Secondary

Services Under Supervision

The introduction of the FAIS Act brought with it a new set of regulatory requirements, including those pertaining to industry incumbents being fit and proper.

As these conditions were refined, it became evident that the financial services industry, renowned for the high turnover in intermediaries, would bleed to death if steps were not taken to allow access to new entrants lacking the required experience and qualifications.

The announcement of an exemption to the fit and proper requirements to allow new recruits access to the industry was therefore heartily welcomed. Board Notice 104 of 2008 sets out the conditions pertaining to appointing representatives working under supervision. An additional requirement, relating to the regulatory examinations, was added later.

The exemption also applies to existing representatives wishing to add new licence categories to their profiles.

This article does not attempt to be the Dummies Guide to Services under Supervision (SUS), but rather to highlight some of the more important aspects which are essential for adhering to the requirements and achieving the desired results.

BN 104 defines SUS as:

“…financial services rendered by a representative who does not meet the prescribed experience, qualification and/or regulatory examination requirements and which services are rendered under the guidance, instruction and supervision of a supervisor…”

Who can act as supervisor?

  • An authorised financial services provider, being a natural person or
  • A representative of the provider or
  • A key individual of the FSP

It is important to note that a supervisor, be it the key individual or a representative, “…must have completed and meet the relevant requirements regarding experience and qualification, and at least the first level regulatory examination in relation to the specific (licence) category or subcategories…”

Supervision Agreement

“A written agreement regarding the execution of the services under supervision on behalf of the FSP, or the arrangement between employer and employee which requires the employee to submit to supervision…”

This document should be based on the conditions contained in BN 104 and subsequent amendments. Failure to adhere to the conditions contained in the supervision agreement is one of the more common concerns raised by the FSB after on-site visits.

Actual Supervision

There are two levels of supervision:

  • “Direct supervision” refers to the initial requirement in terms of “…guidance, instructions and supervision which occurs on a regular (ranging between daily and weekly) basis.”
  • “Ongoing supervision” refers to this function after the initial period. Such supervision should occur on at least a bi-weekly to monthly basis.

The required duration of direct supervision differs between licence categories. Please click here for a table setting out the various levels.

BN 104 and its amendments contain full details of the actual supervision actions you need to complete. What is important to remember is section 4(9)(c)(vi):

“The supervisor and supervisee must have properly documented evidence of the supervision, the method followed and frequency thereof that took place during the period under supervision.”

Regulatory Examination Requirement

Representatives under supervision have until 30 June after their second service anniversary to pass the RE 5. The sooner they complete this obligation, the easier it is to align their legal obligations with the way they do business, and become less of a risk to the business.

The Desired Approach

Working under supervision is nothing new – that is how we all learnt the tricks of the trade. The fact that there are now rules we have to abide by should help formalise the process. The records you keep can actually come in handy for a key individual in the event of a disciplinary hearing, or where under-performance occurs. A representative may likewise find it useful where an unfair dismissal occurs.

Despite its advantages, working under supervision is restrictive to representatives, and time consuming to supervisors. A proper development program, aimed at achieving the desired level of competence in the shortest space of time, will benefit all concerned.

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