Employees, agents and other relevant persons | SYSC Rules and Guidance | FCA Handbook

Skills, knowledge and expertise. Competent Employees.

A firm must employ staff with the skills, knowledge and expertise necessary for them to fulfil their role within the firm. The new SYSC 28 (covered later in this section) contains rules and guidance relating to the minimum knowledge and competence requirements in relation to insurance distribution activities. This includes a requirement for relevant staff to complete a minimum of 15 hours formal CPD per annum.

Further guidance on ways that a firm can demonstrate compliance with these rules and additional requirements for firms advising consumers can be found in the Training and Competence section of this manual.

When complying with the competent employees rule, a firm must take into account the nature, scale and complexity of its business and the nature and range of financial services and activities undertaken in the course of that business.

A firm must have systems and controls in place to satisfy itself of the suitability of anyone acting for them. This should include their competence and honesty. This information needs to be verified:

• at recruitment; and
• in regular assessments throughout the year. It is recommended that a firm assess continued competence at least twice a year.

An individual’s honesty should not need to be reviewed after recruitment unless something happens to deem this necessary. Assessment of an individual’s suitability should take into account the level of responsibility the individual will assume in the firm.

Recruitment

The skills, knowledge, experience, qualifications and employment record of a prospective employee or agent should be verified before an offer of employment or the completion of an agency agreement. Records must be retained on the personnel file of the person concerned, if employed, or on a central register and file of all agents.

Interview – a written record of the interview should be retained in the personnel file of the person concerned. This interview should be used to verify honesty and competence to perform the role. Guidance notes are set out later in this section under Business Standards and in the Training and Competence section (TC Template 1).

References – 2 written references should be obtained, unless personally known by the company. Criminal records and credit history should be obtained.

Maintenance of competence

The firm will need to demonstrate that their members of staff have maintained competence. It is recommended that staff are assessed regularly, at least every six months. This can be done by various means, such as:

• interview;
• assessment test – written or oral;
• spot check of files and outgoing mail;
• workplace assessment e.g. sitting with the member of staff and observing their performance;
• role play; or
• a combination of all the above.

An example of a workplace assessment checklist can be found in the Training and Competence chapter, template section (TC Template 3).

Segregation of functions

A firm should ensure that functions within the firm are segregated to prevent conflicts of interest occurring.

Effective segregation of duties is an important element in the internal controls of a firm in the prudential context. It should help ensure that no one individual is completely free to commit a firm’s assets or incur liabilities on its behalf. It can also help ensure that a firm’s governing body receives objective information on financial performance, risks faced by the firm and the adequacy of its systems and controls.

A firm should normally ensure that no single individual has unrestricted access to do all of the following:

• initiate a transaction;
• bind the firm;
• make payments; and
• account for it.

In some cases, it may not be possible to fully segregate all duties (for example because of a limited number of staff). In this instance the firm should ensure that it has adequate controls in place to mitigate any risks imposed, such as frequent reviews by a senior manager. You should, on a regular basis, review the adequacy and effectiveness of these controls.

Awareness of procedures

A firm should ensure that all relevant staff are aware and trained in the processes and procedures that must be followed to enable them to perform their roles and responsibilities.