1. Ruth Martin The SII Perspective on T&C Development Developments www.sii.org.uk APCIMS Conference 26 th June 2008

2. How does SII interpret the changes for exams linked to: T&C, MiFID and RDR? What are the regulatory stakeholders – FSA, FSSC, QCA, OFQUAL, ‘PSB’, other jurisdictions regulators

3. Regulatory changes ….. Fewer rules More principles-based regulation More senior management responsibility

4. What’s new in the FSA T & C Sourcebook? Commitments replaced by high level competence requirement in SYSC 3.1.6. New term ‘competent employees rule’ Explicit reference to ethical behaviour A new format for the list of activities and products/sectors to which T & C applies.

5. New T & C rules – what have you got think about? What are your criteria for recruiting a new member of staff? 2.1.3G ‘A firm should therefore have clear criteria and procedures relating to the specific point at which the employee is assessed as competent …’ 2.1.8G ‘… firms may wish to impose limits on the time they allow their employees to pass an appropriate examination or place limits on the number of times the examination can be taken.’ Checking what new staff know, if the firm they are moving from does not use industry benchmark exams

6. FSA CP 07/4 “appropriate ethical behaviour” 2.22 Appropriate ethical behaviours are also important – these are closely linked to the corporate culture of the firm and a key responsibility of senior management FSA PS 07/13 2.6 “We regard achieving a good standard of ethical behaviour as an essential part of competence, but believe that firms’ senior management are best placed to decide what behaviours are necessary for their employees’ roles.”

7. The competent employees rule

8. All staff ….. Subject to high level SYSC requirement: 3.1.6R‘.. employ personnel with the skills, knowledge and expertise necessary for the discharge of the responsibilities allocated to them.’ 3.1.7R‘When complying with the competent employees rule, a firm must take into account the nature, scale and complexity of its business and the nature and range of financial services and activities undertaken in the course of that business.’

9. What is Competence Knowledge Attain Competence Behaviour (Promote Trust) Skills (Maintain Competence) SII’s position in that competence comprises these three inter- dependent elements, and competent professionals must possess all three elements.

10. ATTAIN : Examination of Competence, testing knowledge, awarding qualifications. MAINTAIN – Provision of means for continuing professional Development. PROMOTE TRUST : Promote high standards of Trust and Integrity The Principled Practitioner

11. FSSC examination lists Appropriate Examination list for retail activities Available on www.fssc.org select Appropriate Examination listwww.fssc.org Recommended list for wholesale activities

12. FSA changes to T&C Sourcebook from Nov: wholesale implications: recommended list T&C exam requirements disapplied Firms subject to SYSC higher level requirements Exams recognised as evidence of competence – “sturdy breakwater” but no ‘safe harbour’ FSA to take exams on the Financial Services Skills Council recommended list “into account when assessing whether the firm has ensured that the employee satisfies the knowledge component of the competent employees rule.’ SYSC 3.1.10 and 5.1.5

13. FSA changes to T&C Sourcebook from November 2007: retail implications Exam requirements remained; firms select an examination from the Financial Services Skills Council Appropriate Examination list More clients likely to be classified as retail clients under MiFID for individual types of transactions Appendix 1 - Activities and Products/Sectors to which TC applies: Advising Advising and dealing Managing investments Overseeing on a day-to-day basis …

14. FSA Retail changes to T&C Sourcebook More clients likely to be classified as retail clients under MiFID To 19 th November: Financial Regulations + Securities or Derivatives or Securities & Financial Derivatives From 19 th November: SII Certificate meets full FSSC retail exam standards (ApExs 1+2+15/16/17) meaning an additional examination Investment and Risk focussing on Private client advice Investment and Risk = 60 Questions (90 mins) NEW

15. Maintaining Competence…….. T & C rule 2.1.12 ‘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.’

16. Developing the Principled Practitioner Knowledge Assessed by external qualification Behaviour Demonstrated through adherence to Code of Conduct With opportunities for self development Skills Developed by range of CPD Events and adopt SII on-line CPD scheme.

17. CPD – New reality Continuing competence is now as important as initial competence CPD will be mandatory in every firm, wholesale and retail CPD records will be required for each employee Importance of logging to prove T&C adherence

18. 2.4 The demands and responsibilities of different roles in today’s market necessitate raising minimum professional standards (which means skills and behaviours as well as knowledge). 6.2 ‘.. Progress development and implementation of an agreed common framework for professional standards. … examinations, continuing professional development, ethics and behaviours …’ And now for the RDR…………

19. SII and the RDR Affects all three core areas of SII: Attaining Competence Maintaining Competence Promoting Trust

20. The RDR The FSA’s Feedback Statement of 29 th April 2008 Our challenge is to the representatives of the whole (retail) industry, and all other stakeholders, to deliver on this apparent consensus for change (the Edinburgh Declaration) that some have issued.….. We are willing to play our part in facilitating discussions and taking whatever other actions that only we are able to progress, but the involvement and cooperation of all relevant industry parties will be vital if the industry is to avoid more direct intervention from us. “ “

21. RDR Latest Update SII participation in FSA Working Group Likely to see higher level benchmark qualification FSA vision for retail encompasses SII’s ‘attain, competence, maintain competence, promote trust’ Potential larger role for professional bodies linked to clarification of professional practice

22. Emerging Trends In conclusion……………….. Stronger differentiation Retail and Wholesale Partnership working with Professional Bodies Practical collaboration with firms Global-local regulatory spectrum to be managed with care