Failure to comply with fit and proper requirements within set timelines may lead to debarment, an action that will prevent an individual from rendering financial services and functioning as a representative. However, in terms of section 44(4)(a) of the FAIS Act any person may apply to be exempted from any provision/s of the FAIS Act. But are all applications approved for exemption? A recent Tribunal case answers this question with regards to the qualification requirement.
The applicant, Mr M, approached the Tribunal for reconsideration of the FSCA’s original decision to decline his application for exemption from the qualification requirement in terms of section 44(1) and (4) of the FAIS Act read with section 281 of the FSR Act.
The original application
Mr M’s application was based on the following:
| ● | The qualification that he obtained in May 2009 did not meet the requirements of the FSCA to be appointed a representative. |
| ● | He had been a representative since March 2013, and was only made aware in April 2019 that his existing qualification does not meet the requirements of the FSCA. |
As a result he requested exemption from the requirements, pending completion of an approved and accredited qualification.
FSCA refusal of application
The FSCA opposed the application for exemption on the grounds that the application amounts to an abuse of process and that it is “frivolous and vexatious” within the contemplation of section 234(4) of the FSR Act. The FSCA claimed that the applicant simply failed to make out a proper case for the relief sought and reminded the applicant of the detail of the Fit and Proper requirements as well as exemption thereof:
| ● | In terms of section 23 of the Fit and Proper Requirements, a representative must have a qualification recognised by the FSCA. |
| ● | In terms of section 4(4) of the Exemption of Services under Supervision in terms of the Requirements and Conditions, 2008, a representative may work under supervision for a period, not exceeding six (6) years after date of first appointment, whilst obtaining the required recognised qualification by a certain date therein specified. |
| ● | On 1 February 2019, the 2008 Exemption of Services under Supervision was withdrawn. |
| ● | In terms of the provisions of the Exemption of Services under Supervision No. 2 of 2018, a supervised representative must, within six years from the date of first appointment as a representative of a specific financial product, comply with the qualification requirement for that specific financial product. |
The FSCA further stated that one of the objectives of the Financial Advisory and Intermediary Services Act, 2002 is to professionalise the financial services industry and to protect consumers – hence the imposition of the qualification requirements.
In this case the applicant had more than six years since date of first appointment to comply with the qualification requirements, but failed to take the necessary steps to obtain such a qualification. As a result, the FSCA declined his application for exemption.
The Tribunal’s analysis
The Tribunal explored all sections of legislation and established that the legislation provides the FSCA with the statutory authority to grant an exemption from compliance with a financial sector law, on reasonable grounds shown.
The following are the jurisdictional factors for the exercise of this statutory authority:
| ● | That the rendering of the service by that person is partially or wholly regulated by another law; or |
| ● | That the application of the provisions of the Act will cause that person or clients of that person financial or other hardship or prejudice; and |
| ● | The granting of the exemption will not conflict with the public interest, prejudice the interest of clients and frustrate the achievement of the object of the Act. |
The FSCA concluded that the application that served before them simply made out no case for relief under these statutory provisions. Although the applicant was invited to make submission on the jurisdictional factors he failed to do so.
The application for reconsideration was dismissed by the Tribunal.
In our experience, the FSCA has always been more than fair in accommodating reasonable requests for exemption. One has to bear in mind that ours is a professional industry and we have to behave accordingly.
Click here to download the Tribunal case.
