CISI: What the FSA's new TC regime means for discretionaries

A recent Citywire article referred to CP10/12, ‘competence and ethics’ which is about the Training and Competence (TC) Regime and not about the retail distribution review.

Discretionary managers are not covered under the retail distribution review, which was subject to a different consultation paper CP10/14.

Under CP10/12, which tightens the TC regime, discretionary managers will have to become qualified in managing investments if hitherto they have relied upon the grandfathering arrangements that have been in force since FSMA.

This CP proposes withdrawing the grandfathering arrangements and discretionary managers will have 30 months to complete an appropriate examination for managing investments.

This is a particular problem for those existing authorised investment managers currently working to comply with the new examination requirements for RDR who combine within their roles both retail advice, (so come under the RDR), and also discretionary management, now coming within scope of new examination arrangements proposed in the TC consultation paper CP10/12.

For those investment managers who are just discretionary managers with no retail clients, they will also need to take an appropriate examination for managing investments.

It does not apply to advisers who are only retail advisers and who only need to comply with the RDR.

CP10/12 lists the current appropriate examinations but the list is not complete. For example the SII (now CISI) Diploma is permitted under the legacy examination regulations.

Table below gives the CISI qualifications which appear on the legacy list for managing investments.

Separately the RDR consultation paper 10/14 lists those qualifications approved to comply with the RDR, including the CISI (formerly SII) Diploma and also the CISI Masters in Wealth Management (Diploma in Wealth management). 

Investment managers who hold the SII Diploma (Regulation and Compliance paper and any two other papers) are therefore covered both for the retail distribution review and for managing investments. So are those who have completed the CISI Masters in Wealth management (listed in the regulations as Diploma in Wealth management).

Those existing authorised advisers who do not possess either the SII (CISI) Diploma, or its Wealth Management Masters but who combine in their job roles both retail advice and discretionary management, may have to do an additional examination following CP10/12.

The Certificate in Private Client Investment Advice And Management (PCIAM) continues to be approved for the RDR and covers securities advice and advising on packaged products. It does not currently cover managing investments which is not part of RDR.

The CISI will be discussing with the FSA how managing investments might best be linked in for those individuals combining both activities in their role. This may not be resolved until October when the FSA plans to update its lists of appropriate qualifications.