Firms will have to notify the FSA if they uncover issues with an adviser’s competence, including breaches of ethics rules.
Under a new rule proposed in the FSA’s quarterly consultation paper firms will be required not just to monitor their advisers’ behaviour but also to inform the regulator where there are issues with competence or ethics.
The rule will be introduced as part of the Training and Competence module of the FSA handbook.
Firms will have to notify the FSA where an adviser has been assessed as competent but is no longer considered to be; and where an adviser has failed to get an appropriate qualification within the time limit proposed by the FSA in its June competence and ethics paper.
Firms will also have to inform the FSA where an adviser has failed to comply with a Statement of Principle in carrying out his controlled function; and where advisers have acted outside their area of competence without supervision.
The rule will affect IFAs, tied and multi-tied investment advisers, bank advisers, stockbrokers, wealth managers, and product providers.
The FSA says it expects the rule to come into force next January and for the rule to apply to all firms employing approved persons that fall within the scope of the RDR.
It plans to issue feedback and final rules in December 2010.
In the paper the FSA says: “We already receive some ad hoc information relating to possible issues at an individual adviser level into our contact centre. Our proposals in this CP should lead to an increase in such cases and we expect to incur some costs in supervision and enforcement against this new requirement.
“This proposal has the benefits of emphasising the importance we are placing on competence and ethical behaviour of advisers, informing our supervisory activity and providing us with insights on competence and behaviour.
“This will also help us determine the type of information we need to collect in monitoring adviser behaviour after our RDR proposals are implemented at the end of 2012.”
Responses to the proposed Training and Competence rule changes should be received by the FSA by November 6.