The Financial Services Authority today set out proposals for a shorter and more outcome-focused Training and Competence (T&C) Sourcebook that will apply only to retail firms and business.
This is part of the FSA’s drive to simplify and streamline its Handbook and remove prescriptive requirements. The new T&C regime will be founded on high-level rules and guidance but will retain exam requirements for retail business, which are still seen as essential to protect consumers.
The FSA is already committed to disapplying its detailed T&C rules for wholesale business and to making the changes needed to ensure that this regime complies with the Markets in Financial Instruments Directive (MiFID).
All the proposed changes to the T&C regime will come into force on 1 November 2007 when MiFID is implemented.
Dan Waters, FSA Director of Retail Policy, said:
"Our proposals are the result of a 'blank sheet of paper' review of our T&C regime. This is all part of our move to more principles-based regulation. As with the changes we're proposing for the Conduct of Business sourcebook, we believe the new T&C regime will give firms more flexibility to achieve the outcomes we want in a way that suits them best. The new T&C Sourcebook is much simpler, shorter and more user-friendly. There is, though, no question of lowering the competence standards we expect of firms and their staff – these play a key role in protecting consumers."
The new regime will consist of a single high-level competence requirement which will apply to all UK authorised firms, including wholesale firms. This will be supported - for retail firms only - by a simpler T&C Sourcebook, approximately one-third the length of the existing one. We have decided to keep the existing compulsory examination requirements for specified retail activities and the ‘safe harbour’ for firms who use exams taken from the Financial Services Skills Council (FSSC)’s list of appropriate examinations.
The longer-term aim is to be able to remove the T&C Sourcebook altogether and rely on high-level competence requirements across all sectors. However this will not happen until the FSA is satisfied that firms have in place effective ways of achieving appropriate and consistent standards in the T&C area. The FSA will keep the position under review.
Background
- CP07/04 'The Training and Competence Sourcebook Review' is available on the FSA website.
- CP05/10 'Reviewing the FSA Handbook', published in July 2005, set out the principles and basis for the FSA’s comprehensive Handbook Review. It also contained the FSA's proposals for removing the detailed T&C requirements for wholesale business and proposed a wider review of the T&C sourcebook.
- FS06/1 'Reviewing our Training and Competence regime' confirmed the FSA intention to disapply the detailed T&C rules for wholesale business when MiFID is implemented and to carry out a wider review.
- The FSA commissioned Europe Economics to assess the costs and benefits of the current retail exam requirements and the potential competition issue arising from the fact that, under MiFID, FSA will no longer be able to impose exam requirements on inwardly-passporting MiFID firms from the European Economic Area. The Europe Economics Report [PDF] is available on the FSA website.
- An industry group has worked with the FSA in developing these proposals. The members of the group are listed in Annex 1 of CP07/04.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.