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FSA/PN/091/2007
27 July 2007

The Financial Services Authority (FSA) today confirmed the introduction of a more outcome-focused and flexible Training and Competence (T & C) regime - including a new, shorter, simpler and more principles-based T & C Sourcebook.

Dan Waters, FSA Director of Retail Policy, said:

"The new T & C regime is the result of a comprehensive review of our T & C requirements, conducted as part of our move to more principles-based regulation. We believe the new regime will give firms more flexibility to achieve the outcomes we want in a way that suits them best. 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 T & C regime comes into force on 1 November 2007. It is based on high-level rules and guidance, but will retain the existing exam requirements for retail business. This revision is part of the FSA's drive to simplify and streamline its Handbook.

The new regime, on which the FSA consulted in CP 07/4, will:

• introduce a new, overarching competence rule in the Senior Management Arrangements, Systems and Controls sourcebook which will apply to all UK authorised firms, including wholesale firms – this will replace the training and competence Commitments set out in the current T & C Sourcebook.
• replace the existing T & C sourcebook with a simpler, shorter, principles-based sourcebook for retail firms only which will be more outcome-focused and user-friendly and will comply with the Markets in Financial Instruments Directive (MiFID);
• retain the existing compulsory exam requirements for specified retail activities to maintain protection of retail consumers;
• retain the current 'safe harbour' for firms who use exams from the Financial Services Skills Council (FSSC)'s list of 'appropriate examinations'; and
• give due recognition to exams passed by employees of firms not subject to an exam requirement (e.g. those carrying out wholesale business) where they choose to use exams approved by the FSSC to demonstrate compliance with the knowledge element of the competence requirement.

The new T & C Sourcebook is approximately one third of its current length.

Notes for editors

1. PS 07/13 'The Training and Competence Sourcebook Review: Feedback on CP 07/4 and final rules' is available on the FSA website.
2. CP 07/4 'The Training and Competence Sourcebook Review' was published on 28 February 2007 and is available on the FSA website.
3. CP 05/10 '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.
4. PS 07/2 'Implementing the Markets in Financial Instruments Directive (MiFID)' covered the changes required to the FSA's Conduct of Business regime as a result of MiFID and in particular the changes necessary to the T&C requirements.
5. 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.
6. 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.
7. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.