Irish Minimum Competency Requirements (MCR) was first published by the Irish Financial Services Regulatory Authority (IFSRA) back in July 2006. The purpose of the requirements, then as now, is to establish and maintain minimum standards for regulated entities that deal with consumers in relation to retail financial products. The Central Bank issued a revised Minimum Competency Code (MCC) in 2011. Following EU developments, in particular requirements for professional knowledge and competence contained in the Mortgage Credit Regulations, Markets in Financial Instruments Directive II (MiFID II) and Insurance Distribution Directive (IDD) the 2011 MCC was reviewed in 2016/7. On the 1st Sept 2017 a new Minimum Competency Code 2017 (MCC2017) was issued along with The Minimum Competency Regulations (S.I. No.391 of 2017 Central Bank (Supervision and Enforcement) Act 2013 (Section 48 (1)) Minimum Competency Regulations 2017 (the Regulations). MCC2017 and the Regulations together replace the former MCC and take effect on the 3rd January 2018. However it is extremely important to note that although previous codes have been replaced that ‘’Any right acquired or obligation or liability incurred, in respect of a contravention of, or act of misconduct under, the previous Minimum Competency Code 2011 survives the replacement of the previous Minimum Competency Code 2011..’’ The purpose of this article is to highlight some of the more high level changes and to provide some guidance on navigating MCC 2017 and the Regulations. COMPLIANCE WITH THE CODE AND THE REGULATION When any new code, regulation or statutory instrument is issued the most important question for any firm is ‘’how does this apply to us?’’. Whilst it is expected that firms will carefully read the documents and highlight the various elements that have particular application in the firm it is helpful to know where to start. If you have a particular question it is possible that it has been addressed in Review of the Minimum Competency Code 2011 – CP106 Questions and Answers, the third document issued on the 1st of September 2017 to accompany MCC2017 and the Regulations. S.I. No.391 the Minimum Competency Regulations is new, and gives enhanced powers to the Central Bank, therefore this seems like a very good starting point for firms. The document is a relatively straightforward legal instrument that places obligations on regulated firms to ensure the individuals providing products and services are not only properly qualified but also have the necessary experience and skills to deliver a financial service to consumers in a competent and professional manner. The regulations are clearly set out in six parts dealing with general requirements and obligations of regulated entities, grandfathering, new entrants, records and other miscellaneous provisions. For the specifics relating to recognised qualifications and categories of retail financial product and associated specified functions reference back to MCC2017 is required.
For Brokers and Retail Intermediaries understanding the authorisations of the firm will help with the approach to MCC2017. MCC2017 contains the competencies relevant to various statutes and EU directives relating to Insurance Intermediaries (IMR) Investment Intermediaries (IIA), MiFID Firms (MiFID II), Mortgage
Credit Intermediaries (CMCAR) and Debt Management Firms (Central Bank Act 1997). Segregating requirements contained in the MCC 2017 in line with the range of retail financial products and services offered by the firm and recognised qualifications contained in Appendix 4 provides a reasonable oversight of what qualifications are required in the firm. WHAT’S NEW Annual Review of Development and Experience
In the Regulations and the Code there is a new requirement for firms to ensure that members of staff have obtained the competence and skills appropriate to the relevant function, through experience or training gained in an employment context. There is also a requirement on regulated firms to carry out an annual review of staff members’ development and experience needs. Reference back to the range of Competencies set out in Appendix 3 will assist in this new requirement.
Mortgage Credit Intermediaries have two new onerous requirements arising from the Mortgage Credit Regulations and now set out in the MCC 2017. Firstly individuals that provide advice or services in relation to Mortgages will have to hold qualifications by the 21st of March 2019. It is essential that anyone grandfathered for this activity realises that grandfathering for Mortgages will no longer apply after this date. The recognized Qualification for this activity includes the Qualified Financial Adviser, Accredited Product Adviser (Loans) or Accredited Product Professional (Loans). Secondly, all members of a mortgage credit intermediary board, (even if they are non-executive directors) are required to carry out six hours of continuous professional development each year.
Qualification and experience requirements for MIFID firms are also new. For MIFID firms, in addition to obtaining a relevant recognised qualification, there is a requirement on the regulated firm to ensure that members of staff have obtained the competence and skills appropriate to the relevant function, through 6 months experience or training gained in an employment context. Firms authorised under the IIA will see that MCC 2017 still allows for the continuation of grandfathering arrangement in respect of relevant activities (e.g. advising on pure investment products) that fall within the scope of the firm’s authorised under the Investment Intermediaries Act 1995. IN SUMMARY There are new provisions in the MCC2017 and Regulations that affect every firm. The extent of the impact depends on the range of services offered and the scope of authorisations held by the firm. Enforcement can be expected from the 3rd of January 2017 in view of the new regulations. Firms should carry out a review to ensure compliance and take necessary steps to immediately remediate any deficiencies. Reference to the three documents mentioned above, the Central Bank website and of course your representative body Brokers Ireland will help firms to improve knowledge understanding and most importantly application of the new requirements of MCC 2017 and The Regulations.