Secondary

You be the Judge II

This article in Thursday’s Moonstone Monitor elicited the biggest response in years. Many readers shared their views, and no doubt, their preparation for the regulatory exams was very evident. Thanks for all your input. I asked Paul Rabenowitz, FAIS expert at Lightbulb Learning, for his views.

To refresh your memory: we posted this question from a reader, and asked readers for their views.

I was at one of my brokers the other day. The admin staff says that, because they are admin staff, they don’t have to write the Rep (RE 1) exam. So here is an example: a client phones a broker’s office to remove one and add a new vehicle. The new vehicle requires a tracking device, so the admin person advises the client of this. Also, the admin person offers the client various add-ons e.g. car hire, breakdown cover etc. They are not changing the actual product, just up-selling on the existing product. Does this constitute advice, necessitating writing the exam? Please advise (no pun intended!).

Paul Rabenowitz

This is an important and relevant question!

Let’s analyse the facts:

  • We have an ‘admin person’. The Act does not refer to job titles – but rather functions – it does not matter what a position at an FSP may be called, but rather what they do in relation to clients
  • The admin person advises the client that the vehicle needs a tracking device. This does not qualify as advice nor an intermediary service as it is factual in relation to a policy provision.
  • The admin person offers the client various add-ons. They are not changing the actual product, just up-selling on the existing product. Now we get to the heart of the matter: is this ‘advice’? Firstly, the Act states that it does not matter if a product is even sold – it is the recommendation, guidance or proposal to a client which is the crucial aspect. Secondly, advice does not only relate to a new product, but includes a variation of any term or condition applying to a financial product. Thus this is advice. As the admin person is also actually up-selling, this constitutes an intermediary service. This person is therefore providing both advice and an intermediary service!

Let us unpack this further. A representative is a person who renders a ‘financial service’ – which means the provision of advice and/or an intermediary service. We also find the word intermediary in the title of the FAIS Act. We can then never think that the FAIS Act only applies when advice has been given. There are various exclusions from what is advice, such as factual and procedural information, but a person who gives advice must always be a representative. This is not the case with an intermediary service. A person does not need to be a representative if they are (1) rendering clerical or administrative services, (2), acting in a subordinate capacity and (3) does not use their judgement or lead a client into a transaction in response to general queries. In other words – one may not need to be a representative even though an intermediary service is rendered by that person in a subordinate capacity, but there is no exclusion for providing advice – no matter what capacity one is acting in.

As this admin person is both using judgement and leading a client into a transaction the exclusion of intermediary service will not apply.

There are thus two compelling reasons why this admin person must be a rep and therefore write the exams, as well as complying with the requirements of experience, qualifications, CPD and honesty and integrity.

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