The Future of Level 2 REs and CPD

Product knowledge requirements via the level 2 Regulatory Examinations and CPD requirements were originally introduced in Board Notice 106 of 2008.

Subsequent to the effective date of these requirements, the Registrar granted general exemptions to the industry from complying with such requirements to allow it to review the competency framework.

Clarity on how the regulator proposes to ensure that advisers have adequate and appropriate knowledge of financial products in respect of which they render financial services and maintenance of their overall competence is contained in the new Fit & Proper proposals published in October 2016.

Product related Training knowledge

The Registrar is proposing to replace the level 2 regulatory examinations with the following requirements:

  1. class of business training (generic knowledge relevant to a particular product and market or particular business sector); and
  2. product specific training (specialist or specific knowledge of a particular product).

The proposed requirements aim to ensure that persons who render financial services

  1. have adequate, appropriate and relevant skills, knowledge and expertise in respect of the financial services, financial products and functions that those persons perform and
  2. that they maintain their competence.

The Registrar also proposes to replace the current prescriptive CPD requirements with requirements that are more principle based.

Proportionate and fit for purpose Competency requirements

The proposed amendments further introduce proportionate requirements depending on the nature, scale and complexity of the financial services rendered and the financial products in respect of which those services are rendered.

Financial products have been classified in Tier 1 and Tier 2, with a differentiation between the requirements applicable to persons rendering financial services in respect of such products.

Tier 2 financial products are generally simpler and better understood than Tier 1 products and, therefore, are subject to lighter competency standards, but still subject to product specific training requirements.
It is also likely to form part of the product prescriptions mentioned in the Retail Distribution Review.

Quality assurance

The Registrar envisages that

  1. class of business training must be provided by an accredited provider to ensure appropriate oversight by SAQA of such providers thereby ensuring that training and training providers are of the appropriate quality; and
  2. CPD activities must be accredited and tracked by a Professional Body as the latter is recognised by SAQA for setting professional standards in respect of a specific sector or occupation and therefore possess the expertise required to set and maintain those standards.

From the proposals on CPD, it is apparent that this will add yet another layer of obligations on already overburdened employers.

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