A brief background on the regulatory examinations

The amended fit and proper requirements for the financial services industry in South Africa, announced in 2008, are already in affect, with some people already writing the regulatory examinations required of them.

The purpose of the exams is to provide better service to clients, and the FSB expects to achieve this by testing your application of factual knowledge. This is with regards to legal provisions dictated by legislation, subordinate legislation, and codes of conduct, as well as the rendering of financial services pertaining to specific categories and subcategories of clients.

Background and basicsThe exams will be multiple choice questions, with only one right answer, and no negative marking.

  • The exams will be multiple choice questions, with only one right answer, and no negative marking.
  • There’s no limit to the number of times you can write the exam in order to achieve competence.
  • The exams are closed book, which means you won’t be allowed to take anything with you into the exam room.
  • The qualifying criteria (i.e. knowledge and skill sets), developed in consultation between the FSB and industry representatives, determine the scope and content of the exam, and the exam can only include questions based on these criteria.
  • Every task will be covered at least once, as well as its underlying knowledge and skills criteria, so it’s important not to skip anything in your preparation.
  • FSB approved study guides will provide reference to suggested study material available, but it’s your responsibility to source appropriate material and/or training providers because examination bodies cannot provide training or study material.

What you will be tested on

Each exam includes questions that cover four levels:

1. Knowledge

Testing your recall of factual knowledge, for example:

Question: Within how many days must a financial services provider inform the Registrar of the debarment of its representative?

Answer:
☐ 14 days
☐ 7 working days
☐ 30 days
☐ 15 working days.

2. Comprehension

Testing your understanding and interpretation of factual knowledge and concepts, for example:

Question: Sally Smith is a sole proprietor and has no representatives. What are the requirements regarding the compliance function of the FSP?

Answer:
☐ Sally must appoint an external Compliance Officer
☐ Sally doesn’t need to appoint a Compliance Officer
☐ Sally must appoint an internal Compliance Officer
☐ Sally must be appointed as the Compliance Officer.

3. Application

Testing your ability to apply factual knowledge to real life situations, for example:

Question: Jim Jones, the representative of DCB Investments must advise a client that is retiring on specific investments. Which of the following aspects is Jim NOT obliged to disclose about a recommended financial product unless enquired about by the client?

Answer:
☐ The risk of possible capital loss in future due to fluctuations in the financial markets
☐ Information and graphs to illustrate the product’s performance at intervals over a
period of time
☐ Any income and other relevant tax issues of a material nature that need to be considered
☐ Any material illustrations about the product provided by the product supplier.

4. Analysis

Testing your ability to analyse factual knowledge presented in a situation, and decide on the best course of action, for example:

Question: XYZ Financial Services is licensed to render financial services in relation to five different financial products, namely Long-term Insurance B, C and Short term insurance: Commercial and Personal lines. XYZ has ten key individuals each specialising in specific products with experience in the others. XYZ’s key individual Sam Brown will retire in two months and they must appoint a person to replace her. Which of the following candidates who have all passed the first level regulatory examination will be considered?

I. Tom, who has worked as a key individual in Long Term Insurance Category A and Friendly Society Benefits and has a grade 12
II. Suzie, who has worked as a key individual in Long Term Insurance Category A and has a B.Com degree
III. Noliswa, who has worked as a key individual for Long Term Insurance Category B and Short Term Insurance: Personal Lines and has a grade 12
IV. Thabo, who has worked as a key individual for Collective Investment Schemes, Bank deposits and Shares and has a B.Com degree

Who can be appointed as the Key Individual?

Answer:
☐ I & III only
☐ II & IV only
☐ I & II only
☐ II & III only

For more information

For more information on the regulatory examinations, you can check out the following websites:

http://www.fsb.co.za
http://re.fpi.co.za
http://www.iob.co.za/leselo
http://www.moonstoneinfo.com
http://www.regulatoryexams.co.za.

You should also refer to the following material, which was used in the development of the exam questions:

  • The FAIS Act
  • General Code of Conduct
  • FICA Act
  • Board Notices.

And please let us know if there’s any topic you’d like us to discuss in a future blog post to help you get to grips with your upcoming examination!

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