Training and competence

Our training and competence regime supports consumers by making sure the financial services workforce is appropriately qualified and well regulated.

The regime includes a list of appropriate qualifications for firm activities and services. The content and level of these qualifications is prescribed through examination standards.

Individuals must have appropriate qualifications, be assessed as competent by their firm, maintain their competence through training and meet standards of behaviour. Sometimes these qualifications are granted by an accredited body – if investment and pension advisers obtain a specific level of annual Continuous Professional Development (CPD), they are granted an annual Statement of Professional Standing.

Firms need to meet competence requirements in three principal areas: assessing competence, maintaining competence and record keeping.

Training and competence regime

The regime comprises:

  • a high-level competence requirement (the ‘competent employees rule’) that applies to individuals engaged in the regulated activity in all UK authorised firms (including wholesale firms) as set out in our Senior Management Arrangements, Systems and Controls sourcebook (SYSC)
  • more detailed requirements for certain retail activities, including the need to attain a qualification where relevant, as introduced below and set out in our Training & Competence sourcebook (TC)

If the TC does not apply – for example, if firms only carry out wholesale activities – then you may wish to refer to the TC when considering how to meet the high-level requirements in the SYSC.

Generally, you must complete a qualification within 30 months of starting the regulated activity.

Assessing competence

Firms decide which methods to use when assessing employee competence. We define competence as having the skills, knowledge and expertise needed to discharge the responsibilities of an employee’s role.

This competence includes achieving a good standard of ethical behaviour. It is not just a question of having the appropriate qualification and reading the Statements of Principle for Approved Persons (APER) or the Code of Conduct (CO:CON) (as applicable). Firms need procedures in place with clear criteria for individuals to be assessed as competent, so all parties involved understand when competence has been reached.

Maintaining competence

Your firm must review employee competence and training needs regularly. Our Handbook carries further details on assessing and maintaining competence.

You must consider changes in the marketplace and products, regulation and legislation. You must also look at the skills, expertise, technical knowledge and behaviour of your employees in practice.

If your firm does retail investment activities, specific continuing professional development requirements exist.

Firms should make sure appropriate training is provided so employees remain competent. You will also need to monitor and assess regularly the training’s effectiveness to make sure it meets objectives.

Record-keeping

You should keep records on anything that relates to TC compliance. You need to keep records of staff recruitment, training, competence assessment, staff supervision and details of appropriate qualifications for any activity in the TC.

You must keep records for various lengths of time depending on the business to which it relates. For MiFID business, records must be kept for at least 5 years after an individual has stopped carrying on an activity listed within the TC. For non-MiFID business, you must keep records for at least 3 years after stopping the activity. If your firm is a pension transfer specialist, the records must be kept indefinitely.

Level of supervision

Firms should make sure employees are always supervised. How closely the individual is supervised will depend on their experience and whether they have been assessed as competent. The level and intensity of supervision should be significantly greater before competence is achieved than afterwards. We expect firms to have clear criteria and procedures to identify the specific point at which the individual becomes competent so they can prove when and why a reduced level of supervision is warranted. We do not expect supervision to only involve file checking.

Appropriate qualifications

If you are doing an activity or providing a service listed, you will need to hold an appropriate qualification. The table of appropriate qualifications corresponding to activities is available in our training and competence handbook.

These only apply to people dealing with retail clients.

Activities, products and sectors

Activities, products and sectors to which training and competence apply include:

  • advising on:
    • securities (other than stakeholder pension schemes, personal pension schemes or broker funds)
    • derivatives
    • retail investment products (other than broker funds)
    • friendly-society tax-exempt policies (other than Holloway sickness policies)
    • long-term care insurance contracts
    • investments in the course of corporate finance business
    • syndicate participation at Lloyd’s
  • broker fund adviser
  • pension transfer specialist
  • advising and dealing on
    • securities (other than stakeholder pension schemes, personal pension schemes or broker funds)
    • derivatives
  • managing investments
  • daily:
    • operating a collective investment scheme or undertaking the activities of a trustee or depositary of a collective investment scheme
    • safeguarding and administering investments or holding client money
    • overseeing administrative functions in:
      • managing investments
      • effecting or carrying out contracts of life policies insurance
      • the operation of stakeholder pension schemes
  • mortgage and reversion activity for a customer
  • advising; arranging (bringing about) an execution-only sale (full details of training and competence in this area are in the list)

You will need to compare the job role to the activities listed to find what is relevant. For example, if you are advising on investments, including regulated collective investment schemes, you will need to look at ‘advising on retail investment products’, or if you are advising on shares you must look at ‘advising on securities’. The job you do – rather than your job title – determines the relevant activity. Some jobs cross over multiple activities, so you must hold qualifications for each listed activity.

Which qualification?

As you will see in our table of appropriate qualifications, several qualifications can be appropriate for an activity. We cannot recommend which qualification you should complete. We can only tell you which qualifications meet our requirements for specific activities. The choice of qualification is often made by the regulated firm depending on the individual’s role. If you are already working in the industry and do not know which provider to study with, then speak to others in your firm. If you intend to join the industry, then you need to consider which type of firm you want to work for and learn more information from the qualification provider they use. It may be useful to contact the Accredited Bodies.

If you have an unlisted qualification and wish to add it, please ask your provider to contact us.

If you have a qualification and wish to switch it to a different one, you will need to speak to your qualification provider about how you can transfer credits or apply for exemptions.

Your qualification remains valid, however long ago you received it. Nevertheless, firms should make sure their employees are competent. This may include asking staff to re-take qualifications.

Waivers

You can apply for a waiver against the rule if you believe your firm has a unique business model or speciality, or you have mitigating circumstances. However, this would require your firm to show that:

  • compliance with the rule would be unduly burdensome or would not achieve the rule’s purpose
  • anyone whose interests is protected by the rule (typically consumers) would not be put at undue risk

Trainees

Different rules exist for trainees. You will need to hold an appropriate regulatory module for each activity (other than an overseeing activity) you wish to advise on before you can advise.

You cannot advise some activities until you have the full qualification:

  • advising on and dealing in securities that are not stakeholder pension schemes or broker funds
  • advising on and dealing in derivatives
  • acting as a broker fund adviser
  • advising on syndicate participation at Lloyd's
  • acting as a pension transfer specialist

Supervisors

Supervisors will need to pass an appropriate qualification, if they supervise an employee who advises retail clients on retail investment products (eg life policies) or P2P agreements where that employee has not yet been assessed as competent. We also expect supervisors should have the appropriate technical knowledge and coaching and assessment skills to be a supervisor.

There is no specific requirement for supervisors to pass an appropriate qualification where they are supervising people carrying on other activities in the TC. They should have the technical knowledge and coaching and assessing skills to be a competent supervisor and assessor. Firms should also consider whether they wish their supervisors to hold a qualification. Ultimately, firms should be able to explain to us their decision if they decide the qualification is unnecessary.

International experience

An exemption is available under our rules for individuals with recent overseas experience. It says they do not have to pass the technical module of an appropriate qualification if they:

  1. have 3 years up-to-date relevant experience gained overseas
  2. have not previously been subject to the TC qualification requirements for the activity in question
  3. are not advising retail clients on retail investment products, P2P agreements, acting as a broker fund adviser, advising on syndicate participation at Lloyd’s or acting as a pension transfer specialist

An individual who satisfies these conditions will only have to pass the relevant regulatory module of an appropriate qualification.