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 FIA/FSB meeting FIA Communication 5 July 2011

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PostSubject: FIA/FSB meeting FIA Communication 5 July 2011   Fri Jul 08, 2011 2:48 pm

The FIA was represented by Arnold van der Linde, Seamus Casserly, Justus van Pletzen and Joe Kotzé.
The FSB was represented by Dube Tshidi, Gerry Anderson and their team of legal and regulatory exam project experts.
Since inception of the FAIS Act the FIA agreed and supported the FSB in attempting to professionalize the financial planning, insurance and investment industry. At the outset it must be emphasized that the FIA is still in full support of the principles underpinning the regulatory exams and professionalizing the industry. However, there have been a number of developments since the introduction of the regulatory examinations on level 1 and we are now in a better position to debate the real concerns and issues regarding these examinations. There are consequences which might seriously impact financial intermediaries and employees of insurers going forward, also resulting in less effective rendering of financial services to consumers.
The main purpose of our meeting with the FSB was to address the fairness of the exams from a holistic point of view. It was most certainly not to try to abolish the examinations.
Salient points in the FIA presentation:
We confirmed our commitment to the principles underpinning the exams but voiced our concerns about the current state of affairs where rumours and speculation about the outcomes of the exams are rife and mostly negative in nature. It was necessary to be transparent about all relevant data as soon as possible. We held the point that the exams may well still be in a pilot phase and that it was therefore possible to address the myriad of problems and effect such changes that will make the exams fair to all.
It must be stressed that the FSB received abundant feedback from industry, and specifically from the FIA, about the problems experienced. We earlier presented them with a comprehensive legal opinion obtained from Webber Wentzel pertaining to the exercising of powers by the registrar in the process of withdrawal of licenses and debarring of intermediaries who fail the exams. Such powers were confirmed in the legal opinion but the concept of fairness of the exams was highlighted as a consideration when exercising such powers.
Our proposal to the FSB rested on focusing on the fairness issue as a resolve to most of the problems experienced. The purpose of the exams should constantly be had in mind when compiling a question bank – to test understanding of relevant regulation as a primary means to establish greater professionalism in the financial services industry. This process should then involve evaluating exam questions and answers by experts on relevant levels, taking into account all the factors that may influence preparation for the exams and actual taking of the exams. It will also then result in having to reconsider time frames for these exams and to plan new dates for the examinations on both levels 1 and 2, as well as the commencement date of Continued Professional Development cycles.
Matters that may have a bearing on the overall fairness of the exams include:
• Complexity and ambiguity of questions and answers;
• Relevancy of some questions to different sectors of the industry and different categories of providers;
• The apparent disparity in exam papers where “luck of the draw” may determine the outcome;
• How amendments to legislation may affect answers to questions drawn up before such amendments;
• Questions that may fall outside the framework of the qualifying criteria;
• The pass mark in relation to other qualification pass marks;
• Time allowed for these exams may be insufficient for some categories of providers and intermediaries;
• The language issue where some questions are perceived to be a test of comprehension of the English language rather than of the subject matter;
• The appeals process lacks transparency.
Other factors that should be regarded in the total process include:
• Exam fees and costs of rewriting;
• Costs for appeals or re-marking of an exam papers;
• The financial implications of failing an exam;
• The effect of studying for these exams on production time;
• The age factor where the process of studying and retaining information may have become difficult.

Based on the above we are of the considered and respectful opinion that the examinations, their methodology and processes may not be fair to all affected persons. The consequences of failure of these examinations will be detrimental to many functionaries in the financial services industry if the concerns above are not addressed with immediate effect.
FSB response:
Dube Tshidi and his team confirmed knowledge of all the issues raised by the FIA and other role players in the industry and reiterated that they take these problems very seriously. The FSB is in constant deliberation with National Treasury on how to address all relevant issues and how to resolve problems related to the exams.
What is of importance is the fact that there is a serious effort on the part of the FSB to clean up ambiguous and complex questions through a continuous process of moderation by experts.
This process will obviously spill over to the exams on level 2 where various factors will also come under scrutiny of the FSB and their team of experts. The FIA and industry at large will be involved to assist them in their endeavours to achieve a fair dispensation for all.
The roll out of the regulatory exams is a massive process where mistakes will be made. Such mistakes will be addressed and problems rectified. Because of the magnitude of the project the FSB will consider postponing the final dates for both the first and second level exams.
Gerry Anderson and his team will soon issue a circular to industry in which detail will be given about the process so far. This circular will also contain announcements affecting the exams going forward as well as news about the exams in Afrikaans. The circular in its draft form will first be presented to National Treasury for comment and approval.
Some interesting information was shared by the FSB about the exams at the meeting of yesterday and at previous meetings with other industry bodies:
• Comprehensive stats will be released when the sample is larger – at least 20% of industry must write to give meaningful stats. This 20% mark should be reached in August 2011 because the volumes of candidates are increasing:
o At present – approximate figures:
 11 105 reps enrolled, 10 145 wrote = 7,86% of industry;
 1 658 KI’s enrolled, 1 628 wrote = 12,17% of industry;
 Overall = 8,2% of industry wrote;
 Stats are based on ID numbers and only first-time writers;
 The overall pass mark for representative exams currently stands at 62%;
 The pass rate is steadily increasing because people are preparing better than earlier;
 Second-time writers are increasingly successful while third-time writers are declining steeply.

• Complaints about questions:
o If representatives all answered only 3 more questions correctly the pass rate will jump to 70%;
o The FSB meets with exam bodies on a weekly basis to monitor processes;
o The on-going moderation of questions to withdraw questions that are constantly answered incorrectly is handled as below –
 Question must be asked at least 50 times;
 Question pass rate must be 40% or less;
 Questions will be completely withdrawn and not merely reworded;
 New questions may be trialled in official exams as an additional question but will not count towards the pass mark;
 In July experts will review all these particular questions.

• The FSB will consider making available examples of official key individual and representative exam papers from the question bank to assist the industry. Those questions will then be withdrawn from the data bank and replaced with other questions. Another option will be to make known which qualifying criteria should receive more attention, based on questions answered incorrectly.

• Appeal forms will be available at exam sessions and procedures will be explained by invigilators:
o There has been numerous successful appeals;
o R250 cost for three questions – there must be a cost involved in order to curb appeals merely for the sake of appealing.

• Guidelines:
o Candidates must focus on preparation for multiple choice type exam - use comprehensive guide documents issued by FSB;
o Imperative to study relevant legislation because wording of questions and answers come directly from legislation;
o Time management is important because time allowed is actually longer than scientifically needed for these type of exams;
o Very few complaints were thus far received about time allowed for exams.

• The FSB will soon start with satellite broadcasts and conferences to assist industry with exams – a circular with dates and venues will soon be released.

Gerry Anderson referred to the manner in which the FIA is prepared to meet with the FSB as an example of positive engagement. The FIA has regularly been consulting with various departments at the FSB on all industry matters and our collaborative and constructive manner of engagement is highly regarded by the registrar and heads of departments. Therefore we can report that the FIA feedback and proposals are regarded as being under advice and none were rejected.

We trust that we will achieve the outcomes we seek and will communicate to members any further action we may deem appropriate to protect the interests of our members.

Arnold van der Linde

5 July 2011
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FIA/FSB meeting FIA Communication 5 July 2011
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