To debar or not to debar…that is the question?
01 August 2013
Cornea Matthee, Centriq Insurance
In her first article on the debarment of financial services representatives (FAnews - June 2013), Cornea Matthee, compliance officer at Centriq Insurance, concluded that it is the duty of the financial services provider to ensure that its representatives comply with fit and proper requirements, and that failure to do so will result in the Registrar taking action against the provider.
But what does this mean in the context of the industry?
Appropriate action
Where a financial services representative no longer meets the competency requirements, the financial services provider can take appropriate action to effectively address the latter and thus prevent the Registrar from taking action against the provider himself by doing the following:
- Debarring the representative who contravened or failed to comply with the FAIS (Financial Advisory and Intermediary Services) Act in a material manner.
- Requesting a profile change so as to de-list products the representative is not qualified to sell.
- Removing the representative from the applicable provider’s register; requesting the Registrar to remove the representative from the central register as a whole.
The debarment of a representative as envisaged in section 14 of the FAIS Act prevents the representative from rendering further financial services and functioning as a representative not only for the provider who brought about the debarment, but for any financial services provider whatsoever.
Implementation issues
Strictly speaking, implementation of the debarment provision is obligatory whenever a representative no longer complies with the fit and proper requirements.
It follows that a person who has failed to pass the first level regulatory examination by the said deadline date should be debarred. However, an ordinary profile change can be requested, in which case it will not be necessary to go through the debarment process - a process which places an additional administrative burden on the provider and the FSB (Financial Services Board) so as to ensure that all due processes are being followed.
Once the representative has successfully passed the Level 1 RE exam, he/she can be linked to both the FSB’s central, and the provider’s representative register again, which is a far less complicated process to follow.
Restrictive actions
Until such time, however, the representative may not provide financial services (advice and or intermediary services) as a representative. It is furthermore important to note that placing the representative under supervision will not remedy the situation either.
With that said, it is important to note that on 24 April 2013 the FSB released a statement which was welcomed by the industry. In terms of the dispensation providers, key individuals and representatives who had not successfully completed the Level 1 RE exam by 31 March 2013, had until 30 April 2013 to apply to continue rendering financial services until their exemption applications are processed and the Registrar has granted or refused the applications (Board Notice 65 of 2013).
This special dispensation provides for applicants to apply for permission to continue working until such time as their applications for extension have been granted or refused.
It is not an extension of the final date for passing the RE exams, however, but affords applicants an opportunity to write again while they await the outcome of their requests. (Note that this dispensation only applies to a person who complied with all the stipulated requirements.)
Given the above, it is evident that if the grounds for not meeting the fit and proper requirements are of a material nature relating to the honesty and integrity of a representative, the best route to follow is debarment.