Generally the FCA’s Training and Competence (‘TC’) rules only apply to FCA authorised firms where certain activities (as listed in TC App 1.1) are carried on for retail persons. The activities range from what one would recognise as ‘regulated activities’ and which would be associated with a CF30 function to those which seem more operational e.g. oversight on a day-to-day basis of the operation of a CIS or of administrative functions in relation to managing investments. The majority of activities falling within TC App1.1 require an appropriate qualification and all of them are subject to the relevant individuals being ‘appropriately supervised’ by the firm they work for and on-going maintenance of competence.
Firms without any retail involvement escape the TC regime and instead are subject to the higher level non-prescriptive requirements in SYSC 5.1.1 (although strictly speaking this is a rule that applies to most firms regardless of client base).
MiFID 2 firms will be subject to a more stringent regime (Article 25(1) of MiFID 2 provides for relevant persons needing to possess the “necessary knowledge and competence“) when investment advice is given or information is given about financial instruments/services/ancillary services.
In keeping with Article 25(9) ESMA has produced a Consultation Paper which considers that staff knowledge and competence translates into requiring an “appropriate qualification” and “appropriate experience“. By way of exception, ESMA considers that existing relevant staff with not less than five consecutive years of “appropriate experience” could be considered to possess the necessary knowledge and competence. It will be left to individual Member States to set and determine both the “appropriate qualifications” and “appropriate experience”.
Annex IV of the Consultation Paper contains the draft guidelines. It will be noted from paragraph 18 that the compliance function will be responsible for assessing and reviewing compliance with the guidelines, with the review being included in reports to the management body. Annex V provides illustrative examples of the application of certain aspects of the guidelines.
Although MiFID 2 is the driver, note that the proposal will extend to UCITS firms and to AIFMs when they are carrying out permitted additional activities (see definition of ‘firms’ on page 12 of the CP).
The guidelines have to be in place by 3 January 2016 albeit that MiFID 2 will not be transposed until 3 January 2017. ESMA will consider all comments received by 10 July 2015.
