FIA: Regulatory Exams - flavour of the month

Regulatory exams are the latest buzz in the financial services industry. But what’s it all about and just who is affected by this piece of legislation asks Joe Kotze, National Manager: Compliance for the Financial Intermediaries Association of Southern Africa (FIA)…

Examination bodies:

The Financial Services Board (FSB) has approved and appointed four examination bodies which are in the final stages of putting together all the processes and systems that will ensure smooth administration of the regulatory exams.

The examination bodies include Moonstone Information Refinery, the Financial Planning Institute, Institute of Bankers (Leselo) and the South African Institute of Financial Markets. “These bodies will assume responsibility for the development of the exam questions and will present the exams countrywide on behalf of the FSB.

Pilot exams are currently being conducted and the FSB will embark on an extensive communication project to the industry as soon as implementation is ready to commence. This may be in April 2010.

The exams – Level 1 and Level 2:

The exams on Level 1 will be compulsory for all financial services providers who are sole proprietors and all key individuals and representatives. These exams will test factual knowledge on the FAIS Act and its Codes, FICA and the roles and responsibilities of these functionaries in practice. Key individuals who are also representatives will be writing two exams in respect of these different functions. Certain exemptions are applicable to key individuals and representatives who are authorised for product categories 1.1 (assistance policies) and 1.19 (friendly societies) only.

Exams on Level 2 will be product specific and test technical knowledge and skills required when dealing with the products the individual is authorised for. Various exams may thus have to be written, depending on the number of product categories for which the individual is authorised. Certain qualifications will exempt the individual from having to write exams on Level 2. These qualifications are specific to a product category and those approved thus far are listed in Board Notices 105/2008 and 64/2009. Others may also be added from time to time.

These exams will serve as a once-off test of knowledge and will not be based on unit standards which are credit bearing. Once Level 2 has been successfully completed, Continuous Professional Development requirements will ensure that this knowledge is maintained and updated regularly.

The deadlines:

Everyone who has been authorised, approved or registered up to 31 December 2009 must have completed the regulatory exams on level 1 before 31 December 2011 and on level 2 before 31 December 2013.

Those who first enter the industry from 2010 onwards must complete the exams on Level 1 within 2 years and on level 2 within 6 years of authorisation, approval or registration.

Delivery options:

There will be a choice of exam methodology at different examination venues: electronic via a secure browser environment or paper based. Groups of 20 or more can arrange for the exams to be delivered at their office or another suitable venue. This means that there will not be set examination times but a choice of sittings throughout the year.

Special needs such as visual or hearing impairment, wheelchair bound individuals and other disabilities will also be catered for.

Registration of the exams may be handled by telephone, fax, sms, internet or bulk import. Individuals will have the choice of the examination body, venue, methodology, date and a morning or afternoon session.

Preparation:

Exam questions will be based on the qualifying criteria set out in Board Notice 105/2008. By studying these criteria, one can already get a feel for what can be expected. This Board Notice is available on the FSB website.

The FIA will be providing guidelines to its members and will be conducting workshops on these topics during early 2010 to assist members in the preparation process.

Considerations:

1. Make sure you comply with the qualification requirements (credits) of Board Notice 106/2008 by 31 December 2009, if applicable.

2. It is expected that more than a million exams will be written by the industry over a 42-month period. Do your planning early and don’t procrastinate. Deadlines will not be moved.

3. Write these exams at the earliest opportunity.

4. Prepare thoroughly for each exam. There will be cost involved, which makes failing an exam an expensive exercise.

5. Do not underestimate the complexity of exams. Your fit and proper status is at stake.

6. For RE1, you will have to refer to the FAIS Act, its Codes and FICA (where applicable) in order to sharpen your knowledge. Make sure you have the amended and updated legislation at hand.

7. If you are licensed for multiple products and do not market all of these, it is suggested that you ask the FSB to have these removed from your license.

8. Key individuals who do not comply with the requirements may also place the futures of their representatives in jeopardy.

Facts:

1. The deadlines contained in legislation will not be extended, so ignore rumours in this regard.

2. The FSB will exercise its powers to withdraw authorisation of those who fail to comply with the fit and proper requirements.

3. Exam papers will not be for sale or freely available in due course. The strictest measures are taken to guarantee security.

4. These exams are not merely a nuisance but rather another step in the process to professionalise our industry. Embrace it with enthusiasm as your clients will embrace the superior advice and service you render.

These assessments are yet another step by the regulatory authorities in seeking to ensurethe South African public enjoys informed, quality service from those involved in the provision of financial advice and related services.