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Brokers urged to get their CPD ‘house’ in order

14 May 2024 Gareth Stokes

The rules setting out what brokers and financial advisers need to do to meet their annual Continuous Professional Development (CPD) obligations have been known for years, yet FAnews still fields the occasional strange question from readers wanting to know what they may and may not do. The most recent query centres on the mix of CPD-related activities that intermediaries should strive for, and the duties of their compliance officers to inform them of same.

A big deal for advisers, brokers

Those who require a detailed refresher on CPD best download Board Notice 194 of 2017 (BN 194) and spend a couple of hours studying section 31, 32 and 33. For the more confident among you, the following refresher should suffice. BN 194 is sub-ordinate regulation to the Financial Advisory and Intermediary Services (FAIS) Act, making it a very big deal for South African financial services intermediaries. 

Section 32(1) of the board notice is aimed at all financial services providers (FSPs), key individuals (KIs) and Representatives. It describes three general requirements relating to your competence and minimum requirements for CPD as follows. In section 32(1)(a) you are instructed to maintain the required competence to manage or oversee the financial services for which you are authorised and appointed. And section 32(1)(b) explains that you must “comply with the minimum CPD requirements set out in the notice”. 

These requirements depend on your FSP licence categories and are described in greater detail in section 33. Thanks to the Financial Intermediaries Association of South Africa (FIA) who offered the following summary of annual CPD requirements: For a single sub-class within a single class of business, you must complete a minimum of six (6) hours of CPD activities; for more than one sub-class within a single class of business, you must complete a minimum of twelve (12) hours; and for more than one class of business, you must complete a minimum of eighteen (18) hours. 

Ensuring relevance to your function

Section 32(1)(c) requires you to “ensure that the type and combination of CPD activities undertaken” are relevant to your function and role; contribute to your skill, knowledge, expertise and professional and ethical standards; address identified gaps in your knowledge of general and technical knowledge of the industry and its laws; and finally, that these activities adapt to the changing internal and external conditions relevant to the classes and sub-classes of business you are involved in. 

The strange question FAnews recently fielded was whether or not an individual could rely entirely on reading magazine articles to make up their six, 12 or 18 CPD hours. The regulation does not outright prohibit this. Legal and compliance expert, Joe Kotze, commented that the board notice “does not mention a specific requirement for CPD hours to be spread across face-to-face training, reading or webinars” and that “all CPD hours can be attained by, for example, by reading the CPD-verified material offered by FAnews”. The caveat is that the conditions set out in section 32 of board notice must be met. 

When asked what activities an adviser or broker could count towards CPD hours, Lelané Bezuidenhout, CEO of the Financial Planning Institute of Southern Africa (FPI), said it depended on the CPD policies and procedures put in place by each FSP, before offering up more of the regulation for guidance. The requirements for FSP-specific CPD policies are set out in section 32(2) of BN 194. This section mentions the need for establishing and maintaining a policy on how appropriate knowledge and skills will be developed, maintained and updated at the firm, as well as the requirement for drawing up training plans for each CPD cycle. 

Setting limits for verified reading

Bezuidenhout said the FPI’s CPD Policy, which all of its members should follow, contains specific measures that limit the number of CPD hours that members can log for verified reading. She pointed out that FSPs who relied on compliance partners such as Compli-serve, Masthead or Moonstone to assist them with the aforementioned CPD Policy would have to conform to those policy requirements, whatever those might contain. 

According to Kotze, the ultimate responsibility for ensuring compliance with the CPD regulations falls on the KI in the case of a legal entity and the FSP in the case of a natural person authorised in his or her own name. In the last-mentioned case, the natural person is the FSP, and is not referred to as a KI. “Only a legal entity has a KI,” he explained. “Where the FSP has a compliance officer, he or she must also monitor all the fit and proper requirements the FSP must adhere to; report all material irregularities in this regard to the Financial Sector Conduct Authority (FSCA); and report on rectifying measures”. 

Keeping on the CPD theme, each FSP must pay close attention to section 13 of BN 194 which sets out the requirement for establishing, maintaining and updating a competence register in which all qualifications; successfully completed regulatory examinations (RE); product-specific training; class of business training; and CPD activities of the FSP, its KIs and representatives are recorded. The FSCA has not stipulated the form this register must take; but it must be completed within 30 days after the expiry of the CPD cycle. 

Your 31 May CPD hours deadline is looming

The 2023-24 CPD cycle runs from 1 June 2023 to 31 May 2024, so your deadline for locking in the required hours is almost upon you. Your CPD activities must be completed by 31 May each cycle, and the FSP has another 30 days to upload the record of same to the FSCA’s online competence register. To paraphrase from an FIA member communication: an FSP must within 30 days after the expiry of each CPD cycle record the CPD activities of the FSP, its KIs and Representatives in the competence register. 

Furthermore, the FSP must calculate the total number of CPD hours completed by each person; obtain and retain relevant supporting evidence of such hours; and retain this evidence for a period of not less than five years from the end of the CPD cycle concerned. The common sense advice to all advisers and brokers is to inform your FSP of your CPD activities and keep copies of your CPD certificates for future reference. Put another way, while the regulatory authority places the responsibility for record keeping on the FSP or KI, it makes sense for you as an individual adviser or broker to track your own progress through each CPD cycle. 

It can get quite confusing; so, this writer turned to Bezuidenhout to clear things up: “You, the individual, are responsible to ensure that you achieve your CPD hours each year; but the person responsible for reporting on this to the regulator is the FSP [which might also be you]. Your internal compliance person or external compliance partner is there to monitor and report; but the FSP or KI must ensure that such reporting actually takes place”. 

A somewhat sinister warning

Returning to the requirement around the mix of CPD hours, there was a somewhat sinister warning at the end of the FIA member communication around the risk in “duplicating CPD topics and thus causing a shortfall of CPD hours required in a cycle”. It will be up to you to ensure that the hours you log through verified reading are diverse enough to stand up to regulatory scrutiny. 

Writer’s thoughts:

Considering how long ago CPD was introduced, the industry should surely know how to deal with same. Are you unsure of any aspects of CPD including the mix CPD activities you should complete, and your responsibilities versus that of your compliance officer? Please comment below, interact with us on X at @fanews_online or email us your thoughts editor@fanews.co.za.

Comments

Added by Toney John Motha, 18 May 2024
I think i'm late by now, is there any assessment to complete wich will be equivalent to 18 hours?
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