Coming just half a year after its predecessor, CP09/18, one of the most remarkable aspects of CP09/31, is just how much discussion and attention it is generating.
This consultation paper is packed with new details and a good measure of surprises.
First of all, Tempus Fugit. The proposed December 2012 deadline for attaining the new higher level qualifications remains for investment advisers, who have already been assessed as competent before 30 June 2009. However new entrants to the investment advice sector after this date, do not have to meet the December 2012 deadline, but will be subject to new time limit rules, yet to be announced.
The CP has published its list of Transitional Qualifications, legacy qualifications which investment advisers may already have. For holders of these historic qualifications, it may be the case that they will only be required to undertake structured CPD, to ‘gap fill’ the technical professional knowledge – i.e. the gap between the published ApEX standards, and the technical content examined in the respective listed transitional qualifications.
At first glance this looks like good news, but a note of caution is sounded. The transitionary list is published as part of a Consultation Paper, and is therefore far from certain. Many observers forecast that some qualifications on the list will not make it to the final cut. This in itself leaves investment advisers with uncertainty, at least until beyond the third quarter of 2010, when the FSA has committed to consult further on the professional standards expected of individual investment advisers.
Arguably the most significant development from CP09/31 is the shift away from the previously proposed Independent Professional Standards Board, and the emergence in its place of an FSA professional standards governance structure. In simple terms, the FSA will bring the standards setting in-house, to ensure advisers achieve this greater level of professionalism, both initially and on an ongoing basis. They will then effectively outsource the practical execution to Recognised Professional Bodies – RPBs, to take on the responsibility not only for delivering the raised standards, but also to validate the ongoing CPD to prove that standards are maintained.
In effect, through formal approval by the FSA, existing and new Professional Bodies, will take on a statutory role of monitoring regulated Firms’ and Advisers’ standards, and reporting that data to the FSA. This development could see the emergence of new RPBs, if some, perhaps even all of the existing exam awarding bodies opt out of this proposed role.
Many may see the emergence of RPBs and their statutory, supervisory role in the investment advice marketplace, albeit only in competence and CPD terms, as a return to self-regulation, of the nature last seen in the 20th century, when the costs borne by regulated Firms was substantially lower. Indeed, in its Consultative Paper, the FSA cite simplicity and lower costs as one of its drivers in proposing this new regime.
A key measure of the success of the role of the new RPBs will most likely become the costs at which the uplift and maintenance of professional standards within the investment advice market are delivered. In the context of Firms operating radically different business models, post 2012, the overall cost impact on individual investment advisers from statutory auditing of structured CPD outcomes will find itself under very close scrutiny. [The FSA proposal to outsource this activity is a masterstroke].
In practice, CP09/31 creates a clear pathway for structured CPD with a direct link back to a published set of learning outcomes (and standards). For investment advisers, this is very good news indeed, as it means that the CPD can be relevant to their development needs. Advisers can now see a prescribed list of required technical knowledge and can set about identifying the learning areas which either their existing professional qualification hasn’t examined, or that they cannot recall, and to plan and schedule an individual learning programme to complete by the end of 2012.
The new professional qualification Core Modules developed by the FSSC are:
- Financial Regulation and Ethics
- Personal Taxation
- Investment Principles and Risk
Additionally, the advice activity standards (for investment advisers) are divided to be specific for advising on:
- Packaged investment products
- Securities / Derivatives
For advisers with legacy professional qualifications, to which structured CPD is to be added, the FSA expect that the majority of the indicative content within the new core modules would need to be included as CPD top up.
This means that individual advisers holding a Transitional Qualification need access to a practical, cost-effective solution to enable them to work through their structured CPD programme and to evidence that the desired learning outcomes and standards have been assimilated – and retained. Further, since evidencing remains a critical component, advisers need an evidential record of:
- The structured learning
- The learning outcome covered
- The result of the assessment
What this means is that Firms and Advisers can start right away on building a structured CPD programme and to access a learning (CPD) assessment that the FSA will recognise.
Mark Ehlinger - 4th February 2010