The Fit and Proper admin tsunami gains momentum

04 July 2018 Jonathan Faurie
Billy Seyffert – COO Moonstone Compliance

Billy Seyffert – COO Moonstone Compliance

With the introduction of Treating Customers Fairly (TCF) and the Retail Distribution Review (RDR), the Financial Services Conduct Authority (FSCA) has developed a more consultative and inclusive approach when it comes to regulation.

As part of this, the FSCA announced in 2017 that Fit and Proper Principles would replace certain elements within the industry as an effective method of conduct regulation. 

However, this caused a lot of confusion. FAnews recently attended a Moonstone Regulatory workshop where Billy Seyffert – COO Moonstone Compliance – shed some light on what intermediaries can expect when it comes to Fit and Proper. 

The important element

When rules change, confusion unfortunately creeps in. While intermediaries saw the potential of the change towards Fit and Proper principles, there was a bit of confusion as to how their business would be affected, and how the FSCA would regulate them. 

“Fit and Proper hopes to establish a few things in the industry,” said Seyffert, “The most important thing it hopes to establish is increased competence within the industry. Every other element of Fit and Proper hinges on the fact that competence will take centre stage.” 

He added that if there is an increased focus on competence, elements such as honesty and integrity, good standing, operational ability and financial soundness will all fall into place. 

However, this may not be easy. “The point of regulatory reform is that all regulations will align with each other in order to make sure that there are fair outcomes for customers. However, monitoring the compliance around this may cause issues. The test for compliance is always subjective and after the fact. This makes it difficult to guide and make sure that there is compliance,” said Seyffert. 

Competence requirements
It seems as if insurers and intermediaries alike will be kept very busy when it comes to maintaining and proving their competence to the FSCA. 

According to Seyffert, financial service providers (FSP), key individuals (KI) and representatives will in future have to have appropriate, adequate and relevant expertise when it comes to financial products and financial services. 

Further, the FSP must ensure that it has policies and systems in place to ensure that KIs and representatives comply with the law when meeting with a client. 

“The FSP must also make sure that these individuals are trained and that they have maintained a strict regime when it comes to Continuous Professional Development (CPD). In other words, FSPs need to make sure that these individuals are competent enough to offer clients the particular financial services or products for which they are authorised,” said Seyffert. 

The world of admin

It seems as if FSPs will be watching their KIs and Representatives like hawks when it comes to ensuring that they are competent. 

The admin for FSPs does not end there. Seyffert adds that FSPs must establish, maintain, update and submit a competence register to the FSCA in a format that will be determined by the FSCA. 

Further, FSPs will have to immediately notify the FSCA if they are aware that a KI or Representative no longer meets any requirements when it comes to competency. 

Minimum experience

A key element when it comes to competency is the minimum experience that KIs and representatives will need to have in order to service clients in an appropriate manner. 

This is nothing new and all intermediaries undergo extensive product training before they meet with clients. A new caveat when it comes to minimum experience is that it will lapse after five years of inactivity. 

Class of business training

There are also new rules and regulations when it comes to class of business training. In the future, class of business training can only be provided by an accredited provider or education provider. This training must also be assessed by the FSP

“Class of business training may form part of product specific training or qualification. This must also be recorded in the competence register within 15 days, “said Seyffert. 


CPD probably forms the cornerstone of the competency test as it ensures that intermediaries are up to date with all of the new information that exists within the financial services industry. 

“FSPs, KIs and Representatives must maintain a competency register, complete minimum CPD requirements and ensure that CPD activities are relevant, contributes significantly to their skill set and addresses training gaps,” said Seyffert. 

He added that FSPs must establish and maintain CPD policies and procedures within their businesses. Further, the FSP must, within 30 days after the cycle, record activities within their competence register and reconcile this with past entries into this same register. 

Editor’s Thoughts:
While this is not anything new, I am not sure everybody is prepared for the admin tsunami that is headed their way. Surely this is not the best way to improve efficiencies within the industry? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts


Added by Eligos, 04 Jul 2018
What about the so-called "Operational Ability" requirements? Like this one:

The governance framework of an FSP must include, but not limited to, effective and adequate systems of corporate governance, risk management (including conduct risk management) and internal controls that includes a recovery plan for the restoration of the FSP's financial situation following a significant deterioration and viable resolution plan setting out options for the orderly resolution of the FSP in the case of failure.

Clearly drafted by someone who has never been in business for themself.
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