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Regulatory Examinations

Background: Level 1 Regulatory Examinations


The Financial Advisory and Intermediary Services Act, 37 of 2002, (“the FAIS Act”), came into effect on 30 September 2004. The objective of the FAIS Act is to:

  1. Protect consumers, and
  2. Professionalise the financial services industry.

The Act requires all financial advisors and intermediaries (providers) to meet specific competence requirements. At the time, the competence requirements consisted of experience and qualifications. To assist industry participants, the initial qualification requirements required to obtain a licence to act as a provider were “reduced” from full qualification requirements to skills programmes (or credit requirements) to assist those in the industry that did not have any formal qualification and who had to commence with studies as a result of the promulgation of the FAIS Act. However, the intention was always to gradually increase the qualification requirements to the requirement that providers must have full qualifications.

As a result thereof, the Determination for Fit and Proper Requirements for Financial Services Providers, 2003, had to be reviewed. The FSB embarked on a very intensive consultation process with the industry regarding the competency requirements. A “blank slate” approach was followed. In other words, the existing Fit and Proper requirements were set aside completely and industry stakeholders were invited to provide input as to what requirements would be appropriate, reasonable and “workable for them”. Input was also obtained as to what would be a practical and effective way in which to implement the requirements, and what those requirements should be? The consultation process with stakeholders commenced in October 2006 and continued until September 2008. The consultation was open to any provider, individual, industry associations, professional body etc. Participants were mostly product experts, professional bodies, industry associations, providers, representatives from larger corporate companies, and even training providers that specialised within the financial services industry.

Regulatory examination – It is accepted international practice and standard to set professional examinations for professions. The FAIS regulatory examinations are, therefore, not unique. The purpose of the regulatory examination is to set a minimum standard in terms of the following:

  1. Knowledge and understanding regarding the role and responsibilities of a key individual or a representative under the FAIS Act. Although the FAIS Act has been in operation since 2004, it was generally accepted that the level of knowledge, awareness and understanding of the responsibilities imposed by the FAIS Act on providers was lacking. This led to non-compliance with the provisions of the FAIS Act for example; providers did not furnish clients with the necessary information as required by the FAIS Act.
  2. Providers are further under the misconception that ensuring compliance with the legislation is the responsibility of the compliance officer. This is not the case – the key individual is responsible to ensure compliance with the FAIS Act and representatives also have specific responsibilities in respect thereof. The compliance officer is responsible for the monitoring of compliance only.
  3. It was agreed that a once-off regulatory examination should address the problems referred to above, and would ensure that all providers have a proper understanding of their specific regulatory roles. The exams would be compulsory for everyone rendering financial services to clients. This was also seen as part of the objective to professionalise stakeholders in the industry and to have confidence that providers know and understand the legislation that governs their industry.

List of Level 1 Regulatory Examinations (currently available)

 

RE NO: Regulatory Examination Descriptor
RE1 KI Level 1: Cat I, II, IIA, III and IV (General) This is a general examination that applies to all key individuals and sole proprietors in all the Categories. This examination consists of 80 questions. All sole proprietors and key individuals who are responsible for managing and overseeing a business relating to the rendering financial services for FSPs in Category I, II, IIA, III and IV are required to write this examination.
RE2 KI Level 1: Cat 1.1 & 1.19

This examination applies only to sole proprietors and key individuals who are responsible for managing and overseeing the business relating to the rendering financial services for FSPs in Category I that only deals with Assistance Business Policies and Friendly Society Benefits. This examination does not have to be completed together with the RE 1.

* Please note that this exam was suspended because these KIs may in future fall within the Micro Insurance Legislation that will exempt from having to write any exams. Until further clarity can be obtained whether or not they will become part of micro-insurance they are not required to write this particular examination.

RE3 KI Level 1: Cat II & IIA This is a specific examination that only applies to sole proprietors and key individuals in Category II and IIA. All sole proprietors and key individuals who are responsible for managing and overseeing the business relating to the rendering financial services for FSPs in Category II (Discretionary FSPs) and IIA (Hedge Fund FSPs) are required to write this examination in addition to the RE1.
RE4 KI Level 1: Cat III This is a specific examination that only applies to sole proprietors and key individuals in Category III (Administrative FSPs). All sole proprietors and key individuals who are responsible for managing and overseeing the business relating to the rendering financial services for FSPs in Category III are required to write this examination in addition to the RE1.
RE5 Representatives All Representatives, including those employed or mandated by an FSP, who render a financial service to a client (excluding a person rendering clerical, technical, administrative, legal, accounting or other service in a subsidiary or subordinate capacity which does not require judgment or does not lead to a specific transaction in respect of a financial product in response to general enquiries) are required to write this examination.

Compliance Officer Examination is still under development, further information will be communicated as soon as it becomes available. 

Preparation Guides for Level 1 Regulatory Examinations 

Additional Preparation Material  

Study Material
Study material for the level 1 regulatory examination was developed by the Insurance Sector Education and Training Authority (INSETA). This material can be downloaded from their website www.inseta.org.za
DVD

In an attempt to assist candidates with the preparation for the level 1 examination(s), the FSB recorded a DVD that can be used as part of the preparation process. The content of the DVD focus on the structure and content of the level 1 examination, and provides guidance on what to expect and how to approach a multiple-choice examination. The DVD is available in English and Afrikaans.

Copies of the DVD are made and distributed by Moonstone on behalf of the FSB, and the only cost involved would be the cost of copying, packaging and couriering of the DVD.

Positive feedback was received from the candidates who have already made use of this DVD. We trust therefore that the DVD will assist candidates to understand how to better approach the examination which in turn may result in candidates being more prepared for the examination.

Candidates are welcome to order a copy of the DVD by using the following link http://www.moonstone.co.za/services/regulatory-exam-body/re-library/ or call (021) 883 8000

For more information on Regulatory Examinations Registration, please visit the following useful links:

 

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