The Financial Planning Institute of South Africa (FPI) announced on Friday that it had “temporarily withdrawn its status as an examination body for Fais [Financial Advisory and Intermediary Services] regulatory examinations”. Adv Ntai Phoofolo, chairperson of FPI’s board of directors, noted that the “withdrawal will remain in place until such time the institute is confident that it is in a better position to engage the Financial Sector Conduct Authority (FSCA) and seek accreditation from the FSCA as an examination body”.
The decision comes three weeks after the FSCA instructed the FPI to stop running these exams due to concerns it had about the integrity of the process. The FSCA’s Caroline da Silva told Moneyweb at the time that the conduct authority had received information that irregularities were taking place with the examinations that are run for key individuals, financial advisors and brokers.
This was the second time that significant problems had been detected with the FPI’s running of the regulatory exams. Between 2006 and 2013 more than 120 individuals were “found to have obtained the regulatory examinations as well as wealth management certificates in an improper manner”.
Phoofolo noted that as the latest issue was the second time that fraud was detected, the board felt compelled to take further steps, particularly to protect its broader reputation.
“What we wanted to do is make sure that we clean up our house,” Phoofolo said. “There seem to be quite a number of things happening, and we don’t want them to impact on our core competencies, which are on the professional body side.”
The FPI’s primary role is to serve as the professional association for financial planners. It is also the only body in South Africa that offers the Certified Financial Planner (CFP®) qualification.
“We don’t want to put that at risk, because that is what makes the FPI,” said Phoofolo. “We felt that if we can’t properly control the examination body side, that has a direct impact on the reputation and credibility of the organisation as far as the public and members are concerned.”
The board therefore made the decision to stop running the regulatory exams until it was certain that these kinds of issues could not surface again.
“We decided that we must sort this issue out, because we don’t want it to impact on actually what we are meant to be,” Phoofolo said. “If we as the board don’t honestly have the feeling of security that we can deliver these exams with the credibility and integrity they deserve, then let’s not risk our reputation.”
He added that, internally, they are confident that the fraud that has taken place with regards to the regulatory exams is entirely removed from its work as a professional body. However, it nevertheless has an impact on the FPI brand.
“The examinations body and the professional body are two separate departments, with separate employees and separate systems,” said Phoofolo. “We are pretty confident we have a hold on the professional standards and competencies side, but we don’t have a proper hold on exam side.
“Has anything gone awry on the professional body side? The answer is no. But that is a technical question,” Ntai added. “In the minds of the public and our members, this is the FPI running both [sets of] exams, and if something can happen on one side, why can’t it happen on another? That is exactly why we have let go and stepped away from the regulatory exams, so that we can give people the confidence on the professional side while we sort out things on the other end.”
As part of its analysis of what has gone wrong, Phoofolo indicated that the FPI will also have to review whether it should be running the regulatory exams at all.
“Maybe – and this will come out from the in-depth conversations we are going to have – we overextend[ed] ourselves,” Phoofolo said. “We had issues a few years ago, which we thought we had resolved and put the correct measures in place. However, it so happened that even with those measures in place, people found other ways to circumvent the system. It’s not the same thing that happened, but it’s still a difficult one to deal with. I do accept, and the board agrees, that perhaps we should step back and say what is it that we are meant to do actually. Let’s go back to the core function of the FPI.”