Secondary

DOFA and the Five Year Experience Requirement

FAIS Information Circular 2 of 2015, dated 12 April 2015, clarifies a practice which both the Registrar and the industry appears to have applied incorrectly.

At the heart of the matter lies the Fit and Proper requirement that experience must have been gained within five years of an application by a person for authorisation, approval or appointment as a financial services provider (FSP), key individual or representative.

The purpose of the five year requirement is to ensure that a person’s practical experience remains appropriate, applicable and relevant for the category of FSP and subcategory of financial product in respect of which authorisation, approval or appointment is sought.

The effect of the five year requirement is that the experience previously gained by an applicant in respect of a particular category of FSP and/or subcategory of financial product “lapses” where he/she has not rendered financial services in respect of that category or financial product for a period exceeding five years. In other words, the experience previously gained can no longer be recognised as experience as referred to in Part IV of the Fit and Proper Requirements.

Therefore, an applicant who has not rendered financial services in respect of a particular category of FSP and/or subcategory of financial product within a period of five years prior to his/her application for authorisation, approval or appointment must render financial services under supervision until such time that he/she has obtained the required experience.

A critical aspect in the determination of a person’s compliance with the experience requirement is the date of first appointment (DOFA). This is defined as “…the first date on which the representative was appointed by any financial services provider to render financial services in relation to a specific Category or subcategory”. In relation to a key individual means: “the first date on which a key individual was first approved by the Registrar to manage and oversee the rendering of financial services for any financial services provider in relation to a specific Category or subcategory”.

The Registrar notes that it, and the industry, “…incorrectly adopted the practice to regard a person who has not rendered financial services for a period exceeding five years and who then wishes to re-enter the industry, as a new entrant with a new DOFA date.

This allowed such a person to work as a new entrant under supervision whilst obtaining the relevant qualification and/or completing the relevant regulatory examination, thus allowing such a person six years to complete a qualification and two years to complete the relevant regulatory examination from his/her new DOFA date. Where such a person had worked under supervision before, this was not taken into account, thus allowing additional time to work under supervision.

Those first appointed prior to 1 January 2010 were required to obtain a certain minimum number of credits. With the incorrect application of the 5-year rule, they were required to obtain a full qualification and their credits were not recognized as meeting the qualification requirements.

Under the new, correct application, the five year requirement has no impact on a person’s DOFA date. In other words, a person’s DOFA date will not and cannot change where the person has left the industry or has not rendered financial services, for a period exceeding five years. It only impacts on the determination of whether a person is compliant with the experience requirement or not, and does not impact on the qualification (6 years) or regulatory exam (2 years) requirements.

The Registrar intends to rectify its records to reflect the correct DOFA dates for those whose DOFA dates were changed, based on the incorrect application of the five year requirement. It intends interacting with those affected to ensure that no person is unduly prejudiced.

Any future requests to the Registrar to amend or “reset” the DOFA date of a person who has not rendered financial services for a period exceeding five years will not be considered.

Please click here to read the full FAIS Information Circular 2 of 2015.

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