Moonstone: Proposed new requirements for compliance officers

It is not only FSPs who are subject to changes and new fit and proper criteria – compliance officers also face some new challenges, including their own regulatory exams, judging by the discussion documents currently available on the FSB website, from which we quote below.

The first draft amendment of the Board Notices was released for public comment in June 2009. A final draft that takes into account these comments and various discussions with the FAIS Advisory Committee has now been produced. Because this draft differs substantially from the June 2009 draft, it was deemed prudent to allow a further public consultation period to ensure that the final amendment of the compliance officer subordinate legislation is relevant, robust and effective.

The need for increased regulation

The need for the changes emanate from the following:

1. Changes to section 17(1) (b) of the FAIS Act that now requires all compliance officers to meet certain minimum competency requirements.

2. Undesirable practices by compliance officers and compliance practices that became evident during onsite visits conducted by the Registrar at the premises of the financial services provider and compliance practices.

3. Changes to the Fit and Proper requirements for financial services providers and representatives and the need to align these requirements to compliance officers.

The proposed changes are in terms of:

Qualifications & Experience:

This board notice stipulates the competency requirements a compliance officer should meet before being approved. The changes that are proposed will bring the competency requirements of compliance officers in line with the new competency requirements for key individuals and representatives that were published in October 2008. The changes provides for the recognition of qualifications of compliance officers on a list of recognised qualifications. It makes further makes provision for regulatory examinations and continuous professional development as it recognises the necessity of compliance officers, as professionals, to possess important qualifications for the safeguarding of the interests of the public and to ensure that they fully remain so qualified during their whole career. Please note that the qualifying criteria will be incorporated into Board Notice 105 of 2008.

Criteria and Guidelines for approval:

This board notice determines the criteria which a compliance officer must meet on approval and thereafter. The changes distinguish between internal and external compliance officers and between individual compliance officers and compliance practices. It also includes changes to introduce additional operational ability requirements for internal compliance officers and practices.

Exemption in respect to services under supervision rendered by compliance officers:

Our country is currently experiencing a skills shortage for suitably qualified and experienced compliance officers in the financial services industry. It is based on this premise that the exemption is being granted. The exemption makes provision for the requirements and conditions under which supervision is conducted. It stipulates requirements for both the supervisor and supervisee. This exemption will be incorporated into the criteria and guidelines.

Amendment to the Financial Advisory and Intermediary Regulations:

Regulation 1 has been substituted and makes provision in the definitions for a compliance practice manual and compliance services. (see the other article in this newsletter) Regulation 4 and 5 makes provision for application approval and the establishment of a compliance function respectively.

Comment on proposed amendments

The final draft amendments are available on the FSB website to all parties who wish to comment. Submit comments in writing before close of business on 5 February 2010, for attention Ms Wendy Hattingh (e-mail to wendyh@fsb.co.za or fax to (012) 422 2973).