The FSA has published its final rules on professionalism in the context of delivering the Retail Distribution Review (RDR) in policy statement PS11/1.  This completes the policy requirements of the RDR, and now that “all the building blocks are in place”, the FSA expects advisers to consider what they still need to do to ensure they meet the new standards that will apply from 2013.

This e-bulletin summarises the key points in relation to the governance of professional standards and data collection.

Governance of professional standards

  • Accredited professional bodies will be expected to play an important role in raising standards, for example by

    • verifying that adviser members are appropriately qualified, and

    • by sharing information with the FSA relating to the professional standards of its advisers (eg: information relating to conduct issues and complaints).

  • Advisers must hold a Statement of Professional Standing (SPS), to be issued by an accredited professional body.

  • The list of qualifications that the FSA has to date assessed as appropriate under RDR is set out in Appendix 1.  Continuing professional development (CPD) can be used to gap fill qualifications.  Note that qualification standards for protection advisers have not been addressed.

  • Advisers must carry out 35 hours of  annually, 21 hours of which must consist of structured activities.  All CPD must be relevant to retail investment advice activities, be measurable, and consider learning outcomes.  Advisers must keep a written record evidencing the activity completed, the targeted outcome, how this was met, and, if assessed, the result of that assessment.

  • Firms must obtain independent verification that advisers are appropriately qualified, in the form of the SPS.  Firms must also ensure that individual advisers comply with CPD.

  • An express requirement for firms to notify the FSA when they identify competence and ethics issues with their advisers will come into effect in July 2011 (see below).

  • The FSA will retain responsibility for supervising and enforcing professional standards.

Data collection

New specific notification requirements will be imposed on firms, so as to enable the FSA to collect data and information on advisers’ professional standards and ongoing competence:

  • Firms will be expected to provide the FSA with a quarterly report containing data about individual advisers’ professional standards and the name of their accredited professional body, from the end of 2012.

  • From 1 July 2011 firms will be expected to notify the FSA as soon as reasonably practicable after it becomes aware, or has information which reasonably suggests, that there are “significant” competence related issues with an individual adviser.  This requirement will be triggered where a retail adviser:

  • is no longer considered competent;

  • has failed to attain an appropriate qualification within the prescribed time limit;

  • has failed to comply with a Statement of Principle in carrying out his controlled function; and

  • has performed an activity listed in the Training and Competence sourcebook Appendix 1 (eg, advising, dealing etc) before having demonstrated the necessary competence and without appropriate supervision.

In considering whether the above events are “significant”, firms will have to take into account:

  • the potential risk of consumer detriment;

  • whether the event or a pattern of events indicate recurrent issues; and

  • obligations under Principle 11 of the Principles for Businesses.

  • CP10/14 had mooted another notification process which would require firms to systematically report transactional data relating to individual advisers.  The policy statement does not discuss this further, although it states that it will consult on “wider RDR data requirements” in Q1 2011.

Click here for our previous e-bulletin which considers some of the issues arising from the above.

Next steps  

Q1 2011

  • Consultation on “wider RDR notification requirements”
  • Consultation on product disclosure changes arising from the adviser charging rules

  • Policy statement on platforms

2012

  • FSA thematic work on professionalism, remuneration and description of services

  • 31 December: deadline for firms to be fully compliant with RDR rules