The Minimum Competency Code 2017 and the Minimum Competency Regulations 2017 (together the “Code”) replace Minimum Competency Code 2011.
The Code has been introduced to incorporate the implementation of the Insurance Distribution Directive, the Markets in Financial Instruments Directive II and associated European Securities and Markets Authority Guidelines (“MiFID II”) and the European (Consumer Mortgages Credit Agreements) Regulations 2016. This change is effective from 3 January 2018.
Who does the Code apply to?
The Code sets out certain minimum professional standards for persons providing financial services, in particular, persons exercising a controlled function on a professional basis. It does not apply to persons exercising a controlled function concerned solely with the provision of a retail financial product, free of charge in conjunction with another financial product. The Code aims to ensure that consumers obtain a minimum acceptable level of competence from staff acting for and on behalf of regulated firms in providing advice and information and associated activities in connection with retail financial products.
What Information and Advice is covered?
Information is now defined as “the provision of information, at a person’s request or at the initiative of the firm, that may assist a person in choosing a retail financial product or in the context of the provision of MiFID services or activities”. The Code specifically excludes certain types of information, including but not limited to: (i) “staff pointing out where persons can find information”; (ii) “the provisions of a brochure or booklet without giving additional information”; and (iii) “information given in a newspaper, journal, magazine or other publication”, which were previously encompassed under the definition of advice. Advice is now defined as “a personal recommendation to a person, whether at the person’s request or at the initiative of the firm, in the course of performing a relevant function”.
New Qualification Requirements for Staff
The main changes under the Code relate to the qualification and experience requirements of the staff of financial services providers. The Code sets out minimum standards where staff exercise a controlled function in relation to: (i) regulated activities in respect of retail financial products which include, but are not limited to, insurance products; pensions; savings and investments; mortgage credit agreements and consumer credit agreements; and (ii) MiFID services and activities.
All staff carrying out a relevant function must now either have: (i) a recognised qualification (as defined in the Code); (ii) comply with the grandfathering provisions; or (iii) comply with the new entrants’ provisions which includes participating in a training process. Staff are also required to complete annual Continuing Professional Development training and regulated firms are required to maintain written records of this training and review their staff’s development and experience needs.
The Code also requires regulated firms to ensure that, in addition to obtaining a recognised qualification, staff have obtained the relevant competence and skills appropriate to the relevant function, through experience or training. Additional standards must be complied with where staff exercise a controlled function involving: (i) MiFID services and activities; (ii) mortgage credit; (iii) insurance and reinsurance undertakings and insurance intermediaries; and (iv) design of retail financial products.
Regulated firms are now required to conduct an annual review of their staff’s development and experience needs. The Code requires regulated firms, if requested to do so by a consumer, to provide a certificate of such qualifications.
This article first appeared in the International Law Office Insurance and Reinsurance newsletter on 19 September 2017.