Exemption of Services Under Supervision – New Consultation Paper – Impact on new Fit and Proper Requirements

The FSCA published a new consultation paper on “Exemption of Services under Supervision” dated 31 July 2018.

We highlight the proposed changes that impact the Fit and Proper requirements specifically.  The paper addresses more than just the Fit and Proper requirements and we will provide more details in a follow-up article.

You can download the consultation paper for full details.

Purpose

To withdraw the 2008 Exemption and replace it with the new draft exemption published in Annexure A to the consultation paper.

The Exemption is needed to facilitate the entry of new participants into the financial services industry, without compromising the fair treatment of clients, nor good outcomes for them.

The new proposed exemptions extend the relief previously granted by the 2008 Exemption to the new Fit and Proper requirements that became effective on 1 April 2018.

New Entry Level Requirements

The minimum qualification requirements to enter the financial services industry has been lowered or removed for the following:

• Representative of a Category I FSP appointed in terms of section 22(b)(ii) of the Fit and Proper Requirements (execution of sales only) must have
  1. a Grade 10 (was Grade 12); or
  2. an academic achievement equivalent to Grade 10 (was Grade 12).
• Representative of a Category I FSP appointed to render financial services only in respect of Long-Term Insurance subcategory A and/or Friendly Society Benefits no longer have to comply with any minimum qualification.

Examination, Class of Business and Qualifications requirements

The following is proposed for all representatives other than a “specific representative”¹:

• Comply with the applicable Class of Business training requirements within 6 months of date of first appointment² – currently the Class of Business training requirements must be met before a representative can render financial services under supervision;
• Comply with the applicable Regulatory Examination requirements within 2 years of date of first appointment;
• Comply with the applicable qualification requirements within 6 years of date of first appointment.

The following is proposed for specific representatives to render financial services in terms of a Tier 1 product, but excluding representatives registered to perform execution of sales only:

• Comply with the applicable Class of Business training requirements within 6 months of date of first appointment – currently the Class of Business training requirements must be met before a representative can render financial services under supervision;
• Comply with the applicable Regulatory Examination requirements within 2 years of date of first appointment;
• Comply with the applicable qualification requirements applicable to the Tier 1 product within 6 years of date of first appointment.

CPD Requirements

A representative must comply with the applicable CPD requirements from the time they are no longer under supervision.  In other words, reps under supervision are not required to do CPD whilst they are under supervision.

Closing Remarks

The new proposed exemptions are positive as far as the Fit and Proper Requirements are concerned.  There are more changes applicable to the supervision process and requirements, which is beyond the scope of this update.

Stakeholders have until 31 August 2018 to submit comments on the paper.

1 – “Specific Representative” means a representative of a Cat I FSP who only has date of appointment to render financial services in respect of a Tier 2 financial product or perform the execution of sales in accordance with section 22(b)(ii) of the Fit and Proper Requirements in respect of a Tier 1 financial product and that complies with the qualification requirements applicable to the financial services and financial products mentioned earlier.

2 – Date of first appointment means the date on which a person was first appointed as a representative of a financial services provider.