This week I'm still looking at obligations under the FSA's training and competence sourcebook. You will be relieved to know this is not as daunting in size as the FSA's handbook. The T&C Sourcebook contains just two chapters entitled 'Commitments' and 'Detailed rules and guidance'.
The first thing is to decide which chapter or chapters apply to you. Chapter one (TC1) will apply to everyone associated with regulated mortgage contracts (i.e.
if you advise on, arrange, enter into or administer regulated mortgage contracts). TC1 also applies if you communicate or approve qualifying credit promotions (FSA speak for marketing activities like cold calling), or if you advise non-retail
customers on non-investment insurance contracts.
Chapter two (TC2) applies if you are engaged in or oversee certain activities. A list of these is contained in TC2.1.4 which can be seen at
www.fsa.gov.uk/vhb/html/tc/tc2.1.html and is three A4 pages long – too long to list here. However, in simple terms this will concern your back office regulated mortgage activities. TC2 also applies if you advise on lifetime mortgages, design scripted questions for use in lifetime mortgage non-advised sales, oversee non-advised sales of lifetime mortgages or advise retail customers on non-investment insurance contracts.
As discussed last week, your commitment to training and competence is based around five high-level aspirational statements on competence, remaining competent, review of competence, appropriateness of competence and supervision.
To meet your obligations you will need to be clear on how the FSA views competence. It defines competence as: “Being able to show you have the necessary knowledge, skills and experience to do your job and doing it to the required standard effectively and consistently.”
Competence comprises assessment of knowledge, skills and the passing of what are now deemed by the FSA to be 'appropriate' exams. Your manual must formally document how you will assess knowledge and skills and how you do this will form the mainstay of your T&C regime.
Your manual must cover specific areas and you must think about which areas you will monitor and how you will go about this in the day-to-day running of your firm. For example, (and this not meant as an exhaustive list):
Mortgages sold to those completed
Persistence: How will you measure it? Will you include gazumping within this ratio?
Complaints: Remember, unlike existing MCCB regulation the FSA defines a complaint as any expression of dissatisfaction, whether oral or written, whether justified or not
How will you assess client files? What will constitute a good file and what will be your procedures for addressing a poor file?
Continuous professional development: How many hours will you deem sufficient and what will you deem relevant and applicable?
Knowledge assessments: Will you set an examination? What will be the pass mark?
How will you assess skills? Will client meetings be observed and will you assess role-plays?
Job descriptions for yourself and your employees
Supervision arrangements: What do you have in place for non-competent advisers?
Is your supervision appropriate? How are the training needs of your supervisors identified and addressed?
Record keeping: How and for how long will your records be kept? What actually needs to be kept?
How will you evaluate and identify training needs and who will be responsible for training?
Recruitment procedures: What are they?
You may feel some of these areas are not applicable to you and will not require documenting in your T&C scheme. But a word of caution on recruitment – although you may be a one-man band and are adamant that you will never take on staff, the FSA will still expect you to have formal written recruitment procedures in place, just in case.
The final piece of the jigsaw is to identify an individual who will take responsibility for T&C in your firm to ensure what is contained within this manual is adopted in practice.