Secondary

moonstone-financial-sector-regulation-bill-tabled

Competency Framework Review

The determination of Fit and Proper requirements, published in 2008, referred to four competency requirements:

  • Experience
  • Qualifications
  • Regulatory Exams (Level 1 FAIS Legislation and Level 2 Product knowledge)
  • Continuous Professional Development (CPD)

The first two, plus the Level 1 REs were implemented. At the FSB’s FAIS Conference in March 2016, it was pointed out that the challenges regarding Level 2 examinations will be significantly more complex. Where Level 1 entailed only 4 examinations, the Level 2 version would consist of at least 26 examinations.

Product Knowledge Examinations

Taking into account the lessons learnt from the Level 1 examinations, the Regulator will consider the following options to ensure relevant product knowledge:

  • It will have to be practical, clear and cost effective;
  • Should cater for persons in multiple sub-categories;
  • Should cater for significant and/or on-going product updates/changes;
  • Should take into consideration the relevant RDR requirements
  • Product providers to conduct product training and assessment;
  • Should be risk-based and proportionate.

Continuous Professional Development

A general exemption was issued in order to consider a more viable process to implement CPD. At the March FAIS Conference, the following challenges were identified:

  • The process should prevent an administrative burden to approve and record CPD providers;
  • Prevent a multitude of different CPD programmes/interventions/activities to be individually approved and re-approved after the expiry date;
  • Not create challenges in terms of updating and maintaining approved CPD providers and programmes;
  • Be cost effective, clear and practical;
  • Allow support to be provided to affected persons who are unsure about which CPD programmes / providers to use;
  • Be risk-based and proportionate.

Principles of a Future Model for Product Knowledge and CPD

Requirements will take into consideration the principle of proportionality as well as risk to the consumer. In less complicated products, which serve the lower end of the market, product design prescription will address and prevent abuses.

Conversely, professional standards should apply to specific categories of authorised persons based on the activities they perform and the financial products involved. The existing FAIS fit and proper competency requirements will remain in place and will be used as the basis from which any further requirements will be set, with applicable alignment with future regulatory requirements, i.e. RDR / FSR Bill.

In FAIS Newsletter 20, this is summed up as follows:

The consultation process regarding the competency framework is still in progress. The objective of this review is to build on the existing FAIS “fit and proper” competency requirements by establishing an effective and proportionate regulatory framework to ensure that advisers and other intermediaries have the right levels of competence, namely product related knowledge, appropriate standards of professionalism and undergo continuous professional development where necessary.

The development of appropriate standards for different levels of technical knowledge – including standards for financial planners and standards for advisers in so-called simple products models – will also be dealt with through this work.

Wider industry consultation will take place as soon as the FSB has developed a draft for further discussion.

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