Supervision of representatives under FAIS: who can supervise and what to record

Under FAIS, supervision of representatives works like this: a rep who does not yet meet the competence requirements may render financial services only under supervision, and only once a written supervision agreement between the FSP and the rep is in place (FSCA FAIS Notice 86 of 2018, Condition 3). The supervisor must be competent for those products or that class of business and able to coach, assess and monitor the rep. Your records must show the whole arrangement, and you keep them for at least five years.

In practice your file must show who supervises, what the rep may do, the training plan, how closely you supervise, every assessment and every decision to reduce supervision.

On the five years: the Notice sets no period of its own, so use the FAIS Act's five-year rule for records of reps' continued compliance (FAIS Act s18).

Who has to work under supervision?

Any representative who does not yet meet the experience, qualification, regulatory exam, class of business training or CPD requirements of the fit and proper rules. FAIS Notice 86 of 2018, in force since 1 February 2019, exempts them from those requirements on condition that they work under supervision and meet the conditions in its Annexure A (Notice 86, paragraph 2).

The rep must still meet the entry requirements in Condition 1. In most Category I and IV cases that is a Grade 12 certificate. For Category II, IIA and III it is a recognised qualification (Annexure A, Condition 1). Supervision is usually set up at the point of appointment, so it belongs in your process for appointing a representative.

One requirement is not exempted: product specific training. The Notice covers class of business training but not product specific training. That must still be completed before the rep renders any financial service on that product (Board Notice 194 of 2017, s29(1)(b)), unless the FSP is Category II, IIA or III, where product specific training does not apply (s28(3)).

Who can supervise a representative?

The FSP assigns the supervisor. Condition 4(1)(c) of the Notice requires that person to:

• have the relevant skills, knowledge and expertise;
• meet the competence requirements, including CPD, of a representative appointed for those products or of a Key Individual approved for that class of business;
• have coaching and assessment skills; and
• have the operational ability to monitor and supervise the rep effectively.

The FSP must also make sure there is a working relationship that gives the supervisor real oversight, and review the arrangements at regular intervals (Condition 4(1)(d) and (e)). In our view, operational ability means enough time and a manageable number of supervisees.

Does the supervisor have to be a Key Individual?

No. Read the second item in the list above: the supervisor must meet the competence requirements of a rep appointed for those products or of a Key Individual approved for that class of business (Condition 4(1)(c)). A competent senior rep can supervise. A KI can also act as supervisor, but that is on top of their wider Key Individual responsibilities for managing or overseeing the FSP's financial services (FAIS Act s1, definition of key individual).

What must the supervision agreement contain?

It must be in writing and entered into before the rep renders any service under supervision. It can sit inside an employment contract or your performance management process, as long as it covers each item below (Condition 3). Use this as your checklist:

• The supervisor, by name.
• The scope: the tasks, categories and products the rep may deal with.
• The knowledge and skills the rep still needs.
• The training needs and the training plan.
• The supervision arrangements: the supervisor's duties and method, the criteria for reducing the intensity of supervision, the assessment criteria and intervals, and the criteria for signing the rep off.

What must the supervisor's file show?

The supervisor must review and assess the rep's progress at regular intervals and record what they observe. They must also record the method, frequency and intensity of supervision and any change to it, and keep every record of training, supervision activity, assessments and decisions to reduce supervision (Condition 5(c), (e) and (f)).

The Notice sets no fixed frequency for file reviews or sign-offs. The FSP sets the intensity having regard to the products, the rep's assessed competence and the risk to clients, and reviews it at regular intervals (Condition 7). Write down why you chose that intensity.

If a rep has a DOFA date, by when do they need the RE5 and the recognised qualification?

The clocks run from the date of first appointment, the DOFA (Notice 86, paragraph 1). The short answer: the RE5 within 2 years and the recognised qualification within 6 years of first appointment for that product. For class of business training and the qualification, the DOFA is the first appointment for the particular product, so a rep can have more than one start date (Condition 2(3)):

1. Regulatory exam (RE5): within 2 years (Condition 2(1)).
2. Class of business training: within 12 months (Condition 2(3)(a)).
3. Recognised qualification: within 6 years (Condition 2(3)(b)).
4. CPD: applies from when the rep meets the class of business, exam and qualification requirements, or after 6 years, whichever comes first (Condition 2(4)).

For a rep first appointed only for Tier 2 products or only for execution of sales, the 2 years run from their first appointment to render services (other than execution of sales) on a Tier 1 product (Condition 2(2)).

To work out the exact dates for each rep, put their DOFA into the DOFA deadline calculator. The RE5 deadline timeline walks through the same dates step by step, and what happens when a rep misses the RE5 deadline covers the position if the 2 years run out.

To put supervision, training and exam tracking together for a whole team, see how to set up RE5 and RE1 training for your team.

When does supervision end?

When the rep meets every competence requirement, including the minimum experience period, and has been assessed as experienced (Notice 86, paragraph 1, definition of supervised representative, and Condition 2(7)). The representative register, the central register held by the FSCA and your competence register must all show that the rep is supervised, and must be updated within 15 days after supervision ends (Condition 4(2)).

You will often read that supervision has a "6-year maximum". The Notice does not use those words: the figure comes from the 6-year deadline for the qualification. In practice the effect is similar, because a rep without the qualification after 6 years no longer qualifies for the exemption.

What must the supervised rep do?

Actively work towards the training, the exam and the qualification, stick to the agreement, and tell clients that they are working under supervision (Condition 6).

How long must you keep supervision records?

The FAIS Act requires records of representatives' continued compliance with the competence and fit and proper rules to be kept for at least 5 years (s18). Training records must be kept for 5 years after the person stops rendering services for that product or class (BN 194 of 2017, s30(b)).

Sources

• FSCA FAIS Notice 86 of 2018, published by the FSCA on 3 December 2018
• FSCA FAIS Notice 86 of 2018 (searchable text published by Skillfully)
• FAIS Act 37 of 2002, s18 (maintenance of records)
• Board Notice 194 of 2017, Determination of Fit and Proper Requirements (2017 text)
• Board Notice 194 of 2017, s28 (application of class of business and product training)
• Board Notice 194 of 2017, s30 (record keeping)

To see each supervised rep's exam deadline in one list, put their DOFA dates into the free DOFA deadline calculator.

PassPath is an independent study platform. The RE1 and RE5 are written through Moonstone; PassPath is not affiliated with Moonstone or the FSCA.