Moonstone: Failure to write required REs by deadline dates

It is unsure whether the FSB intends amending the current legislation regarding the steps to be taken where key individuals and representatives fail to comply with the competency requirement to write the regulatory exams. Until then, one has to look at th

Circular 2 of 2010 provides the following information:

In the Determination of Fit and Proper Requirements for Financial Services Providers, Section 2 of Part III, being the competency requirements, states that subject to paragraphs (3) to (7), an FSP of any Category and, where applicable, any key individual and/or representative of such FSP must:

1. comply with the applicable minimum experience requirements referred to in Part IV of the above Board Notice;

2. have the relevant qualification referred to in Part V of the same Board Notice;

3. have successfully passed the relevant first and/or second level Regulatory Examination(s), as may from time to time be set by the Registrar and as set out in Part VI of the said Board Notice (my underlining)

4. and comply with the CPD requirements as set out in Part VII of the said Board Notice.

Serious contraventions of the FAIS Act can lead to immediate withdrawal of the FSP’s licence. Normally, the fact that one is not competent to practice, in terms of the Fit and Proper requirements, can be regarded as such a serious offence.

We have seen in the past that lesser transgressions, e.g. failure to submit compliance reports or financial statements, have lead to a suspension. During this period, the FSP can rectify the situation, and have the suspension lifted.

The following excerpt from an actual notification of suspension sets out the requirements imposed on the FSP:

The terms attached to the suspension:

a. The licensees are prohibited from concluding any new business.

b. The licensees must inform all affected clients and product suppliers concerned that their licences have been suspended, and the Registrar must be copied with such correspondence.

c. The licensees must, in consultation with clients and product suppliers concerned, take reasonable steps to ensure that any outstanding business is transferred to another licensed financial services provider in the interest of clients, and must advise the Registrar accordingly.

d. The suspension of the licences will endure for a period of three months after the effective date, whereafter the Registrar will lift the suspension if satisfied that the licensees comply with the requirements of the Act or withdraw the licences if not so satisfied.

These requirements, in itself, are enough to encourage one to avert the situation, where possible.

The steps to be taken by the FSB is determined by the applicable legislation, and is not a spur of the moment decision. Any possible changes to such legislation will need to follow the required steps.

We strongly advise those who have not yet done so, to take the necessary steps to avert such action being taken against them.