FSA to simplify training and competence rules
FSA/PN/017/2006
7 March 2006
The Financial Services Authority confirmed today that its detailed rules on training and competence (T & C) will not apply from next year to those individuals in financial firms who deal only with wholesale or non-private customers. The change forms part of the FSA's move towards a more principles-based approach to regulation. The FSA's high-level Principles and Commitments in the Training and Competence sourcebook still require firms to ensure that their employees are competent, and remain competent, to carry out the roles assigned to them.
The FSA will also conduct this year a wider review of its T & C regime which will take account of the impact of the Markets in Financial Instruments Directive (MiFID) due to be implemented in the UK in November 2007. The removal of detailed T & C rules for wholesale business, together with any further changes resulting from the wider review, will be made at the time MiFID is implemented.
Andrew Whittaker, FSA General Counsel, said:
"Our decision to remove examination requirements from individuals in the wholesale markets reflects our aim to move to a more principles-based approach by allowing wholesale firms to take their own decisions about the competence of their staff."
These changes to the T & C regime are set out in FS06/1. The consultation produced a range of views. Many welcomed the increased flexibility which our proposals provide, but some expressed concerns that the removal of detailed rules for wholesale business could lead to a lowering of standards. However, the FSA believes that these concerns are largely based on a misunderstanding of how the T & C regime currently works. The Feedback Statement explains why these changes will not alter the standards of competence expected of firms and how these standards will be maintained.
The FSA's Consultation Paper last July proposed two other sets of changes to simplify and reduce the burden of regulation on firms: these proposed changes were to the Money Laundering and Approved Persons regimes. The FSA confirmed in January in PS06/01 that it will remove the existing detailed rules on anti-money laundering controls in their entirety, replacing them with high-level requirements for firms to have their own risk-based controls on money laundering. Today's Feedback Statement is confined to the T & C proposals as the FSA is still considering the impact MiFID may have on the Approved Persons regime. The FSA expects to publish feedback once it is clearer on the impact that MiFID has on this issue. It will aim to implement these changes in a way that best fits with the wider changes associated with MiFID.
The Handbook Review programme focuses on eliminating or changing requirements which are more restrictive than needed to achieve the FSA's statutory objectives, which do not deliver benefits to justify their costs, or which are not consistent with the FSA's focus on senior management responsibility.
Notes for editors
- Feedback Statement 06/1 'Reviewing our Training and Competence regime' is available on the FSA website.
- Consultation paper 05/10 'Reviewing the Handbook' is available on the FSA website.
- Policy Statement 06/1 'Reviewing our Money Laundering regime: Feedback on Chapter 2 and made text' is available on the FSA website.
- In reviewing the Handbook, the FSA is guided by the following principles:
- Focusing on making changes in areas where it can have real impact and only respond to suggestions to make changes to individual Handbook provisions where the benefits are clear;
- Taking advantage of opportunities to streamline the Handbook as they arise – for instance, where there is scope to redraft material when implementing a Directive;
- Adopting high-level standards where these are more appropriate than detailed rules. Benefits arise from focusing our attention on senior management responsibilities and allowing firms greater flexibility in some areas; and
- Ensuring that the FSA does not leave firms without guidance that is useful.
- 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.