Moonstone: Regulatory examinations

Please be sure to read the article linked above for the basic background to these exams. For the record, the first level Regulatory Exam (RE 1) focuses on the regulatory environment and the second level Regulatory Exam (RE 2) on products and skills.

We take a look today at some practical implications on a typical brokerage to help you prepare for the event, or rather, events, as there could be several exams, depending on your own particular situation.

Scenario 1 - A Sole Proprietor licensed for both short-term personal and commercial lines, healthcare and collective investments:

In theory, the sole prop must write two RE 1s; one as a key individual and the one for representatives, but there does appear to be some uncertainty about whether he will be required to do both.

Then, regarding RE 2, he or she will be obliged to write the exams for each of the product lines listed above if not in possession of a suitable qualification that exempts him or her from such exams. This means that a sole proprietor could write as many as 5 or 6 exams over the four year period starting in 2010. Short-term personal lines and commercial each has its own RE 2.

Scenario 2 - An FSP consisting of one key individual who also acts as representative and who employ two representatives. The FSP is licensed for pension benefit funds, retail pension benefit funds and collective investments:

The key individual may have to write two level 1 REs, as well as the RE 2 exams for those product lines that he acts as representative for. The representatives would have to write the level 1 RE for representatives before the end of 2011, and then one RE 2 for each product they "sell". The eventual sum of exams would range between 3 and 4 RE level 1 exams and between 3 and 9 level 2 Res, depending on licensing conditions.

It is important that the stipulated time frames be born in mind when planning for these events. Currently one has two years in which to complete the level 1 REs (to the end of 2011) and then a further two years for the rest. Experience has shown that most people prefer to leave it as late as possible. Given the expected failure rate (or the more politically correct expression "not yet competent") this may not be wise.

There are currently discussions on what the cost should be and we would prefer to wait for the official announcement to avoid creating confusion in the market place.