A quick guide
Individuals must hold the appropriate qualifications, be assessed as competent by their firm, maintain their competence through training and meet the expected standard of behaviour. Firms need to meet competence requirements in three principal areas:
- Assessment of competence,
- Maintaining competence,
- Record keeping.
Individuals who give Investment Advice need to evidence the appropriate level of annual structured CPD to attain their annual Statement of Professional Standing – this allows them to practice their profession.
A firm should decide which methods to use when assessing competence. Competence according to the regulator is “having the skills, knowledge and expertise needed to discharge the responsibilities of an employee’s role”.
Competence includes achieving a good standard of ethical behaviour – it’s not just a question of having the appropriate qualifications.
A firm needs procedures in place, with clear criteria for individuals to be assessed as competent, so all parties involved understand when competence has been achieved.
When employing new staff, a firm needs a robust process to evidence that an assessment has been made to ensure that the member of staff is competent to perform the role and complies with the additional fit and proper requirements. The output of the process needs to provide a clear audit trail to evidence that it has been followed. This is extremely important when employing new people who require regulatory approval or sit within the new Certification or Senior Management Regime.
A firm must review employee competence and training needs regularly.
They should consider changes in the marketplace, products, regulation and legislation. It must look at the skills, expertise, technical knowledge and behaviour of its staff in practice – CPD must reflect the regulated activity the individual performs.
Appropriate training should be provided so that staff remain competent. To ensure the “appropriateness” the training effectiveness need to be monitored and assessed regularly to ensure it meets objectives.
FCA Rule – TC 2.1.15. A firm must ensure that a retail investment adviser who has been assessed as competent remains competent by completing a minimum of 35 hours of appropriate CPD in each 12 month period.
FCA Rule – TC 2.1.16. In order to meet the requirement a retail investment adviser should complete no less than 21 hours of structured CPD activities.
A firm should keep records on anything that relates to training and competence compliance. This includes staff recruitment, training, competence assessment, staff supervision and details of appropriate qualifications for any activity.
The length of time records should be kept depends upon the business to which it relates. MiFID business records should be kept for five years (may change to seven under MiFID II) after the individual has stopped carrying on an activity listed within the Training and Competence Rule book. Non-MiFID business, the firm must keep records for at least three years after stopping the activity. Any pension transfer business, records must be kept indefinitely.
A good way to gauge whether you meet the requirements of the FCA Rules is to ask yourself the following questions;
- Does the T & C policy accurately reflect how we assess competence?
- Is the annual training which is required to be undertaken by all staff relevant and engaging?
- Do we assess our people that undertake a regulated activity or sit within the Certification regime in a robust way?
- Do we have the capacity to assess our people in the way the regulator requires?
- Do we give people enough specialist technical training relevant to their role?
- Are the conferences our people attend and count as CPD credible?
If you can’t confidently answer ‘Yes’ to all of the above, then please contact us to discuss how we can support you.
You may also want to take a look at our all in one Competence assessment and CPD service.
Other posts which may be of interest to you: