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To debar or not to debar?

03 June 2013 Cornea Matthee, Centriq Insurance

In the first of two articles, Cornea Matthee, compliance officer at Centriq Insurance, sheds light on aspects to consider when a financial services representative is debarred.

The debarment of representatives working in the financial services industry requires an in-depth understanding of fit and proper requirements (Board Notice 106 of 2008) and a business risk assessment from both a regulatory and operational point of view.

The point of departure when determining the fit and proper requirements that apply to a representative is the date of first appointment (DOFA). This is generally the date on which a person was first deployed in a Financial Advisory and Intermediary Services (FAIS) role, and registered under a Financial Services Provider (FSP) licence for the purpose of providing advice and/or intermediary services. Thus, it is not the date on which a person started working at the current organisation.

The date of first appointment determines the type of qualification and experience needed in the various categories, whereas the fit and proper requirements for all key individuals and representatives include honesty, integrity and competence.

The competency requirements specify the minimum experience, qualifications, prescribed regulatory exams, as well as continuous professional development required by a representative in relation to the product category for which the representative is registered.

Broadly, the minimum fit and proper requirements for representatives to be registered under an FSP licence can be split into two categories: date of first appointment pre-2010; and date of first appointment post-2010.

 
Requirements for date of first appointment pre-2010:
1. Honesty and integrity.
2. Competency, including:
• product experience;
• appropriate credits, or skills programme, or recognised qualification;
• first and second level regulatory examinations.
3. Continuous professional development points.

DOFA post-2010:
1. Honesty and integrity.
2. Competency, including:
• product experience;
• entry level qualification and recognised qualification;
• first and second level regulatory examinations;
3. Continuous professional development points.

The Level 1 regulatory exams caused much debate. This is mainly because of the deadlines imposed by the Financial Services Board (FSB), the costs associated with complying, and the impact that debarred representatives have on the industry. They are prohibited from providing financial services until they have successfully passed the exam.

Since it is not always possible to appoint representatives who meet the experience and qualification requirements at date of first appointment, the Regulator has provided for an exemption (Board Notice 104 of 2008).

The exemption allows a representative to gain the required experience, obtain the necessary qualification, and complete the regulatory examinations while working under supervision, subject to certain conditions.

With that said, it is important to note that the fitness and proprietary of representatives is not assessed by the Registrar, and that it is the duty of the provider to ensure that its representatives are fit and proper.

A provider may therefore not appoint a person as a representative unless satisfied that such a person complies with the fit and proper requirements. Should the provider fail to ensure that its representatives are competent to act and comply with the fit and proper requirements, the Registrar will take action against the provider.

As such, the provider must take appropriate action whenever a representative fails to meet the competency requirements.

Read more about this in the August edition of FAnews.

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