AMENDED SUPERVISION REQUIREMENTS – FORMAL AGREEMENT NOW A NECESSITY
by Janine Geldenhuys
The Financial Advisory and Intermediary Services Act (FAIS) Act requires of all FSPs, key individuals (KIs) and representatives to be fit and proper. FSPs, KIs and representatives appointed in terms of the FAIS Act must be competent and meet the following fit and proper requirements, as set out by the FSCA in Board Notice 194 of 2017:
Honesty, integrity and good standing;
Competence (Experience, Qualification, RE, Class of Business Training and Product Specific Training);
Compliance with the continued professional development;
It is the duty of the FSP to ensure that KIs and representatives are fit and proper. If the FSP fails to do this, the Financial Sector Conduct Authority (FSCA) may take action against the FSP or KI for non- compliance in terms of the FAIS Act.
FAIS notice 86 of 2018 makes provision for a representative to work under supervision if the competency requirements of BN 194 of 2017 are not met at date of appointment. The person will be supervised by a representative or key individual, until such time that they meet all the fit and proper competency requirements.
It a requirement that a formal agreement be drawn up between the FSP and the rep – the details of such a contract is actually spelt out in FAIS Notice 86.
According to Condition 3 of FAIS Notice 86, the FSP and supervised representative must enter into a written supervision agreement, prior to the rendering of services under supervision. This agreement may form part of any other relevant agreement or the FSP’s performance management process.
In other words, existing reps under supervision have must have a supervision agreement in place by 1 June. For new appointments, this should form part of their employment contract.
Certain conditions must be met for a representative to qualify for this exemption. These conditions are:
Condition 1: Entry level requirements
Condition 2: Specific timeframes
Condition 3: Supervision agreements
Condition 4: Duties of FSP
Condition 5: Duties of supervisor
Condition 6: Duties of supervised representative
Condition 7: Intensity of supervision
A FSP must then ensure that there is a documented supervision process that includes adequate controls to meet regulatory requirements.
- A documented supervision framework that includes adequate controls to meet regulatory requirements.
- A supervision control sheet, providing evidence (POE’s) in confirming the effectiveness of the supervision process.
- A supervision control sheet setting out reason(s) for representative being placed under supervision.
- A supervision control sheet detailing the supervisor experience and fit and proper in the relevant financial product categories
- Signed supervision agreement in place that meets the legislative requirements in terms of content.
- Proof of qualification and regulatory examination
- A supervision control sheet setting out representative’s training history
- A supervision control sheet setting out where supervision interactions are being recorded.