Knowledge and Competence
The Markets in Financial Instruments Directive II (MiFID II) requires that staff who advise on or sell investment products to clients possess an appropriate level of knowledge and competence in relation to the products offered. As such, relevant staff need to have acquired an appropriate qualification and appropriate experience to fulfil obligations in Article 24 and 25 MiFID II in order to provide the relevant services. This is particularly important given the complexity of investment products and continuous innovation in their design.
The European Securities and Markets Authority (ESMA) issued Guidelines for the assessment of knowledge and competence, which the GFSC has adopted.
The purpose of the ESMA Guidelines is to specify the criteria for the assessment of knowledge and competence required under Article 25(1) of MiFID II, in accordance with Article 25(9) of the same Directive.
The ESMA Guidelines require the GFSC to publish information, as per paragraphs 21 and 22, in relation to the characteristics of an appropriate qualifications that meets the EU published criteria, these are set out below, and information on time periods and assessments for allowing staff to come up to speed with the requirements.
Firms should consider the below information alongside the ESMA Guidelines and ensure compliance with these.
Benchmark for Qualifications
MiFID II sets out the importance of knowledge and competence and specifically the need to establish and maintain a high standard. As per paragraphs 21 of the ESMA Guidelines we are publishing a list of qualifications.
This paper sets out a benchmark of qualifications. This list is not meant to be exhaustive and the onus is on the firm to assess and review compliance with the ESMA Guidelines and assess the details of relevant individual’s qualifications against these to establish if they meet the benchmark.
The GFSC does not need to approve individual’s qualifications or equivalent qualifications, it is expected that the firm has in place robust processes, the GFSC may however review this as part of its ongoing supervision.
Qualifications should form part of a wider approach by firms to ensure that relevant staff have a high knowledge and competence and that this is maintained. Firms should also ensure that they have a minimum of 15 hours CPD covering the areas set out in the Annex to MiFID II.
Firms should also consider as part of their approach what qualifications and training is required of, for example, information providers.
The following qualifications are considered relevant qualifications:
|Diploma for Financial Advisers (DipFA)
||The London Institute of Banking and Finance
|Level 4 - relevant qualifications for providing advice in investments. (UK levels)
||Chartered Institute for Securities and Investment
Publication of information by Competent Authorities
As per Paragraph 22 of the ESMA Guidelines the GFSC is required to publish further information in relation as to our view on some specific aspects of the ESMA Guidelines to assist firms in forming their policies and approaches.
(i) The GFSC is of the view, in line with ESMA recommendations that 6 months is the minimum period of time required to gain appropriate experience;
(ii) The GFSC agrees with ESMA guidelines that 4 years is the maximum period of time under which a staff member lacking appropriate qualification or appropriate experience is allowed to work under supervision; and
(iii) The responsibility for the review of staff member’s appropriate qualification lies with a firm, the onus is on the firm to establish its own internal mechanisms for making these assessments against the GFSC benchmark set out above.