FSB debars individuals who bribed their way to a qualification

Under current regulations people who provide financial services or products to the public must not only be properly qualified, but they must also show that they have integrity. There is a level of honesty needed when you’re dealing with other people’s money.

So when it is revealed that a number of people have obtained their Financial Advisory and Intermediary Services (FAIS) qualifications fraudulently, there is obviously cause for concern.

Earlier this month the Financial Services Board (FSB) announced that it was taking action against “a large number of individuals” involved in qualification and examination fraud at the Financial Planning Institute of South Africa (FPI). The regulator had found that a number of people had obtained qualifications irregularly, apparently by bribing FPI employees.

The regulator noted that it been informed of the matter by the FPI back in 2014 and had been investigating 120 representatives and key individuals of registered financial services providers (FSPs) who were implicated.

The FSB’s head of FAIS compliance, Thabang Malimbe, confirmed to Moneyweb that a number of representatives “who were found to have obtained the Regulatory examinations as well as Wealth Management certificates in an improper manner were debarred”. At least another 60 cases are still under way.

Suspicious results

The FPI told Moneyweb that it had become aware that there could be a problem when it started seeing unusual exam results.

“As soon as the FPI discovered an unusual pattern in FAIS regulatory examination results from certain candidates over a period of time, the Institute immediately started processes to ascertain the reasons thereof,” the FPI noted in response to written questions. “Certain candidates, with a history of not passing the regulatory examinations, would all of a sudden pass with high marks or a set series of questions were answered in exactly the same way, while other answers on the same paper differed widely.”

Companies whose employees were writing FPI exams also contacted the institute to say that they were suspicious of the results they were seeing. One company specifically raised the concern that FPI employees may be involved.

“The FPI’s investigation revealed that during the period 2010 to 2013, three of its employees working in the FAIS exam department of the FPI and responsible for various important stages of the regulatory exam delivery and marking processes, colluded to falsify regulatory exam results of certain candidates in return for monetary payments from the benefactors,” the FPI said. “Following its own investigation, the FPI took immediate action against the employees, reported the matter, and handed over its investigation files, to the Financial Services Board (FSB), South African Police Service (SAPS) – Commercial Crime Unit as well as Insurance Sector Education and Training Authority (INSETA).”

All three of these employees were found guilty of dishonesty and dismissed. Charges of fraud were also laid against them with the Commercial Crimes Unit.

Corrective measures

The serious concern for the industry is that the public needs to have faith in the qualification process. A lot of effort has been put into educating the public about only dealing with registered financial service providers and representatives who meet certified standards.

The process for obtaining such qualifications therefore needs to be trusted. This is why the FSB and the FPI have not only acted against those involved, but also taken steps to prevent similar situations in future.

“The FSB also conducted an audit of the FPI Examination Body’s internal security measures, systems and processes,” the regulator said. “Following the audit, the FSB recommended additional security protocols to ensure that a similar situation does not arise in the future – recommendations that the FPI has adopted and implemented.”

The FPI explained to Moneyweb that this involved “additional segregation of duties, limitation of access to systems, job rotation and system enhancement so as to flag unusual patterns in exam results in real time. Since these additional measures were put in place in 2014, FSB has conducted an audit of the FPI’s overall security measures. The audit was conducted to review and confirm that the additional measures put in place by the FPI were satisfactory to prevent a similar incident from recurring.”

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