The Financial Services Authority is proposing to replace its training and competence 'commitments' with an overarching 'competent employees' requirement - contained in MiFID - and apply it to all authorised firms.
The FSA says the high-level provisions in its training and competence sourcebook – known as ‘commitments’ – are covered either explicitly or implicitly by the MiFID competence requirement, which states:
“[Firms] must employ personnel with the skills, knowledge and expertise necessary for the discharge of responsibilities allocated to them…taking into account the nature, scale and complexity of the business of the firm, and the nature and range of investment services and activities undertaken in the course of that business.”
The FSA has already consulted on copying out the MiFID provision into the ‘senior management arrangements, systems and controls’ sourcebook (SYSC) for MiFID firms, and it is now intends to do the same for non-MiFID firms for reasons of simplicity and consistency.
It believes the proposal does not alter the competence standards expected of firms and the reference to “expertise” in the MiFID competence requirement does not introduce an additional test over and above the current requirements.
Tracey Mullins, director of public affairs at the Association of IFAs (AIFA), says: "Although the MiFID requirement is shorter, it is not a dumbing down of the competence requirement. It is about moving towards being professional and firms have to evidence that they are complying."
The FSA is also proposing to introduce a new provision into the SYSC which states where a firm that is not subject to a compulsory exam requirement still choose to use exams approved by the Financial Services Skills Council (FSSC), the FSA will take this into account when assessing compliance with the knowledge component of the new competent employees rule.
The regulator says it is too early to remove the T&C sourcebook entirely, but in the future it hopes industry guidance will mean the sourcebook is no longer necessary.
Instead, it intends to replace the sourcebook with one that is one-third the length and which contains a small number of mainly exam-related rules, together with a limited amount of guidance.
Section one of the new sourcebook will explain the scope and purpose of the sourcebook, section two will cover how to assess and maintain competence and section three will contain record-keeping requirements.
Section two requires firms to ensure an employee attains the necessary level of competence and maintains this over time.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7034 2680 or email [email protected].IFAonline
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