SYSC 28.1 Minimum knowledge, ability and good repute requirements for carrying out insurance distribution activities

Application

SYSC 28.1.1 R
  1. (1)

    2This chapter applies to a firm with Part 4A permission to carry on insurance distribution activities.

  2. (2)

    2SYSC 28.2 (except SYSC 28.2.1R(1)) does not apply to an authorised professional firm with respect to its non-mainstream regulated activities.

1
SYSC 28.1.2 R

1In this chapter, relevant employees are employees or other persons:

  1. (1)

    directly involved in the carrying on of the firm’sinsurance distribution activities; or

  2. (2)

    within the management structure responsible for the firm’sinsurance distribution activities; or

  3. (3)

    responsible for the supervision of a relevant employee acting in the capacity as set out in (1).

[Note: article 10(1) and the fifth paragraph of article 10(2) of the IDD]

SYSC 28.1.3 R

1In this chapter ‘employee’:

  1. (1)

    is not restricted to an individual working under a contract of employment; and

  2. (2)

    includes (without limitation) any natural or legal person whose services are placed at the disposal of the firm, under an arrangement between the firm and a third party; and

  3. (3)

    also includes appointed representatives and their employees.

SYSC 28.1.4 G

1 Rules specified in sections SYSC 28.2 (knowledge and ability), SYSC 28.4 (record-keeping) and SYSC 28.5 (other requirements to consider) relate to the requirements in:

  1. (1)

    SYSC 3.1.6R;

  2. (2)

    SYSC 5.1.1R;

  3. (3)

    SYSC 3.2.20R, SYSC 9.1.1R and SYSC 9.1.1AR;

  4. (4)

    TC 4.2 (Specified requirements for firms carrying on insurance distribution activities); and

  5. (5)

    article 22 of the AIFMD level 2 regulation.

SYSC 28.2 Knowledge and ability requirements

Knowledge and ability requirements

SYSC 28.2.1 R
  1. (1)

    1A firm must ensure that it and each relevant employee possesses appropriate knowledge and ability in order to complete their tasks and perform their duties adequately.

  2. (2)

    A firm must ensure that it and each relevant employee complies with continued professional training and development requirements in order to maintain an adequate level of performance corresponding to the role they perform and the relevant market.

  3. (3)

    A firm must ensure that each relevant employee completes a minimum of 15 hours of professional training or development in each 12 month period.

  4. (4)

    For the purposes of (3), a firm must take into account the:

    1. (a)

      role and activity carried out by the relevant employee within the firm; and

    2. (b)

      type of distribution and the nature of the products sold.

[Note: article 10(1) and the first, second and fourth paragraphs of article 10(2) of the IDD]

SYSC 28.2.2 G

Training and development can encompass various types of facilitated learning opportunities including courses, e-learning and mentoring.[Note: recital 29 to the IDD]

SYSC 28.2.3 R

1A firm must, including in relation to the relevant employee, demonstrate compliance with the following professional knowledge and competence requirements:

  1. (1)

    for general insurance contracts:

    1. (a)

      minimum necessary knowledge of terms and conditions of policies offered, including ancillary risks covered by such policies;

    2. (b)

      minimum necessary knowledge of applicable laws governing the distribution of insurance products, such as consumer protection law, relevant tax law and relevant social and labour law;

    3. (c)

      minimum necessary knowledge of claims handling;

    4. (d)

      minimum necessary knowledge of complaints handling;

    5. (e)

      minimum necessary knowledge of assessing customer needs;

    6. (f)

      minimum necessary knowledge of the insurance market;

    7. (g)

      minimum necessary knowledge of business ethics standards; and

    8. (h)

      minimum necessary financial competence;

  2. (2)

    for insurance-based investment products as defined at article 2(1)(17) of the IDD (which in summary says that it is an insurance product which offers a maturity or surrender value, and where the maturity or surrender value is wholly or partially exposed, directly or indirectly, to market fluctuations. This excludes products such as non-investment insurance and certain life insurance):

    1. (a)

      minimum necessary knowledge of insurance-based investment products, including terms and conditions and net premiums and, where applicable, guaranteed and non-guaranteed benefits;

    2. (b)

      minimum necessary knowledge of advantages and disadvantages of different investment options for policyholders;

    3. (c)

      minimum necessary knowledge of financial risks borne by policyholders;

    4. (d)

      minimum necessary knowledge of policies covering life risks and other savings products;

    5. (e)

      minimum necessary knowledge of organisation and benefits guaranteed by the pension system;

    6. (f)

      minimum necessary knowledge of applicable laws governing the distribution of insurance products, such as consumer protection law and relevant tax law;

    7. (g)

      minimum necessary knowledge of the insurance market and the saving products market;

    8. (h)

      minimum necessary knowledge of complaints handling;

    9. (i)

      minimum necessary knowledge of assessing customer needs;

    10. (j)

      conflict of interest management;

    11. (k)

      minimum necessary knowledge of business ethics standards; and

    12. (l)

      minimum necessary financial competence; and

  3. (3)

    for long-term insurance contracts:

    1. (a)

      minimum necessary knowledge of policies including the terms, conditions, the guaranteed benefits and, where applicable, ancillary risks;

    2. (b)

      minimum necessary knowledge of organisation and benefits guaranteed by the pension system of the relevant Member State;

    3. (c)

      knowledge of applicable insurance contract law, consumer protection law, data protection law, anti-money laundering law and, where applicable, relevant tax law and relevant social and labour law;

    4. (d)

      minimum necessary knowledge of insurance and other relevant financial services markets;

    5. (e)

      minimum necessary knowledge of complaints handling;

    6. (f)

      minimum necessary knowledge of assessing consumer needs;

    7. (g)

      conflict of interest management;

    8. (h)

      minimum necessary knowledge of business ethics standards; and

    9. (i)

      minimum necessary financial competence.

[Note: article 10(2) last paragraph and annex I of the IDD]

SYSC 28.3 Good repute

Good repute requirements

SYSC 28.3.-1 R

2This section does not apply to a connected travel insurance intermediary.

SYSC 28.3.1 R

1A firm2 must ensure that all the persons in its management structure and any staff directly involved in insurance distribution activities are of good repute.[Note: article 10(3) paragraphs 1 to 3 of the IDD]

SYSC 28.3.2 G

1This includes but is not limited to those natural persons:

  1. (1)

    that are directly involved in insurance distribution activities; or

  2. (2)

    within the management structure responsible for insurance distribution activities; or

  3. (3)

    within the management structure responsible for any staff directly involved in insurance distribution activities.

[Note: article 10(3) paragraphs 1 and 3 of the IDD]

SYSC 28.3.3 R

1An IDD ancillary insurance intermediary must ensure that natural persons working in the firm, responsible for ancillary insurance distribution activities, are of good repute.

[Note: article 10(3) paragraph 4 of the IDD]

SYSC 28.3.4 R

1In considering a person’s repute the firm must at a minimum ensure that the person:

  1. (1)

    has a clean criminal record or any other national equivalent in relation to serious criminal offences linked to crimes against property or other crimes related to financial activities; and

  2. (2)

    has not previously been declared bankrupt,

unless they have been rehabilitated in accordance with national law.

[Note: article 10(3) paragraph 1 of the IDD]

SYSC 28.3.5 G
  1. (1)

    1In the United Kingdom the following persons will be considered to have been rehabilitated:

    1. (a)

      in relation to a serious criminal offence, where the conviction is considered ‘spent’ under the Rehabilitation of Offenders Act 1974;

    2. (b)

      in relation to bankruptcy, where the bankruptcy has been discharged.

  2. (2)

    References to “serious criminal offences” are not restricted to offences considered to have been committed in or under the law of the United Kingdom.

  3. (3)

    A firm should give particular consideration to offences of dishonesty, fraud, financial crime or other offences under legislation relating to banking and financial services, companies, insurance and consumer protection.

SYSC 28.3.6 G

1A firm’s systems and controls should enable it to satisfy itself of the suitability of anyone who acts for it (see SYSC 3.2.13G and SYSC 5.1.2G). This includes, among other things, the assessment of an individual’s honesty.

SYSC 28.4 Record-keeping requirements

Record-keeping requirements

SYSC 28.4.1 R

1A firm must:

  1. (1)

    establish, maintain and keep appropriate records to demonstrate compliance with this chapter; and

  2. (2)

    be in a position to provide to the FCA, on request, the name of the person responsible for the record-keeping requirement in (1).

[Note: article 10(8) last paragraph of the IDD]

SYSC 28.4.2 R

1A firm must:

  1. (1)

    make an up-to-date record of the continued professional training or development completed by each relevant employee in each 12 month period;

  2. (2)

    retain that record for not less than 3 years after the relevant employee stops carrying on the activity; and

  3. (3)

    be in a position to provide any version of the record to the FCA on request.

[Note: article 10(2) second paragraph of the IDD]

SYSC 28.4.3 R

1A firm must not prevent a relevant employee from obtaining a copy of the records relating to that relevant employee which are maintained by the firm for the purposes of SYSC 28.4.1R and SYSC 28.4.2R.

SYSC 28.5 Other requirements to consider

SYSC 28.5.1 G

1In addition to the requirements in SYSC 28:

  1. (1)

    firms may have to take into account and comply with the requirements in the Training and Competence sourcebook (TC);

  2. (2)

    article 22 of the AIFMD level 2 regulation and the competent employees rules (SYSC 3.1.6R and SYSC 5.1.1R) set out a high-level competence requirement which every firm has to comply with; and

  3. (3)

    it may be that the effect of the rules referred to in (1) and (2) is that firms have to meet requirements additional to those in SYSC 28.