Compliance - How much supervision?

The risk-based nature of the regulations means that firms have to decide for themselves what measures are appropriate. The best way to approach this is to take the lead of the Financial Services Authority and examine what outcomes or results the rules aim at. The Competent Employees Rule (SYSC 3.1.6) indicates that your staff members must have the skills, knowledge and expertise necessary to discharge their responsibilities.

The desired outcome could be that they handle the business correctly from a procedural perspective and are able to apply their knowledge to give your customers appropriate advice as well as treat them fairly. Your monitoring activities should be able to evidence these competiencies.

This leads to a re-examination of your statement that your staff's experience means they are competent as, for example, the FSA interpretation of treating customers fairly is evolving constantly. Does your training and competence scheme enable you to demonstrate that knowledge is being kept up to date and that recent changes to products and the rules, possibly resulting in changes to the firm's procedures, have been incorporated into your staff training regime? All of these things should form part of the firm's professional development arrangements.

Compliance experts can assist in setting up a monitoring routine that suits your business. This will include consideration of the frequency and number of files to be reviewed, how you demonstrate adherence to both regulatory and company procedures and whether there is sufficient evidence to support the quality of your fact finding, as well as how this has been matched to subsequent advice. You must set up procedures for remedying any omission and, where this turns out to be a systematic or systemic error, provide appropriate and documented retraining.

As regards your own knowledge, the FSA gives further guidance in the TC Sourcebook; you should consider employees' levels of relevant experience to determine the level of supervision required and you should also have the necessary coaching, assessment skills and technical knowledge to act as a competent supervisor and assessor.

- Ian Ritchie, director, RWA Group

If you would like to ask a question to our management clinic panel please contact editor Andew Tjaardstra at andrew.tjaardstra@incisivemedia.com.