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How Fit For Purpose Are Your T&C Arrangements – Part 1

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Julie Pardy

Julie Pardy

With more than 30 years service in the Financial Services industry Julie has spent many years at the coal face undertaking a wide variety of roles in banking from Compliance to Sales, Operations to Training.

Training & Competence (T&C) has been a regulatory requirement of the Financial Conduct Authority (FCA) since the late 1990’s.  As such, it doesn’t grab the headlines the way more recent regulation, such as MIFID II Knowledge and Competence, Insurance Distribution Directive and Senior Managers & Certification Regime have. However, these newer regimes all have the same underlying theme, that being key staff have, and evidence, the knowledge and competence necessary for them to fulfil their jobs effectively. As a result, activities like regular performance reviews, ‘on the job’ observations, programmes of continuing professional development (CPD) and robust record keeping supported by effective monitor have never been more relevant. Therefore, whilst not necessarily grabbing the headlines, never have the principles and underlying activities of T&C been more relevant.

This is the first of a series of three special, extended blogs designed to help you review the fitness of your T&C or wider competence management arrangements and, in doing so, that underpin your organisation’s compliance with a range of regulation.

For ease, this blog is laid out in three sections, ‘Overall Responsibility’ and ‘The Scheme Itself’. Each section contains a series of questions and answers;

Click here for the next Blog in this series;

Overall Responsibility

  • Who is responsible for T&C in the firm and why?

Like anything in organisations, for things to work and stay working, someone needs to be given responsibility for T&C. And, as is always the case with assigning responsibility, the person needs to have the resources and the authority to fulfil what’s expected of them.  

  • How will this role be carried out, what standards are expected and how is success/failure measured?

Again, good practice demands that the person with responsibility for T&C needs clear guidelines on what ‘good looks like’ and how it will be measured and rewarded.

The Scheme Itself

  •  How do you know the scheme is effective?

Similar to understanding what standards the scheme ‘owner’ should be measured by, a T&C should have metrics to judge whether it is effective. At its simplest, all staff in the scheme(s) will be competent to undertake their role for the benefit of both the organisation and customers alike. To achieve this however, a series of planned activities, processes and MI need to be in place.

  • What management information is in place, how do you know it is robust, how often is it reviewed and by whom?

Developing good MI is a key consideration for a T&C scheme owner as staff are often spread across multiple roles, are in different divisions and multiple locations.

Like all good MI, the MI required to manage your T&C scheme should accurately reflect what is happening, should provide data on key metrics, e.g. number of formal reviews, number of ‘fails’ etc. It should also be real time and provide both at a summary, i.e. dashboard, level as well as being able to drill down to case level. Importantly exceptions, such as staff failing T&C activities such as training or exams, should provide immediate alerts.

The MI should be available to all the key ‘actors’ in the T&C process, i.e. senior manager stakeholders, T&C supervisors, line managers and staff themselves. Each ‘actor’ should see the data relevant to their role in the T&C scheme. Finally, in addition to be available in the real time, a timescale should be agreed for formal review of the T&C scheme’s status, e.g. monthly or quarterly.  

  • How often is the scheme audited and why this timescale?

T&C schemes should be subject to periodic audits, ideally from an impartial third party, e.g. internal audit or experienced external consultancy. Audit timescales vary, but best practice guidelines can be sought via Trade Associations who often have interest groups, including T&C.

  • What are the specific objectives of the audit and how are they measured?

If your organisation has audit objectives and measurement methods, they should be validated. Again, a good starting point are the Trade Associations.

  • How are remedial action points identified, taken forward and reviewed?

Best practice is that audit results are formally reviewed by both the T&C scheme owner and sponsor and a formal programme of activities put in place to resolve the remedial actions.

  •  What mechanisms are in place to ensure clear and consistent communication of the scheme requirements?

Thought should be given to ensuring that details of the T&C scheme are available to all staff concerned. Documents such as Guidelines, Handbooks, T&C Forms etc. should be uploaded to a central location and/or be placed on the organisation’s intranet. It’s also important that these documents are reviewed on a periodic basis to ensure they are still accurate.

  • What records are made, why, by whom and are they secure and accessible?

Organisations vary in who is given responsibility for conducting T&C activities alongside the individual. In some organisations, it is the manager of the staff member who is responsible, in others it is a separate team of T&C supervisors and in some, it’s a combination of both. Irrespective of who is responsible for conducting the T&C activities with the member of staff, these records should be securely held. The days of paper records are long gone. However, for T&C records to be accessible for managers supervising the T&C scheme and for T&C records to be available in MI, schemes should really use dedicated T&C systems.   

  • Are all appropriate individuals included within the T&C arrangements?

This is a fundamental question. Members of staff should be included in a T&C scheme if they are fit within the FCA’s ‘competent employees rule’. This rule that applies to individuals engaged in the regulated activity in all UK authorised firms (including wholesale firms). Staff such as advisors clearly fall into this category as well as their managers. However, because of the potential for customer detriment, staff such as complaint handlers are often included under an organisation’s T&C arrangements. 

  • How do the organisation’s T&C arrangements fit in with its business ethos and practices?

The design of the T&C scheme should reflect the organisation’s business model and culture. For example, if the organisation provides simple products such as general insurance, T&C arrangements can be lighter touch. By contrast, if an organisation provides more complex services or products such as investment products, the T&C scheme should be both more detailed and rigorous

Hopefully, these questions have provoked some thought and the responses some guidance on how you can define and keep your T&C and competence arrangements fresh. The second blog in this series considers key issues such as recruiting into roles that are part of a T&C scheme, the stages of competence and supervision.

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