FAIS : Experience Requirements For Fit and Proper Status.
Everyone has heard about the FAIS Act (Financial Advisory and Intermediary Services Act) and everyone, even those companies who deal with it on a daily basis is running scared when they hear the acronym. This fear is with good reason, because a mere breach can lead to severe penalties for financial services providers and even the revocation of the FSP’s licence.
FAIS should therefore not be taken lightly and it is important to stay up to date with developments in this Act, especially if you are a FSP.
In order for a FSP to give advice on financial product that FSP and its representatives need to meet the Fit and Proper requirements under the FAIS Act.
An important section of the requirements of a representative complying with the requirements of Fit and Proper, explained more fully in Board Notice 106 of 2008, entails such representatives complying with the minimum experience requirements before being permitted to act as a representative. This is in addition to minimum qualification requirements and the successful completion of prescribed regulatory exams.
Board Notice 106 sets out the experience requirements as follows:
(1) Experience Requirements for Category I:
·(a) Subject to the provisions of the Act, an FSP (who is a sole proprietor) in respect of Category I must meet the minimum experience applicable to the subcategories as described in either column two and/or three of Table A below. The experience must be practical experience gained in the rendering of financial services in respect of Category I and the subcategories concerned: Provided that:
(i) such experience involved the active and ongoing gaining of knowledge, skills and expertise required in terms of the Act;
(ii) such experience was obtained through the active involvement of in rendering such financial services, irrespective of whether the experience was gained in the course of rendering such services under supervision
(iii) such experience could have been gained either within or outside the Republic of South Africa;
(iv) such experience could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(v) such experience may have been gained simultaneously in multiple subcategories, provided that proof of such experience can be provided.
(vi) where an FSP changes its licence restrictions to include additional financial services or renders services in relation to additional subcategories, the FSP is required to meet the experience requirements relating to the additional subcategories with the proviso that where the change in restriction will include:
(aa) additional financial service (advice or the rendering of intermediary services, as applicable), the FSP is required to obtain 50 percent of the experience requirements applicable to the additional financial services;
(bb) an additional subcategory, the FSP is required to gain 100 percent of the experience requirements relation to the additional subcategory.
·(b) A representative of a FSP in respect of Category I at the date of appointment by the FSP comply with the same relevant experience requirements as referred to in sub-paragraph 1(a), provided that a representative who does not meet such requirement on date of authorisation, may be exempted by the Registrar to acquire the required minimum experience while working under supervision.
·(c) A key individual of an FSP in respect of Category I, must, on the date of approval by the Registrar, have at least one (1) year's practical experience in the management or oversight of the activities of a business or part thereof. Provided that such experience:
(i) could have been gained either within or outside the Republic of South Africa;
(ii) could have been gained during intermittent periods, not more than 5 years prior to the application for approval and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(iii) may have been gained in the management or oversight of services similar to or corresponding to the financial services rendered by the FSP.
Table A : Category 1 experience requirements for an FSP and representative
Column One subcategory Column Two advice: Column Three intermediary services:
minimum experience minimum experience
1.1 Long-term Insurance Category A [1 year] 6 months [6] 2 months
1.2 Short-term Insurance Personal Lines 1 years 6 months
1.3 Long-term Insurance Category B 1 years 6 months
1.4 Long-term Insurance Category C 1 years 6 months
1.5 Retail Pension Benefits 1 years 6 months
1.6 Short-term Insurance Commercial Lines 1 years 6 months
1.7 Pension Fund Benefits 1 years 6 months
1.8 Securities and instruments: Shares 2 years 1 year
1.9 Securities and Instruments: Money 2 years 1 year
market instruments
1.10 Securities and Instruments: 2 years 1 year
Debentures and securitised debt
1.11 Securities and Instruments: 2 years 1 year
Warrants, certificates and other
instruments acknowledging debt
1.12 Securities and Instruments: Bonds 2 years 1 year
1.13 Securities and Instruments: 2 years 1 year
Derivative instruments excluding warrants
1.14 Participatory Interests in one or 1 years 1 year
more collective Investment schemes
1.15 Forex Investment Business 2 years 1 year
1.16 Health Service Benefits 2 years 2 years
1.17 Long-term Deposits 6 months 3 months
1.18 Short-term Deposits 6 months 3 months
1.19 Friendly Society Benefits 6 months 2 months
(2) Category II : Experience Requirements:
·(a) Subject to the provisions of the Act, an FSP (who is a sole proprietor) in respect of Category II must meet the minimum experience applicable to the subcategories as described in column two of Table B below. The experience must be practical experience gained in the rendering of financial services in respect of Category II and the subcategories concerned: Provided that:
(i) such experience involved the active and ongoing gaining of knowledge, skills and expertise required in terms of the Act;
(ii) such experience was obtained through the active involvement in rendering such financial services, irrespective of whether the experience was gained in the course of undergoing services under supervision;
(iii) the experience could have been gained either within or outside the Republic of South Africa;
(iv) the experience could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(v) the experience may have been gained simultaneously in multiple subcategories, provided that proof of such experience can be provided;
(vi) may have been gained in a team environment where the person participated in the process of making investment decisions whilst working under supervision;
(vii) where a Category II FSP applies for the amendment of the restrictions on its licence to allow such FSP to render the financial services referred to in sub-paragraph (a) in additional subcategories, the FSP must comply with the experience requirements applicable to the additional subcategories.
·(b) A representative of an FSP in respect of Category II, must at appointment by the FSP comply with the same relevant experience requirements as referred to in sub-paragraph 2(a) above, as the FSP with authorisation, provided that a representative who does not meet such requirement on date of authorisation, may be exempted by the Registrar to acquire the required minimum experience while working under supervision.
·(c) A key individual of a provider in respect of Category II, must have at least one (1) year's practical experience in the management and oversight of services similar to or corresponding to the financial services rendered by the provider and must have actually provided the financial services in relation to the subcategories or part thereof on date of approval. Provided that:
(i) the experience could have been gained either within or outside the Republic of South Africa;
(ii) the experience could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(iii) the experience may have been gained in the management and oversight of services similar to or corresponding to the financial services rendered by the provider.
Table B: Category II Experience Requirements for FSP And Representative
Column One Column Two
Subcategory Advice
Minimum
Experience
2.1 Long-term Insurance Category B 2 years
2.2 Long-term Insurance Category C 2 years
2.3 Retail Pension Benefits 2 years
2.4 Pension Fund Benefits 2 years
2.5 Securities and instruments: Shares 3 years
2.6 Securities and Instruments: Money market 3 years
instruments
2.7 Securities and Instruments: Debentures and 3 years
securitised debt
2.8 Securities and Instruments: Warrants, 3 years
certificates and other instruments acknowledging debt
2.9 Securities and Instruments: Bonds 3 years
2.10 Securities and Instruments: Derivative 3 years
instruments excluding warrants
2.11 Participatory Interests in one or more 2 years
collective Investment schemes
2.12 Forex Investment Business 3 years
2.13 Long-term Deposits 1 year
2.14 Short-term Deposits 1 year
(3) Category IIA : Experience Requirements:
·(a) Subject to the provisions of the Act, an FSP (who is a sole proprietor) in respect of Category IIA must have 3 years experience. The experience must be practical experience gained in the rendering of financial services in respect of Category IIA:
Provided that :
(i) such experience involved the active and ongoing gaining of knowledge, skills and expertise required in terms of the Act;
(ii) such experience was obtained through the active involvement in rendering such financial services, irrespective of whether the experience was gained in the course of undergoing services under supervision;
(iii) the experience could have been gained either within or outside the Republic of South Africa;
(iv) the experience could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act.
·(b) A representative of an FSP in respect of Category II, must at appointment by the FSP comply with the same relevant experience requirements as referred to in sub-paragraph 3(a) above, as the FSP with authorisation, provided that a representative who does not meet such requirement on date of authorisation, may be exempted by the Registrar to acquire the required minimum experience while working under supervision.
·(c) may have been gained in the management and/or oversight of services similar to or corresponding to the financial services rendered by the provider.A key individual of a provider in respect of Category IIA, must have at least one (1) year's practical experience in the management and oversight of services similar to or corresponding to the financial services rendered by the provider and must have actually provided the financial services in relation to Category IIA on date of approval. Provided that:
(i) the experience could have been gained either within or outside the Republic of South Africa;
(ii) the experience could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(iii) the experience may have been gained in the management and oversight of services similar to or corresponding to the financial services rendered by the provider.
(4) Category III : Experience Requirements:
·(a) Subject to the provisions of the Act, the key individual of a Category III FSP must have 3 year's practical experience gained in the rendering of financial services as referred to in the definition of "administrative FSP": and must have at least one (1) year's practical experience in the management and/or oversight of services similar to or corresponding to the financial services rendered by the FSP: Provided that such practical experience:
(i) involved the active and ongoing gaining of knowledge, skills and expertise required in terms of the Act;
(ii) was obtained through the active involvement in the rendering of such financial services
(iii) could have been gained either within or outside the Republic of South Africa;
(iv) could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(v) may have been gained simultaneously in multiple subcategories provided that proof of such experience can be provided and irrespective of whether the experience was gained whilst rendering such services under supervision.
·(b) A representative of a Category III FSP must, unless exempted, at the date of appointment by the FSP comply with the same relevant experience requirement as referred to in subparagraph 4(a), excluding the requirement to have at least one year's practical experience in the management and/or oversight of services similar to or corresponding to the financial services rendered by the FSP.
(5) Experience Requirements for Category IV:
·(a) Subject to the provisions of the Act, a Category IV FSP (who is a sole proprietor), must have one (1) year's experience gained in the rendering of financial services as referred to in the definition of "administration of assistance policies": Provided that such practical experience:
(i) involved the active and ongoing gaining of knowledge, skills and expertise required in terms of the Act;
(ii) was obtained through the active involvement in the rendering of such intermediary services and irrespective of whether the experience was gained whilst rendering such services under supervision: provided that proof of such experience can be provided;
(iii) could have been gained either within or outside the Republic of South Africa;
(iv) could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
·(b) A representative of an FSP in respect of Category IV must with authorisation by the FSP meet the same relevant practical experience requirement, mentioned in sub-paragraph 1(a) above, as an FSP (who is a sole proprietor) on authorisation, provided that a representative who does not meet such requirement on date of authorisation by the FSP, may be exempted by the Registrar to acquire the required minimum experience while working under supervision for the minimum experience period.
·(c) A key individual of an FSP in respect of Category IV must, on the date of approval by the Registrar, have at least one (1) year's practical experience in the management and/or oversight of services similar to or corresponding to the financial services rendered by the FSP: Provided that such practical experience:
(i) could have been gained within or outside the Republic of South Africa;
(ii) could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(iii) may have been gained in the management and/or oversight of services similar to or corresponding to the financial services rendered by the provider.
If the above confuses you, don’t feel alone, many people do not know what these requirements are and it only makes sense to contact attorneys or other FSP’s who have gone through the exercise of FAIS fit and proper requirements.
The term experience is defined in the Act as practical experience gained in the rendering of services similar or corresponding to financial services. This experience must involve the active and ongoing gaining of knowledge and skills and expertise required and a certain period of this experience must be relevant to the subcategory of financial products in respect of which the representative requires authorisation.
It is irrespective whether the experience was gained as owner, trustee, associate, member, director, partner, employee, consultant of the business or in the course of undergoing practical training or a learnership.
With staff turnover as well as organic growth affecting most businesses at some time or another, coupled with the recruitment of new entrants to the marketplace, Financial Services Providers are faced with the prospect of employing persons who do not have the requisite experience and who have no way of acquiring it. The same applies in respect of the new qualification requirements in Board Notice 106 of 2008. This is, in essence, a catch 22 situation, which is addressed by means of Board Notice 104 of 2007.
Board notice 104 provides for persons who do not meet the basic experience requirements to conduct themselves as a representatives, and be registered as such, provided that they comply with certain criteria. This is known as services under supervision and some guidance is given in terms of the requirements of the supervision process itself.
It must be noted here that the Financial Services Board has closely aligned the requirements in terms of this with the standards applied by the Financial Services Authority (FSA) in the UK. Board Notice 104 of 2008 has been legislated to replace the previous exemption, and brings a lot more clarity to the table in terms of requirements and the supervision process. It is effective 31 December 2008.
The object of the exemption is to relieve FSPs of certain of the experience and qualifications as prescribed in Board Notice 106 of 2008 in respect of their representatives at date of appointment. This provides for an integration and training period during which such representatives can acquire both the minimum experience and obtain the necessary qualifications and regulatory exam requirements. On the job training, so to speak for new entrants to the industry.
Extent of exemption in respect of fit and proper requirements
The following is exempted:
·(a). The experience requirements to be found in:
par. 4(1)b - this is the Column 2 or 3 requirements of Table A for Cat I providers,
par. 4(2)b - this is the Column 2 requirements of Table B for Cat II providers); and
par. 4(3)b - which is 3 years appropriate experience for Cat III providers;
·(b) Qualifications in terms of par 5(1)d and 5(2)d - this refers to the Gazetted recognised qualifications for Category I, II, IIA and III providers;
·(c) The first and second level regulatory exams as per par. 6(2)c and 6(3)c; and
·(d) The continuous professional requirements (CPD) as per par 7(1).
Even more confusing could be the sections relating to exemption. Once again, it might be prudent to contact someone who can assist you with FAIS compliance such as your attorneys or an independent FAIS Compliance Officer.
Adrian Naudé
Naudes Attorneys
Everyone has heard about the FAIS Act (Financial Advisory and Intermediary Services Act) and everyone, even those companies who deal with it on a daily basis is running scared when they hear the acronym. This fear is with good reason, because a mere breach can lead to severe penalties for financial services providers and even the revocation of the FSP’s licence.
FAIS should therefore not be taken lightly and it is important to stay up to date with developments in this Act, especially if you are a FSP.
In order for a FSP to give advice on financial product that FSP and its representatives need to meet the Fit and Proper requirements under the FAIS Act.
An important section of the requirements of a representative complying with the requirements of Fit and Proper, explained more fully in Board Notice 106 of 2008, entails such representatives complying with the minimum experience requirements before being permitted to act as a representative. This is in addition to minimum qualification requirements and the successful completion of prescribed regulatory exams.
Board Notice 106 sets out the experience requirements as follows:
(1) Experience Requirements for Category I:
·(a) Subject to the provisions of the Act, an FSP (who is a sole proprietor) in respect of Category I must meet the minimum experience applicable to the subcategories as described in either column two and/or three of Table A below. The experience must be practical experience gained in the rendering of financial services in respect of Category I and the subcategories concerned: Provided that:
(i) such experience involved the active and ongoing gaining of knowledge, skills and expertise required in terms of the Act;
(ii) such experience was obtained through the active involvement of in rendering such financial services, irrespective of whether the experience was gained in the course of rendering such services under supervision
(iii) such experience could have been gained either within or outside the Republic of South Africa;
(iv) such experience could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(v) such experience may have been gained simultaneously in multiple subcategories, provided that proof of such experience can be provided.
(vi) where an FSP changes its licence restrictions to include additional financial services or renders services in relation to additional subcategories, the FSP is required to meet the experience requirements relating to the additional subcategories with the proviso that where the change in restriction will include:
(aa) additional financial service (advice or the rendering of intermediary services, as applicable), the FSP is required to obtain 50 percent of the experience requirements applicable to the additional financial services;
(bb) an additional subcategory, the FSP is required to gain 100 percent of the experience requirements relation to the additional subcategory.
·(b) A representative of a FSP in respect of Category I at the date of appointment by the FSP comply with the same relevant experience requirements as referred to in sub-paragraph 1(a), provided that a representative who does not meet such requirement on date of authorisation, may be exempted by the Registrar to acquire the required minimum experience while working under supervision.
·(c) A key individual of an FSP in respect of Category I, must, on the date of approval by the Registrar, have at least one (1) year's practical experience in the management or oversight of the activities of a business or part thereof. Provided that such experience:
(i) could have been gained either within or outside the Republic of South Africa;
(ii) could have been gained during intermittent periods, not more than 5 years prior to the application for approval and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(iii) may have been gained in the management or oversight of services similar to or corresponding to the financial services rendered by the FSP.
Table A : Category 1 experience requirements for an FSP and representative
Column One subcategory Column Two advice: Column Three intermediary services:
minimum experience minimum experience
1.1 Long-term Insurance Category A [1 year] 6 months [6] 2 months
1.2 Short-term Insurance Personal Lines 1 years 6 months
1.3 Long-term Insurance Category B 1 years 6 months
1.4 Long-term Insurance Category C 1 years 6 months
1.5 Retail Pension Benefits 1 years 6 months
1.6 Short-term Insurance Commercial Lines 1 years 6 months
1.7 Pension Fund Benefits 1 years 6 months
1.8 Securities and instruments: Shares 2 years 1 year
1.9 Securities and Instruments: Money 2 years 1 year
market instruments
1.10 Securities and Instruments: 2 years 1 year
Debentures and securitised debt
1.11 Securities and Instruments: 2 years 1 year
Warrants, certificates and other
instruments acknowledging debt
1.12 Securities and Instruments: Bonds 2 years 1 year
1.13 Securities and Instruments: 2 years 1 year
Derivative instruments excluding warrants
1.14 Participatory Interests in one or 1 years 1 year
more collective Investment schemes
1.15 Forex Investment Business 2 years 1 year
1.16 Health Service Benefits 2 years 2 years
1.17 Long-term Deposits 6 months 3 months
1.18 Short-term Deposits 6 months 3 months
1.19 Friendly Society Benefits 6 months 2 months
(2) Category II : Experience Requirements:
·(a) Subject to the provisions of the Act, an FSP (who is a sole proprietor) in respect of Category II must meet the minimum experience applicable to the subcategories as described in column two of Table B below. The experience must be practical experience gained in the rendering of financial services in respect of Category II and the subcategories concerned: Provided that:
(i) such experience involved the active and ongoing gaining of knowledge, skills and expertise required in terms of the Act;
(ii) such experience was obtained through the active involvement in rendering such financial services, irrespective of whether the experience was gained in the course of undergoing services under supervision;
(iii) the experience could have been gained either within or outside the Republic of South Africa;
(iv) the experience could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(v) the experience may have been gained simultaneously in multiple subcategories, provided that proof of such experience can be provided;
(vi) may have been gained in a team environment where the person participated in the process of making investment decisions whilst working under supervision;
(vii) where a Category II FSP applies for the amendment of the restrictions on its licence to allow such FSP to render the financial services referred to in sub-paragraph (a) in additional subcategories, the FSP must comply with the experience requirements applicable to the additional subcategories.
·(b) A representative of an FSP in respect of Category II, must at appointment by the FSP comply with the same relevant experience requirements as referred to in sub-paragraph 2(a) above, as the FSP with authorisation, provided that a representative who does not meet such requirement on date of authorisation, may be exempted by the Registrar to acquire the required minimum experience while working under supervision.
·(c) A key individual of a provider in respect of Category II, must have at least one (1) year's practical experience in the management and oversight of services similar to or corresponding to the financial services rendered by the provider and must have actually provided the financial services in relation to the subcategories or part thereof on date of approval. Provided that:
(i) the experience could have been gained either within or outside the Republic of South Africa;
(ii) the experience could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(iii) the experience may have been gained in the management and oversight of services similar to or corresponding to the financial services rendered by the provider.
Table B: Category II Experience Requirements for FSP And Representative
Column One Column Two
Subcategory Advice
Minimum
Experience
2.1 Long-term Insurance Category B 2 years
2.2 Long-term Insurance Category C 2 years
2.3 Retail Pension Benefits 2 years
2.4 Pension Fund Benefits 2 years
2.5 Securities and instruments: Shares 3 years
2.6 Securities and Instruments: Money market 3 years
instruments
2.7 Securities and Instruments: Debentures and 3 years
securitised debt
2.8 Securities and Instruments: Warrants, 3 years
certificates and other instruments acknowledging debt
2.9 Securities and Instruments: Bonds 3 years
2.10 Securities and Instruments: Derivative 3 years
instruments excluding warrants
2.11 Participatory Interests in one or more 2 years
collective Investment schemes
2.12 Forex Investment Business 3 years
2.13 Long-term Deposits 1 year
2.14 Short-term Deposits 1 year
(3) Category IIA : Experience Requirements:
·(a) Subject to the provisions of the Act, an FSP (who is a sole proprietor) in respect of Category IIA must have 3 years experience. The experience must be practical experience gained in the rendering of financial services in respect of Category IIA:
Provided that :
(i) such experience involved the active and ongoing gaining of knowledge, skills and expertise required in terms of the Act;
(ii) such experience was obtained through the active involvement in rendering such financial services, irrespective of whether the experience was gained in the course of undergoing services under supervision;
(iii) the experience could have been gained either within or outside the Republic of South Africa;
(iv) the experience could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act.
·(b) A representative of an FSP in respect of Category II, must at appointment by the FSP comply with the same relevant experience requirements as referred to in sub-paragraph 3(a) above, as the FSP with authorisation, provided that a representative who does not meet such requirement on date of authorisation, may be exempted by the Registrar to acquire the required minimum experience while working under supervision.
·(c) may have been gained in the management and/or oversight of services similar to or corresponding to the financial services rendered by the provider.A key individual of a provider in respect of Category IIA, must have at least one (1) year's practical experience in the management and oversight of services similar to or corresponding to the financial services rendered by the provider and must have actually provided the financial services in relation to Category IIA on date of approval. Provided that:
(i) the experience could have been gained either within or outside the Republic of South Africa;
(ii) the experience could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(iii) the experience may have been gained in the management and oversight of services similar to or corresponding to the financial services rendered by the provider.
(4) Category III : Experience Requirements:
·(a) Subject to the provisions of the Act, the key individual of a Category III FSP must have 3 year's practical experience gained in the rendering of financial services as referred to in the definition of "administrative FSP": and must have at least one (1) year's practical experience in the management and/or oversight of services similar to or corresponding to the financial services rendered by the FSP: Provided that such practical experience:
(i) involved the active and ongoing gaining of knowledge, skills and expertise required in terms of the Act;
(ii) was obtained through the active involvement in the rendering of such financial services
(iii) could have been gained either within or outside the Republic of South Africa;
(iv) could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(v) may have been gained simultaneously in multiple subcategories provided that proof of such experience can be provided and irrespective of whether the experience was gained whilst rendering such services under supervision.
·(b) A representative of a Category III FSP must, unless exempted, at the date of appointment by the FSP comply with the same relevant experience requirement as referred to in subparagraph 4(a), excluding the requirement to have at least one year's practical experience in the management and/or oversight of services similar to or corresponding to the financial services rendered by the FSP.
(5) Experience Requirements for Category IV:
·(a) Subject to the provisions of the Act, a Category IV FSP (who is a sole proprietor), must have one (1) year's experience gained in the rendering of financial services as referred to in the definition of "administration of assistance policies": Provided that such practical experience:
(i) involved the active and ongoing gaining of knowledge, skills and expertise required in terms of the Act;
(ii) was obtained through the active involvement in the rendering of such intermediary services and irrespective of whether the experience was gained whilst rendering such services under supervision: provided that proof of such experience can be provided;
(iii) could have been gained either within or outside the Republic of South Africa;
(iv) could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
·(b) A representative of an FSP in respect of Category IV must with authorisation by the FSP meet the same relevant practical experience requirement, mentioned in sub-paragraph 1(a) above, as an FSP (who is a sole proprietor) on authorisation, provided that a representative who does not meet such requirement on date of authorisation by the FSP, may be exempted by the Registrar to acquire the required minimum experience while working under supervision for the minimum experience period.
·(c) A key individual of an FSP in respect of Category IV must, on the date of approval by the Registrar, have at least one (1) year's practical experience in the management and/or oversight of services similar to or corresponding to the financial services rendered by the FSP: Provided that such practical experience:
(i) could have been gained within or outside the Republic of South Africa;
(ii) could have been gained during intermittent periods, not more than 5 years prior to the application and includes experience gained prior to the date envisaged in section 7(1) of the Act;
(iii) may have been gained in the management and/or oversight of services similar to or corresponding to the financial services rendered by the provider.
If the above confuses you, don’t feel alone, many people do not know what these requirements are and it only makes sense to contact attorneys or other FSP’s who have gone through the exercise of FAIS fit and proper requirements.
The term experience is defined in the Act as practical experience gained in the rendering of services similar or corresponding to financial services. This experience must involve the active and ongoing gaining of knowledge and skills and expertise required and a certain period of this experience must be relevant to the subcategory of financial products in respect of which the representative requires authorisation.
It is irrespective whether the experience was gained as owner, trustee, associate, member, director, partner, employee, consultant of the business or in the course of undergoing practical training or a learnership.
With staff turnover as well as organic growth affecting most businesses at some time or another, coupled with the recruitment of new entrants to the marketplace, Financial Services Providers are faced with the prospect of employing persons who do not have the requisite experience and who have no way of acquiring it. The same applies in respect of the new qualification requirements in Board Notice 106 of 2008. This is, in essence, a catch 22 situation, which is addressed by means of Board Notice 104 of 2007.
Board notice 104 provides for persons who do not meet the basic experience requirements to conduct themselves as a representatives, and be registered as such, provided that they comply with certain criteria. This is known as services under supervision and some guidance is given in terms of the requirements of the supervision process itself.
It must be noted here that the Financial Services Board has closely aligned the requirements in terms of this with the standards applied by the Financial Services Authority (FSA) in the UK. Board Notice 104 of 2008 has been legislated to replace the previous exemption, and brings a lot more clarity to the table in terms of requirements and the supervision process. It is effective 31 December 2008.
The object of the exemption is to relieve FSPs of certain of the experience and qualifications as prescribed in Board Notice 106 of 2008 in respect of their representatives at date of appointment. This provides for an integration and training period during which such representatives can acquire both the minimum experience and obtain the necessary qualifications and regulatory exam requirements. On the job training, so to speak for new entrants to the industry.
Extent of exemption in respect of fit and proper requirements
The following is exempted:
·(a). The experience requirements to be found in:
par. 4(1)b - this is the Column 2 or 3 requirements of Table A for Cat I providers,
par. 4(2)b - this is the Column 2 requirements of Table B for Cat II providers); and
par. 4(3)b - which is 3 years appropriate experience for Cat III providers;
·(b) Qualifications in terms of par 5(1)d and 5(2)d - this refers to the Gazetted recognised qualifications for Category I, II, IIA and III providers;
·(c) The first and second level regulatory exams as per par. 6(2)c and 6(3)c; and
·(d) The continuous professional requirements (CPD) as per par 7(1).
Even more confusing could be the sections relating to exemption. Once again, it might be prudent to contact someone who can assist you with FAIS compliance such as your attorneys or an independent FAIS Compliance Officer.
Adrian Naudé
Naudes Attorneys