’s 107 734 industry representatives only joined the industry after 1 July 2010. (Those who joined the industry after this date are exempted from the 30 June RE deadline – and have two years from date of joining to comply). Is it possible that four in 10 of the current representative force has less than two years industry experience? Was there a massive spate of resignations and re-hires over the past two to three years? And – against the backdrop of cost-cutting by the likes of Absa and Standard Bank – have financial services firm really employed this many new agents over the period? The massive spike in “new hires” contradicts those who believe that the industry – most notably the independent financial advice segment – is shrinking. What is going on?
Inconsistent results reporting
The FSB publishes a “catch all” disclaimer with its FAIS Circular 7/2012, by noting: “Subsequent [to the 12 April publication] the statistics have been refined further and more detail can be provided regarding the current status of the Level 1 Regulatory Examinations.” We cannot see how this disclaimer – or the fact the figures no longer include key individuals and representatives “linked to foreign FSPs” or category 1.1 and 1.19 FSPs – can explain away the difference between April’s and May’s statistics.
In April the FSB told us that 63 368 representatives had sat RE 5, but by May only 51 790 had done so… Likewise, the 41 318 RE 5 candidates reported to have passed the exam by 12 April 2012, has shrunk to just 35 646. These are major discrepancies! “Imagine the consequences were an FSP to publish similar wildly varying statistics relating to their product performance,” opines our reader.
The FSB has once again presenting the statistics with a degree of positive spin. “78.04% of the key individuals that must write RE 1 have already written the examination,” they trumpet. That’s good news except that the industry should not concern itself with how many individuals have written the exam, but rather how many have passed. A closer analysis shows that only 58% (7383 of 12645) key individuals have passed RE 1 to date (22 May).
Likewise the FSB mentions that 82.42% of representatives have sat the RE 5 exam, when they should be lamenting the mere 56.73% (35646 of 62835) who have passed it. The situation is even gloomier if we reintroduce the so-called new entrants. The FSB claim that only (sic) 25.69% of representatives need to sit re-writes by 30 September – and that a mere 17.58% have not sat the exam at least once – is overshadowed by the following reality: A staggering 51.92% (55 944 of 107 734) of South Africa’s representatives have not yet attempted the exam.
Will the industry meet the RE deadline?
Is the industry on track to meet the regulator’s 30 June deadline? If the latest FSB statistics are an accurate reflection of the situation we could be cutting things rather fine. By the FSB’s figures, only 718 key individuals sat the exam between 11 April and 22 May this year – and it seems unlikely that triple this number will report to an exam hall over the next month. A similar situation holds for representatives, where 11 045 (excluding new entrants) must still sit the exam before deadline.
The capacity is in place – with the FSB claiming the various examination bodies can conduct 56 000 examination per month – so the only question is whether those who have not yet stepped up to the plate intend doing so!
Editor’s thoughts: What will happen on 1 July 2012? Any decision by the FSB to “yank” the licenses of those who have not completed RE could be chaotic… But that is the censure promised! Do you expect tough action from the FSB immediately after the RE deadline? Add your comment below, or send it to gareth@fanews.co.za
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