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Fit and proper principles to replace REII exams

11 July 2017Jonathan Faurie
Caroline da Silva, Deputy Executive Officer of FAIS at the FSB

Caroline da Silva, Deputy Executive Officer of FAIS at the FSB

Over the years, many industry stalwarts have sung the praises of the industry and the fact that the Financial Services Board (FSB) is putting its best foot forward when it comes to professionalising the industry. The industry is indeed a far cry from what it was ten years ago when it comes to professionalism, and it seems like this will change even further when a new wave of regulatory reform reaches the industry’s shores in 2018.

In an effort to not become complacent, and keeping true to its mantra of insurers taking on more responsibility, the FSB announced at a media round table that it is having a relook at the RE II exams. It also announced that they may be phased out in the not too distant future.

A time honoured tradition

Before we get into why the FSB is considering scrapping the RE II exams, it is important to point out what they will be replaced with.

Caroline da Silva, Deputy Executive Officer of FAIS at the FSB, led the charge at the media briefing and spoke about a time in the industry (pre-regulatory reform) where insurers embarked on massive skills development programmes whereby brokers would be educated on the products that they are selling and the environment that the specific product line exists in.

This, Da Silva pointed out, took a back seat when regulatory reform was introduced as insurers became a little bit unsure of the future environment that they would be operating in.

“Regulatory reform is now becoming a reality. The Twin Peaks Bill is in the final stages of ratification and should be implemented next year. It is now time for insurers to take on more responsibility and go back to the long honoured tradition of embarking on massive skills development programmes,” said Da Silva.

A new approach

As part of this new approach, insurers will train their staff and the FSB will then trust that all of those representing the company will do so in a fit and proper manner.

But it is not enough that they give the FSB assurances that their staff is acting in a fit and proper manner; Da Silva points out that insurers must prove to the FSB (which will become the Financial Sector Conduct Authority under Twin Peaks) that they have programmes and mechanisms in place which measures how fit and proper their staff are.

“We haven’t announced the date for the RE II exams because we want this fit and proper principle to take its place,” says Da Silva, “All new entrants into the industry will still have to write RE I exams, but RE II exams may be a thing of the past.”  The fit and proper principle will be phased into the industry and will hopefully take full effect by the end of 2017. 

As the industry moves forward and new regulation is implemented in the industry, Continuous Professional Development will ensure that brokers, advisers and intermediaries will keep up to date with changes in the industry. 

Lessons learnt

It seems as if the FSB has learned a few lessons over the years, these lessons are driving its new approach.

Da Silva adds that when it comes to the RE II exams, the FSB has noticed a few things:

  • There are a number of people who write the same exam on a repeated basis, so passing the exams is a problem;
  • There needs to be an exemption for brokers and advisers who only need a very basic product knowledge, these are call centre agents who are guided by a script or who are under supervision; and
  • The fact that there would need to be 26 different exams to cover all lines of business is unrealistic and unsustainable. 

It is important to note that Da Silva is not demeaning the role that the RE exams play in the industry. In fact, she sang their praises throughout the briefing. She pointed out that in 2013, when compliance with RE exams was low, there was a lot of regulatory action being taken out in the industry. As more industry participants passed their exams, this action decreased significantly. 

Moving forward

A lot of people feel that the FSB is being disingenuous with its Regulatory Reform in trying to change the way that the industry did business in the past. This may be true, but the simple fact of the matter is that the world is evolving, and so should the financial services industry.

And it’s not like the FSB is doing this sitting in an ivory tower; Da Silva herself admitted that the old way of regulation was inappropriate and that trust needs to be brought back in the industry. The FSB (or FSCA) needs to trust the industry, and the industry needs to trust the FSB/FSCA

Editor’s Thoughts:
Time will tell whether scrapping REII exams would be the right choice. What are your thoughts on the matter? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts



Added by Jonathan Faurie, 12 Jul 2017
Hi Lelane.

Thank you for your feedback. You are 100% correct. On reflection, it was a bit confusing. Caroline was referring to product knowledge examinations and not level 2 regulatory exams.

Thank you for your contribution.

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Added by LB, 11 Jul 2017
Hi Johnathan

It must be made clear - Caroline is referring to Level II Regulatory Examinations (which would have tested product knowledge) and NOT RE2 for level I regulatory examinations.

The Level II regulatory examinations can also not "be scraped" as it never came into fruition.

Class of Business training and Product Specific Training (see section 29 of the proposed amended fit and proper requirements) is the training Caroline is referring to and CPD together with the said training could take the place of Level II regulatory examinations.

Your article creates some confusion in that new entrants may think that some of the RE exams (for level I) has been "scraped".

Perhaps just clarify that you are referring to Level II and not RE II

Many thanks

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Added by Ayanda, 11 Jul 2017
How wonderful to have such a breath of fresh air in that "mighty organisation"!
This is what happens when you hire people at the FSB with a little more than just a smattering of prior industry experience.
RE1 and RE5 taught absolutely nothing whatsoever about the actual practice of insurance, and RE2 was distinctly running the same risk. Putting training back into the hands of the industry and working for a restoration of the trust that for decades existed between the industry and its shepherd (i.e. the FSB), is precisely what was required in our jaded society. Well done Ms da Silva, we are fans forever!
Now your practical mind needs to turn to how to convert the impending Twin Peaks / RDR shambles into some form of working model.

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Added by Namedi Mphahlele, 11 Jul 2017

it is important that to keep up with changes but black businesses are struggling due to lack of resources. Only big white owned businesses are able to keep up with the changes cause they benefited from APARTHEIT and still benefit by maintaining the very system that made sure black people don't participate. Banks are part owners of insurance companies and they(banks) are corrupt. Competition commission is useless, just like the FSB, by encouraging corruption by private companies with just a 10% of the profits of corruption.
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