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TC 2.1 Assessing and maintaining competence13

Assessment of competence and supervision

TC 2.1.1R
  1. (1)

    13A firm must not assess an employee as competent to carry on an activity in TC Appendix 1 until the employee has demonstrated the necessary competence to do so and has (if required by TC Appendix 1) attained 16each module of an appropriate qualification16. This assessment need not take place before the employee starts to carry on the activity.14

    161613
  2. (2)

    A firm may assess an employee who is subject to, but has not satisfied, an appropriate qualification16requirement as competent to the extent that:14

    16
    1. (a)

      that employee works in a branch in an EEA State other than the United Kingdom;14

    2. (b)

      the employee is engaging in MiFID business; and14

    3. (c)

      there is no appropriate qualification 16or equivalent in that EEA State.14

      16
TC 2.1.2R

A firm must not allow an employee to carry on an activity in TC Appendix 1 without appropriate supervision.

TC 2.1.3G

Firms should ensure that employees are appropriately supervised at all times. It is expected that the level and intensity of that supervision will be significantly greater in the period before the firm has assessed the employee as competent, than after. A firm should therefore have clear criteria and procedures relating to the specific point at which the employee is assessed as competent in order to be able to demonstrate when and why a reduced level of supervision may be considered appropriate. At all stages firms should consider the level of relevant experience of an employee when determining the level of supervision required.

Supervisors

TC 2.1.4G

Firms should ensure that those supervising employees carrying on an activity in TC Appendix 1 have the necessary coaching and assessment skills as well as technical knowledge and experience17 to act as a competent supervisor and assessor. In particular firms should consider whether it is appropriate to require those supervising employees not assessed as competent to attain 16an appropriate qualification 16as well except where the employee is giving advice on retail investment products or advising on P2P agreements, 24 see TC 2.1.5 R.

16161717
TC 2.1.5R

Where an employee has not been assessed as competent to do so and: 24

  1. (1)

    24gives advice on retail investment products to retail clients24, the firm must ensure that the individual supervising and assessing that employee has attained an appropriate qualification24; or

  2. (2)

    24gives advice on P2P agreements to retail clients, the firm must ensure that the individual supervising and assessing that employee has attained an appropriate qualification for giving advice on retail investment products to retail clients.

16171716161616

Knowledge and competence requirements before starting MCD credit agreement activities

TC 2.1.5AR
TC 2.1.5BR

19A firm must ensure that an employee does not carry on any of the activities 23A to 23E in TC Appendix 1 without having an appropriate level of knowledge and competence, which includes an appropriate:

  1. (1)

    knowledge of MCD credit agreements and any ancillary services offered by the firm with them;

  2. (2)

    knowledge of the laws relating to MCD credit agreements for consumers (in particular, consumer protection);

  3. (3)

    knowledge and understanding of the property purchasing process;

  4. (4)

    knowledge of security valuation;

  5. (5)

    knowledge of the organisation and functioning of land registers;

  6. (6)

    knowledge of the market;

  7. (7)

    knowledge of business ethics standards;

  8. (8)

    knowledge of the process of assessing a consumer's creditworthiness or, where applicable, competence in assessing the consumer's creditworthiness; and

  9. (9)

    level of financial and economic competency.

[Note: article 9 and annex III (1) of the MCD]

TC 2.1.5CR

19A firm must not assess knowledge and competence based solely on relevant professional experience. It should also take into account relevant professional qualifications, such as diplomas and degrees, training and competency tests.

[Note: annex III (3) of the MCD]

TC 2.1.5DG

19For the purposes of assessing the employee's knowledge and competence, professional experience means their years of employment in areas relating to the origination, distribution or intermediation of MCD credit agreements.

[Note: annex III (3)(b) of the MCD]

TC 2.1.5ER

19A firm must, for the purposes of TC 2.1.5B R, take into account the nature of the employee's role and their level of responsibility within the firm and decide the appropriate level of knowledge and competence for that employee.

[Note: annex III (2) of the MCD]

TC 2.1.5FG

19Where an employee, carrying on an activity in relation to a regulated mortgage contract, has attained the appropriate qualification required by TC Appendix 1, a firm may for the purposes of TC 2.1.5B R assess that employee as having knowledge and competence. Additionally, firms will need to meet any other requirements in this or other sourcebooks that are applicable, taking into account the employee’s role and responsibilities.21

Knowledge and competence requirements when advising on P2P agreements

TC 2.1.5GR
TC 2.1.5HR

24A firm must not, for the purposes of TC 2.1.1R, assess an employee as competent to carry on activity 9A in TC Appendix 1 until the employee has attained each module of an appropriate qualification for giving advice on retail investment products to retail clients.

TC 2.1.5IG

24An employee who only carries on activity 9A in TC Appendix 1 is not a retail investment adviser. As such, the rules in this section applicable to retail investment advisers are not relevant to employees who only advise on P2P agreements.

Qualification requirements before starting activities16

TC 2.1.6R

A firm must ensure that an employee does not carry on an activity in TC Appendix 1 (other than an overseeing activity) for which there is a qualification 16requirement without first attaining16 the relevant regulatory module of24:

16
  1. (1)

    24(in respect of activities other than advising on P2P agreements (activity 9A in TC Appendix 1)) an appropriate qualification; or

  2. (2)

    24(in respect of advising on P2P agreements (activity 9A in TC Appendix 1)) an appropriate qualification for giving advice on retail investment products to retail clients.

1616
TC 2.1.7R

A firm must ensure that an employee does not carry on any of the following activities without first attaining 16each module of an appropriate qualification:16

16
  1. (1)

    [deleted]16

    16
  2. (1A)

    16advising on and dealing in securities which are not stakeholder pension schemes, personal pension schemes 18 or broker funds;

  3. (1B)

    advising on and dealing in derivatives;

  4. (2)

    the activity of a broker fund adviser;

  5. (3)

    advising on syndicate participation at Lloyd's; or

  6. (4)

    the activity of a pension transfer specialist.

TC 2.1.8G

[deleted]16

16
TC 2.1.8AR

17A firm must ensure that an employee who was assessed as competent as a retail investment adviser for the purposes of TC 2.1.1 R at 30 June 2009 does not carry on the activity of a retail investment adviser without first attaining an appropriate qualification.

Exemption from appropriate qualification requirements16

TC 2.1.9R
  1. (1)

    If a firm is satisfied that an employee meets the conditions in this rule then the requirements to have attained 16each module of an appropriate qualification 16will only apply if that employee is carrying on one of the activities specified in this rule.

    1616
  2. (2)

    The conditions are that a firm should be satisfied that an employee:

    1. (a)

      has at least three years' up-to-date relevant experience in the activity in question obtained while employed outside the United Kingdom;

    2. (b)

      has not previously been required to comply fully with the relevant qualification 16requirements in TC 2.1.1 R; and

      16
    3. (c)

      has passed the relevant regulatory module of an appropriate qualification16;

      16

    but (b) and (c) do not apply to an employee who is benefiting from the "30-day rule" exemption in SUP 10A.10.8 R or the "14-day rule" exemption in SYSC 5.2.28AR22, unless the employee benefits from that rule because he is advising retail clients on retail investment products24, is providing advice on P2P agreements to retail clients24 or is a broker fund adviser.

    25251717
  3. (3)

    The relevant activities are:

    1. (a)

      advising on investments (except P2P agreements) 24 which are retail investment products,17 if that advice is given to retail clients;24 or

      17
    2. (aa)

      24advising on P2P agreements, if that advice is given to retail clients; or

    3. (b)

      the activity of a broker fund adviser;24 or

    4. (c)

      advising on syndicate participation at Lloyd's; or

    5. (d)

      the activity of a pension transfer specialist.

Selecting an appropriate qualification17

TC 2.1.10E
  1. (1)

    This rule applies for the purposes of TC 2.1.1 R, TC 2.1.5 R, TC 2.1.5HR, 24TC 2.1.6 R, TC 2.1.7 R ,16TC 2.1.9 R, TC 2.2A.1 R, TC 2.2A.3 R and TC 2.2A.6 R16.

  2. (2)

    To ensure that a qualification16 is appropriate, a firm should select an appropriate qualification from the list of qualifications set out in TC Appendix 4E16.

    1616
  3. (3)

    Contravention of 16 (2) may be relied on as tending to establish contravention of 16the rules referred to in (1).

    1616
TC 2.1.10AG

16TC Appendix 5G sets out:

  1. (1)

    the criteria which the FCA may take into account when assessing a qualification provider; and

  2. (2)

    the information the FCA will expect the qualification provider to provide if it asks the FCA to add a qualification to the list of appropriate qualifications in TC Appendix 4E.

TC 2.1.10BG
  1. (1)

    17TC Appendix 6G sets out guidance in relation to accredited bodies.

  2. (2)

    TC Appendix 7G sets out guidance on gap-filling in relation to appropriate qualifications and the function of accredited bodies in that regard.

Training needs

TC 2.1.11G

Firms should ensure that their employees' training needs are assessed at the outset and at regular intervals (including if their role changes). Appropriate training and support should be provided to ensure that any relevant training needs are satisfied. Firms should also review at regular intervals the quality and effectiveness of such training.

Maintaining competence

TC 2.1.12R

A firm must review on a regular and frequent basis employees' competence and take appropriate action to ensure that they remain competent for their role.

[Note: article 9(1) of the MCD]19

TC 2.1.13G

A firm 16should ensure that maintaining competence for an employee 16takes into account such matters as:

1616
  1. (1)

    technical knowledge and its application;

  2. (2)

    skills and expertise; and

  3. (3)

    changes in the market and to products, legislation and regulation.

TC 2.1.14G

A firm may choose to establish, implement and maintain a training and competence scheme.

Continuing professional development

TC 2.1.15R

Subject to TC 2.1.17 R, a firm must ensure that a retail investment adviser who has been assessed as competent for the purposes of TC 2.1.1 R remains competent by completing a minimum of 35 hours of appropriate continuing professional development in each 12 month period.17

17
TC 2.1.16G

In order to meet the requirement in TC 2.1.15 R, a retail investment adviser should complete no less than 21 hours of structured continuing professional development activities.17

17
TC 2.1.17R

A firm is permitted to suspend the requirements of TC 2.1.15 R in respect of a retail investment adviser for the period of time during which the retail investment adviser is continuously absent from work, if that absence is due to:

17
  1. (1)

    maternity, paternity or adoption leave;

  2. (2)

    long-term illness or disability;

  3. (3)

    caring responsibilities for a family member who has a long-term illness or disability; or

  4. (4)

    any other absence allowed in order for the firm to meet its statutory duties in relation to equality and diversity.17

TC 2.1.18G

In TC 2.1.17R (3), a family member includes a partner, parent, grandparent, sibling or child.17

17
TC 2.1.19G

In deciding whether to suspend the requirements of TC 2.1.15 R, a firm should take into account:

17
  1. (1)

    the retail investment adviser's individual circumstances;

  2. (2)

    the length of time the retail investment adviser is likely to be absent from carrying on the activity; and

  3. (3)

    its statutory duties in relation to equality and diversity.17

TC 2.1.20G

Examples of structured continuing professional development activities include participating in courses, seminars, lectures, conferences, workshops, web-based seminars or e-learning which require a contribution of thirty minutes or more.17

17
TC 2.1.21G

Examples of unstructured continuing professional development activities include:

17
  1. (1)

    conducting research relevant to the individual’s role;

  2. (2)

    reading industry or other relevant material;

  3. (3)

    participating in professional development coaching or mentoring sessions.17

TC 2.1.22G

All continuing professional development should:

17
  1. (1)

    be relevant to the retail investment adviser's current role and any anticipated changes to that role;

  2. (2)

    maintain the retail investment adviser's knowledge by reference to current qualification standards relevant to the retail investment adviser's role;

  3. (3)

    contribute to the retail investment adviser's professional skill and knowledge;

  4. (4)

    address any identified gaps in the retail investment adviser's technical knowledge;

  5. (5)

    have written learning objectives based on learning needs and a documented learning outcome;

  6. (6)

    be measurable and capable of being independently verified by an accredited body.17

TC 2.1.23G

Continuing professional development completed by a retail investment adviser in relation to activities other than acting as a retail investment adviser should not be taken into account for the purposes of TC 2.1.15 R unless it is also relevant to the activity of acting as a retail investment adviser.17

17
TC 2.1.24R

A firm must, for the purposes of TC 3.1.1 R (Record keeping), make and retain records of:

17
  1. (1)

    the continuing professional development completed by each retail investment adviser; and

  2. (2)

    the dates of and reasons for any suspension of the continuing professional development requirements under TC 2.1.17 R.17

TC 2.1.25R

A firm must not prevent a retail investment adviser from obtaining a copy of the records relating to that retail investment adviser which are maintained by the firm for the purposes of TC 2.1.24 R.17

17

Annual declarations

TC 2.1.26R

A firm must ensure that a retail investment adviser confirms annually in writing that the retail investment adviser has, in the preceding 12 months:

17
  1. (1)

    complied with APER or COCON (as applicable)20; and

  2. (2)

    if applicable, completed the continuing professional development required under TC 2.1.15 R. 17

Independent verification

TC 2.1.27R

A firm must obtain from an accredited body independent verification of the firm's compliance with:

17
  1. (1)

    in respect of its retail investment advisers only, the requirement in TC 2.1.1 R to attain each module of an appropriate qualification;

  2. (2)

    TC 2.1.15 R; and

  3. (3)

    TC 2.1.26 R.17

TC 2.1.28R

The independent verification in TC 2.1.27 R must be obtained by a firm:

17
  1. (1)

    in respect of a competent retail investment adviser who began to carry on the activity of a retail investment adviser on or before 31 December 2012, within 60 days of that date and of the anniversary of that date thereafter;

  2. (2)

    in respect of a retail investment adviser who began to carry on the activity of a retail investment adviser on or after 1 January 2013, within 60 days of the date on which the retail investment adviser was assessed as competent as a retail investment adviser and of the anniversary of that date thereafter.17

TC 2.1.29G

Independent verification for the purposes of TC 2.1.27 R should take the form of a statement of professional standing issued by an accredited body.17

17
TC 2.1.30G

The Glossary definition of accredited body contains a list of bodies recognised by the FCA for the purpose of providing the independent verification required under TC 2.1.27 R. Information on accredited bodies, including guidance on the process for including a body in the list is set out inTC Appendix 6G and the obligation to pay the application fee is set out in FEES 3.2.17

17

Notification requirements

TC 2.1.31R

17A firm must notify the FCA as soon as reasonably practicable after it becomes aware, or has information which reasonably suggests, that any of the following events has occurred or may have occurred in relation to any of its retail investment advisers, and the event is significant:

  1. (1)

    a retail investment adviser, who has been assessed as competent for the purposes of TC 2.1.1 R, is no longer considered competent for those purposes;

  2. (2)

    a retail investment adviser has failed to attain an appropriate qualification within the time limit prescribed by TC 2.2A.1R (1);

  3. (3)

    a retail investment adviser has failed to comply with a Statement of Principle in carrying out their20 controlled function or has failed to comply with COCON (as applicable)20; and

  4. (4)

    a retail investment adviser has performed an activity in TC Appendix 1 before having demonstrated the necessary competence for the purposes of TC 2.1.1 R and without appropriate supervision.

TC 2.1.32G

17When considering whether an event is significant a firm should include the following in its considerations:

  1. (1)

    the potential risk of consumer detriment as a result of the event;

  2. (2)

    whether the event or a pattern of events indicate recurrent issues in relation to one or more retail investment advisers; and

  3. (3)

    its obligations under Principle 11.

TC 2.1.33G

17The Retail Investment Adviser Competence Notification Form approved by the FCA for notifications under TC 2.1.31 R may be found at the FCA's website www.fca.org.uk/firms/regulatory-reporting/adviser-reporting-requirements23.