FSA To Simplify Rules For Retail Financial Services Businesses

by Robin Pilgrim, LawAndTax-News.com, London

05 March 2007

The UK's Financial Services Authority last week set out proposals for a shorter and more outcome-focused Training and Competence (T&C) Sourcebook that will apply only to retail financial services firms and businesses.

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 financial services regulator is in the process of putting in place similar amendments to the T&C rules for wholesale businesses, 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, explained that:

"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 FSA revealed last Thursday that 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. Howeverm the FSA has 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 FSA concluded by explaining that:

"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."

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