Strive for continuous monitoring, says Colin Rawlings
In its T&C Sourcebook, the FSA lists five T&C commitments that should be fulfilled by all firms.
The firm's first commitment to T&C should be that its employees are competent. To this end, matrices can be used to record staff competencies and details of the T&C scheme. This will not only be a useful tool in terms of identifying any shortfalls within the scheme and specific training needs, but will also provide clear documentation that is invaluable for audits or regulatory visits.
Firms must also ensure that employees remain competent for the work that they do. The most effective T&C schemes are those that assess competence on an ongoing basis so that obtaining competent status is viewed as a continuous process and not an end result.
Regular testing of knowledge and skill, often through annual assessments, is the most typical approach. Although this method ensures uniformity of standards, it can be difficult to organise and may not accommodate individual needs. Further, it has also not proved to be an effective way of ensuring knowledge retention.
The third commitment, ensuring that employees are appropriately supervised, is an essential element of attaining and maintaining competence.
The two most important factors of an effective T&C scheme are how much input supervisors should have in determining training requirements and how much discretion supervisors should exercise. Allowing supervisors to exercise their discretion when designing training and assessing competence ensures efficient use of their time and concentrates effort on those employees who most need supervision.
The fourth commitment requires that competence is regularly reviewed and this is therefore fundamental to ensuring continued competence for all firms. It is important to ensure that T&C schemes remain appropriate as a firm's business and market develops.
Regular assessments should be carried out and the frequency of reviews should depend on the risk profile of the firm. Each review should monitor the core competencies and training requirements in relation to the current risk profile of the firm.
Finally, competence levels should always be appropriate to the nature of the business. Operating a risk-based scheme, tailored to the needs of the firm and the specific needs of individuals, ensures that sufficient action is being taken to achieve the required results, but also avoids over-expenditure on the scheme.
T&C is not only a regulatory requirement in its own right, but also an integral element in complying with other regulations. Implementing an effective T&C scheme will therefore provide protection at all levels of a firm, which could lead to a lighter regulatory touch. It can also be a powerful tool in promoting the compliance culture within a firm and encouraging cost effective business practices.
Competent staff will be better at their jobs, which will lead to increased customer satisfaction and, ultimately, fewer complaints from customers and an enhanced reputation for the firm.
If you have received a minded to authorise letter, email