What Is the RE1 Exam? A Plain Guide for Key Individuals

If you manage or oversee the people who give financial advice in South Africa, the law treats you differently from the advisers themselves. You carry responsibility for the whole operation, and the RE1 regulatory examination is how the Financial Sector Conduct Authority (FSCA) checks that you understand that responsibility.

This guide explains who writes the RE1, what it covers and how to approach it.

Who must write the RE1?

The RE1 is the first-level regulatory examination for key individuals. A key individual is a natural person who is responsible for managing or overseeing the activities of a financial services provider (FSP) that relate to rendering financial services. In a sole proprietorship that is the owner. In a company or close corporation it is whoever actually manages or oversees the financial services side, whatever their job title.

Two points catch people out:

• A key individual is always a natural person. A company cannot be a key individual.
• A key individual may not start acting until the Authority has approved them. Approval comes first.

If you are a key individual who also advises clients yourself, you wear two hats. You need the RE1 for the managing role and the RE5 for the advising role, and you must appear on the FSP's register of representatives.

What does the exam look like?

Feature	RE1
Number of questions	80 multiple-choice
Time allowed	2 hours 30 minutes
Pass mark	65%, which is 52 correct answers
Format	Four options, one correct

That works out to a little under two minutes a question. Many questions are scenarios: a short story about an FSP followed by a question about what the key individual must do.

What does it cover?

The FSCA publishes qualifying criteria that set out 16 tasks. Every exam question is written against one of them. In plain terms they are:

1. The FAIS Act and where it fits in the regulatory framework
2. The role and powers of the Authority, and the definitions that decide who needs a licence
3. Getting and keeping the FSP licence, including changes, suspension, withdrawal and lapsing
4. The key individual's own role and fit and proper requirements
5. Operational ability and financial soundness
6. The General Code of Conduct and the specific codes
7. The compliance function and the compliance officer
8. Record keeping
9. Accounting and audit requirements
10. The Financial Intelligence Centre Act
11. Complaints and the Ombud for Financial Services Providers
12. to 15. Appointing, managing and supervising representatives, and keeping the register
13. Debarment

The weighting is uneven. Maintaining the licence and managing representatives carry far more criteria than, say, the Ombud. A sensible study plan gives them more time.

How is it different from the RE5?

The RE5 asks, "What must I do when I deal with a client?" The RE1 asks, "What must the business do, and how do I make sure it happens?"

So where the RE5 tests whether you know that a record of advice is required, the RE1 tests whether you know what systems an FSP needs so that records of advice are made, kept for five years and can be produced within seven days when the Authority asks. The RE1 also goes into areas the RE5 barely touches: liquidity calculations, the appointment of auditors, compliance reports, the debarment process and what happens when a licence is suspended.

It is also longer: 80 questions in two and a half hours, against 50 questions in two hours for the RE5.

How hard is it?

The RE1 is an exam of detail. Most of the wrong answers in the exam are not silly. They are the answer that would be right under a slightly different rule: 15 days where the law says five, "the compliance officer" where the law says "the FSP", "may" where the law says "must".

Candidates who pass tend to do three things:

• Learn the periods exactly. Five days to notify the Authority of a debarment. Fifteen days to report most changes. Twenty-one days for representations on an undesirable practice. Sixty days to rectify.
• Learn who carries each duty. The FSP, the key individual, the compliance officer, the auditor and the Authority each have their own.
• Practise full papers under time. Eighty questions is a long sitting, and concentration in the last half hour decides many results.

Where to start

Read the qualifying criteria once so you know the map. Then work through the 16 tasks in order, testing yourself as you go, and finish with full timed exams. Our RE1 study course follows the tasks one by one, and the first full 80-question exam simulation is free.