This is in line with its objective of moving towards a more principles-based regime. Mifid has also occasioned some minor changes to ensure UK compliance with its requirements.
The proposed final version can be studied in annex 3 of CP07/4 which is available on the FSA website. Other amendments are being made to the senior management arrangements systems & controls sourcebook (SYSC), where the requirement is established for all staff to have the skills, knowledge and expertise necessary for the discharge of their responsibilities.
The new wording is similar to that which currently exists but there are differences which must be considered. SYSC also re-enforces the responsibility of senior management to ensure that the firm meets all the requirements.
The revised T&C sourcebook focuses on retail business as there has been a relaxation of the exam requirements for other types of business. The new rules may be shorter but the FSA says this does not necessarily acquaint to less. The requirements may be pretty similar and have undoubtedly been expressed in a more understandable manner. However, the shortened version still needs to be read and considered carefully to determine its real impact on individual firms.
My interpretation is that the new requirements represent a significant move in practical terms and are something that firms must respond to.
The onus on senior management under SYSC to ensure all staff have the skills, knowledge and expertise necessary for the discharge of their responsibilities is a stiffer test than the exam requirement on adviser staff and new text is included to identify the value of staff who are not required to hold a Financial Services Skills Council-appropriate exam being able to demonstrate knowledge by holding a qualification.
For all staff covered by T&C, the rules underline the importance of maintaining competence. In a fast-moving industry such as mortgages, knowledge quickly becomes outdated unless positive action is taken. Firms and individuals are required to keep up to date on technical knowledge, skills, expertise, changes in the market, products and legislation.
We all welcome the move to shorter and more understandable rulebooks. The FSA says it would like to develop this approach through all aspects of the handbook. It will be watching the response of the industry to the new T&C sourcebook and if firms can show they have a real appetite to own responsibility for their compliance with principles, there is a real opportunity to encourage the move to the next phase – principles-based regulation.
Given the complexity of the existing handbook, it will be interesting to see how far the FSA will be able to move in terms of its simplification. Many people in the industry respond positively to such developments but there are some who seek total clarity and enjoy the certainty they believe detailed rules provide. The FSA also has to take a view on how well it will be able to police business and bring transgressors to heel if it is not able to point specifically to rule breaches. All these issues must be addressed in future.
Practitioners must recognise the very significant part they have to play in making it happen.
Richard Fox is chief executive of the Society of Mortgage Professionals.