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More exams looming….

01 February 2010 Fanews

The new regulatory exams introduced by the FSB have created an expected outcry among intermediaries, many of whom are understandably confused by the new set of requirements. FAnews asked the industry experts to clarify the issue.

A surprisingly small number of advisors have taken the time to read and fully understand the impact of legislation, such as the FAIS Act and FICA (anti-money laundering legislation), which affects the way in which they are required to do business. In addition, the qualifications and Skills Programmes that supported the competency requirements of FAIS were of varying degrees of quality.

To deal with these issues, the FSB’s FAIS Department has taken control of the standards required for the competency of financial services providers (FSPs) and introduced a two-tiered regulatory examination structure known as RE1 and RE2.

Before we get into the details of what the REs entails, let’s first look at what it is not.

No effect on previous Fit & Proper requirements

Completing these Regulatory Exams is an entirely separate issue from adhering to the Fit & Proper credit deadlines, which required either 30 or 60 credits, at the relevant NQF level, depending on the licensing categories, by 31 December 2009. These 30 or 60 credits represent only an approximate quarter or half of a full qualification, respectively. By way of an example, if the RFP 1, 2 and 3 exams were successfully completed through the FPI, the candidate would now have a full NQF Level 5 qualification, which is recognised by the FSB for FAIS purposes.

In short, RE exams are not based on unit standards which are credit bearing and are therefore not qualifications.

What does RE entail?

Now we can look at what RE is. The new competency structure that kicks in from 2010 onwards has the following elements:
1. Regulatory Exam 1 (RE 1) covering the regulatory and legislative environment.
2. An “approved” qualification
3. Regulatory Exam 2 (RE 2) – covering the content of a specific license category. Thus, if you are licensed across more than one license category, you may have to do more than one RE 2.
In addition, FSP’s will be required to do Continuous Professional Development (CPD), effective from a future date.

Each category in more detail

RE 1
• Focus on the FAIS Act and subordinate legislation such as the General Code of Conduct, disclosures and other requirements of the FAIS legislation.
• Also covers the FICA Act and other relevant anti-money laundering legislation.
• Test factual knowledge of an individual’s responsibility as either a key individual or representative in the context of the above-mentioned legislation.
• There are different RE 1 exams for key individuals appointed in Cat I; II/IIA; III and IV. Thus, key individual appointed in any two such categories must write both of the relevant RE 1 exams.

RE 2
• Focus on product category specific information and requirements.
• Test technical knowledge and skills required when dealing with the products the individual is authorised for.
• More than one exam may have to be written on this level, depending on the number of product categories for which you are authorised.

Who must write RE1?

• All financial services providers who are sole proprietors, all key individuals and all representatives regardless of existing qualifications.
• The only exception is representatives licensed for Long Term Insurance Category A products (1.1) and Friendly Society Benefits (1.19) products).
• Key individuals who are also deemed to be “acting as representatives” must complete both the RE 1 exam for representatives and the RE 1 exam for key individuals.

Who must write RE2?

• All financial services providers who are sole proprietors, all key individuals and all representatives, will write exams related to each product category licensed for.
• Individuals who have completed the 30 or 60 credits, but have not completed the full qualification.
• The FSB may grant individuals with certain qualifications exemptions for the relevant RE 2 exam, but they need to apply to the FSB for the exemption. This will only apply to those who hold qualifications that are specifically approved by the FSB as sufficiently covering the content of RE 2 exams at the same level and with the same integrity as the RE 2 exams.

CPD for all

Once RE 2 has been successfully completed, continuous professional development requirements, to commence at a later date, will ensure that knowledge is maintained and updated regularly.

Deadlines for completion of the RE exams

• RE 1: 31 December 2011
• RE 2 - 31 December 2013
• For new entrants from January 2010:
- RE 1: within 2 years; and
- RE 2: within 6 years of authorisation, approval or registration.
• The deadlines contained in legislation will not be extended.

What will the exam look like?

• Multiple choice questions, based on case study type assessments.
• Questions are based on the current General Code of Conduct, the FAIS Act and FICA.
• Relevant sections of the Act will be provided. The exam will test how you understand the applications of the Act.
• Exam questions are based on the qualifying criteria set out in Board Notice 105/2008, available on the FSB website.
• There is no limit on the number of attempts, but there will be a cost involved.
• Choice of the examination body, venue, methodology, date and a morning or afternoon session.
• Choice of exam methodology: electronic via a secure browser environment or paper-based.
• Exams can be delivered at the office or another suitable venue for groups of 20 or more.

The implications

The FSB may withdraw authorisation of those who fail to comply with the Fit and Proper requirements, including successful completion of the REs. Key individuals who do not comply with the requirements may also place the futures of their representatives in jeopardy.

Where to from here?

• The FIA will be providing guidelines and conducting workshops during early 2010.
• Do not procrastinate.
• The FSB has appointed four examination bodies:
- Moonstone Information Refinery
- Financial Planning Institute
- Institute of Bankers (Leselo)
= South African Institute of Financial Markets.
• Registration is handled by telephone, fax, sms, internet or bulk import.
• Prepare thoroughly for each exam. Do not underestimate the complexity of exams.

While certainly adding to the already heavy regulatory burden advisors face, bear in mind that these exams are another step in the process to professionalise our industry.

Contributors

Anton Swanepoel
FAIS expert
Cruxprop 2000

Ben Rossouw
Member of the FAIS Advisory Committee of the FSB

Jason Hartman
Compli-Serve SA

Charmaine Koch
Professional Development Manager
IISA

Joe Kotze
National Manager: Compliance
FIA

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