The draft document published by the FSB on proposed changes to the fit and proper requirements makes provision for further distinctions between certain product categories.
In 2012 the Registrar granted an exemption to representatives in Long-term Insurance subcategories B1 and B2 and Short-term Insurance Personal Lines from having to complete the level 1 REs by the stipulated deadline.
The Registrar was satisfied that reasonable grounds existed to distinguish between persons that render financial services in respect of basic and easy to understand financial products, and persons that render financial services in respect of more complex financial products. The objective of the exemption was “…to create an enabling environment for increased access to financial services and to prevent the creation of entry barriers into the industry.” Phrased differently elsewhere, it states that another reason for this exemption was that not all of these representatives would be able to successfully complete the Level 1 RE 5.
The exemption was subject to the condition that the relevant representatives complete a “bespoke” first level regulatory examination by a date to be determined by the Registrar.
The exemption is only an interim measure until the Registrar is able to effect the required legislative amendments to provide for the new subcategories of financial products. The proposed amendments now provide for the new subcategories of financial products as well as qualifying criteria.
The proposed new sub-categories are:
“‘Long-term Insurance subcategory B1-A’ means those long-term insurance policies referred to in the definition of Long-term Insurance subcategory B1 which require no or limited underwriting”
“‘Long-term Insurance subcategory B2-A’ means those long-term insurance policies referred to in the definition of Long-term Insurance subcategory B2 which provide for the premiums to be invested in an investment portfolio managed by the product supplier with no option by the policyholder to request a change or amendment to that portfolio;”
The proposals to define these products do not make for easy reading. We have drafted some suggestions to the FSB to make the eventual definitions clearer.