Page 26 - Profile's Unit Trusts and Collective Investments 2021 issue 2

How to use this book

Skip Ahead?
Much of this section is devoted to information about qualifications for FSPs and the FSCA’s
regulatory exams. This is aimed at financial advisors. If you want to learn about collective
investments and unit trusts but have no interest in qualification requirements, skip straight to
Chapter 1, a history of collective investment schemes in SA.

A qualification recognised by the FSCA as appropriate for the FSP’s area of activity.
At least one year’s experience in managing or overseeing the financial services of an
organisation.
Writing of the regulatory exams.
Ongoing continuous professional development (ie, CDP points).
Qualifications and regulatory examinations do not have to be done sequentially.
A representative may choose to write the regulatory exams before obtaining a qualification, and in
fact the regulatory exams can be written by anyone. This allows students who plan to enter the
industry in the future to complete these exams before applying for positions. A period of six years
is allowed to gain the necessary experience, to complete the regulatory exams and to achieve the
necessary qualifications.
Regulatory Exams
The FSCA’s regulatory exams (known as the RE exams) are part of the FAIS Fit and Proper
Requirements. (Note that the structure of the RE exams may change in the not-too-distant future
under COFI – see chapter 5 for more details.)
The FSCA had originally planned to introduce two levels of regulatory exams: Level I, covering
legislation and regulations, and Level II, covering specific product areas. However, as development
of the Level II exams was delayed, a general exemption was granted. At this stage, under the Fit
and Proper regulations published in December 2017, product specific training falls to FSPs.
The Level I exams are broken into five parts as follows:
RE1 applies to all individuals and FSPs giving advice (categories I, II, IIA, III and IV).
It covers legislation such as FAIS, FICA and subordinate legislation.
RE2 (currently suspended) applies to Assistance Business Policies and Friendly Societies.
RE3 applies to sole proprietors, FSPs and key individuals with discretionary mandates in
categories II and IIA.
RE4 applies to key individuals and FSPs in category III (administrative FSPs) and is written
in addition to RE1.
RE5 applies to all representatives except persons rendering clerical, technical, administrative,
legal, accounting or other service in a subsidiary or subordinate capacity which does not
require judgment or lead to a specific financial product transaction.
The product categories are broken into two tiers, where tier 2 products are those that are less
complex and have lighter competency standards. Collective investment products are tier 1. Although
described as “product categories”, the category differences have more to do with advice (category I)
versus discretionary mandates (category II). Independent financial advisors, as discretionary FSPs,
are required to write RE3. FSPs and KIs who write RE3 do not have to write RE1 as well.
The regulatory exams must be completed in addition to educational or qualification
requirements. All key individuals have to write regulatory examinations. Further information is
available on the FSCA website: www.fsca.co.za.
The regulatory exams, which are administered nationally by appointed examining bodies, focus
on the application of factual knowledge in two areas:
Relevant legislation, the rights and duties of services providers and their clients, and the
implications of these provisions; and
The competence of FSPs to apply these provisions correctly in rendering financial services
within specific categories or subcategories.

24 Profile’s Unit Trusts & Collective Investments — Understanding Unit Trusts