Re-entering the financial industry?
A case study on re-entering the financial industry as a representative
Are you considering re-entering the financial service environment as a representative after a long absence from the industry? Or do you wish to appoint a representative that has not rendered financial services for quite some time? Here is what you need to know regarding a representative’s fit and proper status and how it may affect his/her appointment as a representative.
The fit and proper requirements for a representative are as follow:
Personal character qualities of honesty, integrity and good standing;
Competence (Minimum experience, qualification, regulatory exams, Class of business Training and Product specific training);
Continuous professional development; and
A representative’s date of first appointment date (DOFA date) remains unchanged.
The date of first appointment refers to the first date a representative was appointed (as a representative) by a financial services provider in the financial industry. Previously a representative who left the financial industry for a period longer than 5 years, was able to request the Regulator to “reset” his or her DOFA date and, subsequently, was able to re-enter the financial industry as a new entrant rendering services under supervision. This practice gave the representative additional time to comply with the fit and proper requirements, such as the completion of the RE exams and the qualification requirements.
During May 2015, the FSB (now FSCA) issued a FAIS Circular (2 of 2015) in which the registrar clarified the application of both the five year experience requirement and date of first appointment (DOFA), confirming that the aforementioned practice was incorrect. In the Circular the Registrar clearly states: “A person’s DOFA date is static and cannot change as it reflects the first date on which the person was appointed or approved to perform a particular financial service in respect of a particular category of FSP and subcategory of financial product.”
Why is the DOFA date of such importance?
It is used to determine three things:
The qualification requirements that apply to a person;
The timeframe in which a person must meet the qualification and regulatory examination requirements; and
To some extent, used to track the experience gained by a representative.
Application of the Experience Requirement ( “5 year requirement”)
Section 16 of Board notice 194 of 2017 stipulates that the experience ( in relation to a financial product and category of FSP) gained by a representative, lapses when the representative has not rendered a particular financial service, with respect to a particular financial product of a particular category of FSP, for a period of five consecutive years. Such a person must render financial services under supervision until such time he or she has obtained the required experience.
Angie was appointed as a representative after she matriculated. Her first date of appointment as a new entrant to the financial environment was the 1st of March 2012. She rendered advice and intermediary services for Short-term insurance products. After 6 months she, however, decided she wants a career as an actress and went to Los Angeles to pursue her dreams of becoming a superstar. After several failed movies she decided to return to South Africa and pursue her career as a financial advisor. She has not completed her Regulatory exam or any additional qualification but informs her potential employer (Best Financial Services Ever (Pty) Ltd) that she has gained the necessary experience and is of the opinion that she is a suitable candidate as a representative for short-term insurance products and she can start working on the 5th of August 2018.
Unfortunately, Angie’s statement is incorrect. If Best Financial Services Ever (Pty) Ltd appoints and loads her as a representative on its representative register the FSP will be non-compliant. Angie is in fact not a suitable candidate as a representative. Let us have a closer look at Angie’s fit and proper status with specific reference to her competency requirements:
Experience: Angie only gained the minimum experience required for intermediary services in relations to short-term insurance products. Further, according to the 5 year requirement, her experience lapsed. She will thus have to render services under supervision.
Regulatory exams: BN 260 of 2013 states that a representative must successfully complete the relevant first level regulatory examination by 30 June after the expiry of 24 months from the first date of appointment as a representative. Her deadline to write the RE exams was the 30th of June 2014. She will be required to successfully complete her Regulatory exam before her appointment.
Qualification: BN 260 of 2013 states that a representative must obtain the relevant qualification by 30 June after the expiry of 72 months from the date of first appointment as a representative. Angie only had until 30th of June 2018 to obtain her a recognised qualification.
Despite the aforementioned hurdles in her competence requirements, Angie is required to complete her class of business training (requirement effective from the 1st of August 2018) and product specific training (requirement effective as of the 1st of May 2018) before her appointment as a representative since none of the transitional provision will be applicable to her. The FSP will also be required to ensure that she complies with the honesty and integrity, CPD and operational requirements.
It is advisable for any FSP to ensure that, before appointing a representative, the representative has the relevant skills, knowledge, and experience for the function he/she will be performing and where the representative is falling short, assist the representative to meet the requirements.
How can Etude help?
To assist you in managing your responsibility to identify, develop and maintain your staff’s professional credentials, Etude has a variety of tailored services that can be used to remain compliant and give you peace of mind.
Assess and verify your employees’ fit and proper status.
2. Career Development
Allow us to assist you in a tailor-made solution to develop your employees’ skills.
3. Training Programmes
Etude can provide you with insight into the various regulatory training programs available at our preferred service providers.
Please visit our website at www.etude.co.za for further information or contact us directly at 087 550 1115.