14.2 Honesty, Competence, Experience, RE & CPD

14.2 Honesty, Competence, Experience, RE & CPD

Quick Answer: Under the Determination of Fit and Proper Requirements (Board Notice 194 of 2017) and related instruments, representatives must be fit and proper on an ongoing basis. The framework is commonly taught in four pillars: honesty, integrity and good standing; competence (experience, qualifications, regulatory examinations, class of business training, product-specific training, and CPD); operational ability themes as they apply to how services are rendered; and financial soundness (for representatives, characteristically not being insolvent or under provisional/final sequestration or liquidation). RE5 is the representatives’ first-level regulatory exam, subject to listed exceptions. Passing RE5 once does not replace CPD cycles or product training.

Why fit and proper is personal and continuous

Section 14.1 defined the representative role. Fitness answers a different question: may this person be trusted and equipped to render those services? FAIS continuous-compliance themes (including section 8A-type ideas) mean fitness is not a single onboarding tick. Material character failures, missed RE deadlines, expired competence, or insolvency events can destroy the right to continue — and can lead to removal from the register and debarment (Chapter 16).

RE5 tests whether you can map the pillars, not whether you can recite every annexure cell from memory. When a question quotes BN 194 detail, use the wording given in the item.

The four pillars at a glance

Exam trap: Political affiliation, marital status, height, social-media fame or car choice are not fit-and-proper pillars.

Pillar 1 — Honesty, integrity and good standing

Honesty and integrity

These standards ask whether the person is honest and of integrity in dealings that matter to financial services. Events that commonly threaten the standard include:

• Convictions for fraud, theft, forgery, perjury or other offences involving dishonesty;
• Findings of dishonest or improper conduct by courts, regulators, professional bodies or employers;
• Deliberate deception of clients, the FSP, auditors, the CO or the Authority;
• Misappropriation of client funds or premiums;
• Fabrication or falsification of advice records, applications or compliance evidence.

Good standing

Good standing supports public confidence. Teaching themes include absence of findings of dishonest, negligent or improper conduct that reflect on fitness; serious dismissals for dishonesty; or removal from positions of trust — judged against the determination’s criteria, not office gossip.

Continuous character duty

A clean police clearance at appointment is not a permanent shield. New convictions, admissions of fraud, or proven dishonesty after appointment can mean the person no longer meets honesty/integrity/good standing — triggering FSP investigation, possible debarment, and Authority notification duties.

Scenario — late integrity failure
A top-producing rep is convicted of fraud unrelated to the FSP’s product line. Management wants to “wait and see” because production is high.
Analysis: Fitness is not waived by sales volume. The FSP must assess whether the person still meets honesty/integrity/good standing and act under fair procedure — including debarment pathways where appropriate.

Pillar 2 — Competence (the RE5 engine room)

Competence is a bundle, not a single certificate. Industry teaching and RE5 items commonly list:

1. Experience
2. Recognised qualifications (where required for the category/role)
3. Regulatory examinations (RE5 for representatives, subject to exceptions)
4. Class of business training
5. Product-specific training
6. Continuous professional development (CPD)

Experience

Experience requirements ensure the person has practical exposure appropriate to the category/subcategory. Until experience (and other outstanding competence elements) are completed, the representative may need to work under supervision for those lines (FSCA FAIS Notice 86 of 2018 services-under-supervision framework and related rules — detail in Chapter 15).

Key supervision-path preview facts RE5 often tests:

• Services under supervision are still regulated rendering of financial services;
• Oversight, review and disclosure of supervision status to clients are required themes;
• Notice 86 sets hard deadlines measured from the date of first appointment (DOFA): the regulatory examination within 2 years (Condition 2(1)), class of business training within 12 months and a recognised qualification within 6 years of first appointment in respect of a particular product (Condition 2(3)); the six-year qualification deadline is therefore the practical outer limit of the supervised path;
• A person may gain experience in more than one category at the same time, remaining under supervision in each until that line’s requirements are met — multiple categories do not double the maximum into an unlimited career of permanent supervision.

Qualifications

Where the determination requires a recognised qualification for the category, the representative must obtain it within prescribed timelines (often while under supervision). “I passed RE5” does not always replace a required qualification pathway.

Regulatory examinations — where RE5 sits

RE5 is therefore your exam for most representative appointments. Recognised exceptions taught in official prep materials include representatives appointed only for:

• Certain funeral / friendly-society style product lines (commonly linked to subcategories such as 1.1 and 1.19 in training materials);
• Tier 2 products only (Annexure Three of BN 194);
• Execution of sales only on Tier 1 products (no advice — pure execution intermediary service).

Exam traps on exceptions:

• Adding one Tier 1 advice product to a “simple” book usually destroys a Tier 2-only RE story;
• Calling recommendations “execution” to avoid RE5 is dishonest classification;
• Passing RE5 does not make you an approved KI (that is a different approval + often RE1 pathway).

Failing to pass the required regulatory examination within the prescribed period is a classic competence failure: the person may not continue rendering the relevant services as if nothing happened.

Class of business training

Class of business training builds understanding of the class (for example long-term insurance, investments, short-term insurance) in which the representative will operate. It sits above pure product memorisation and below generic life skills. It is a competence component, not operational ability or financial soundness.

Product-specific training

Product-specific training goes to the actual products the representative will recommend or handle — features, risks, exclusions, fee structures, and operational rules. Advising on a product you have not been trained on is both a competence and a suitability risk under the GCOC.

Continuous professional development (CPD)

CPD is the ongoing-competence component. After entry requirements are met, knowledge decays unless refreshed. CPD requires representatives (and KIs) to complete professional development activities for the relevant classes of business in each CPD cycle, for the hours prescribed for those classes, and to retain evidence.

The CPD cycle and the hours

Board Notice 194 of 2017 (Chapter 4) publishes both, and RE5 can test them directly:

• A CPD cycle is a period of 12 months running from 1 June to 31 May of the following year.
• Minimum hours per cycle depend on the spread of business you are appointed for (section 33(1)):

The reporting mechanics matter too:

• Representatives and key individuals must submit evidence of their CPD activities to the FSP within 15 days after the cycle expires (section 33(2)).
• The FSP must record the activities in its competence register within 30 days after the cycle expires and retain the supporting evidence for at least five years from the end of that cycle (section 32(3)).
• Someone appointed for less than 12 months in a cycle completes a pro-rated number of hours (section 33(4)).
• A CPD activity must be accredited by a professional body and carry an hour value; it excludes activity done towards a qualification and excludes product-specific training.

Who is outside CPD (section 31(2)): a Category I FSP, its key individuals and representatives appointed only for Long-term Insurance subcategory A and/or Friendly Society Benefits; and a representative of a Category I FSP appointed only to render a financial service in respect of a Tier 2 product and/or an intermediary service in respect of a Tier 1 product. Note this list is close to, but not identical with, the RE5 exemption list — do not assume that being outside one puts you outside the other.

Other teaching points:

• CPD is mandatory ongoing competence, not optional webinars for CV padding;
• RE5 success does not exempt you from CPD in later years;
• Different product mixes can change which class-of-business CPD obligations apply — a new appointment can push you from 6 hours to 18.

If an exam item reproduces a section or states a specific hour total, use the figure in the item.

Pillar 3 — Operational ability (representative lens)

At firm level, operational ability means governance, resources, systems and procedures to render financial services effectively. For representatives, the exam angle is practical:

• Can you actually follow the FSP’s advice and intermediary processes?
• Do you have access to mandated tools (disclosure packs, needs-analysis templates, product information, record systems)?
• Are supervision and dual-control steps workable when required?
• Automated advice or digital channels still need operational-ability substance — a chatbot that “recommends” is still advice if it produces recommendations.

Operational ability is not the same as personal solvency, CPD hours, or honesty history — those sit in other pillars.

Pillar 4 — Financial soundness (representative lens)

For representatives, financial soundness is commonly taught as requiring that the person is not insolvent and not under provisional or final sequestration or liquidation (as applicable). It is not a minimum net-worth brag, a luxury-lifestyle test, or a substitute for competence.

Firm-level financial soundness (capital, liquidity, professional indemnity) is primarily an FSP/KI concern, but representative insolvency events still matter for personal fitness.

Competence stack — assembly view

New-hire under-supervision path (preview)

Scenario — first week on the job
Lerato is appointed for Category I long-term B1 advice. She has started class-of-business training, booked RE5, and has a documented supervisor.
Correct path:

1. Confirm FSP licence + her appointment particulars on the register;
2. Render services only under supervision arrangements until competence is complete;
3. Disclose supervision status to clients as required;
4. Complete RE5, training, qualification and experience within prescribed timelines — not when “sales ramp-up allows”;
5. Keep honesty/integrity clean from day one — supervision does not pause character standards.

Incorrect path: Solo complex advice with no review; hiding supervision status; treating the six-year outer limit as a reason to delay all study until year five.

Worked competence scenarios

Scenario 1 — RE deadline missed
A rep under supervision repeatedly postpones RE5 beyond the prescribed period.
Analysis: Failure to pass the required regulatory examination within the prescribed period is a competence failure. The person cannot simply continue rendering unrestricted services; the FSP must stop the non-compliant rendering path (tighten/stop appointment lines, extend only where lawfully allowed, or remove/debar as facts require).

Scenario 2 — Product training skipped
A rep completes RE5 and generic class training but is pushed to recommend a new structured product with no product-specific training.
Analysis: Product-specific training is part of competence. Recommending without it undermines suitability and fit-and-proper competence.

Scenario 3 — CPD ignored after “fully competent”
A rep finished supervision three years ago and has done no CPD for the class of business.
Analysis: CPD is ongoing competence. “I already passed RE5” is not a defence. The FSP’s monitoring should flag the gap; the rep remains personally responsible for maintaining currency.

Scenario 4 — Exception myth
A rep appointed for Tier 2 deposits only begins giving CIS advice “occasionally.” Management claims RE5 is still unnecessary.
Correction: Occasional Tier 1 investment advice engages broader competence/RE expectations. Exceptions are narrow; mixed books must be assessed honestly.

Link to later Task 8 sections

• Register entries should reflect categories, supervision status and related particulars accurately (Chapter 15).
• Loss of fit and proper forces FSP action — including possible debarment (Chapters 15–16).
• Advice vs intermediary (section 14.3) interacts with competence: execution-only exceptions and advice-process duties depend on correct service classification.

Exam focus checklist

• Name the four pillars and give a one-line meaning for each.
• List competence components: experience, qualifications, RE, class-of-business training, product-specific training, CPD.
• Place RE5 as the reps’ first-level exam with listed exceptions only.
• Treat CPD as cycle-based ongoing competence as prescribed for the class of business.
• Preview supervision: controlled path while competence is incomplete; maximum period themes; disclosure duties.