Firms will pay the penalty if HR fails new FSA rules

first_imgFirms will pay the penalty if HR fails new FSA rulesOn 11 Dec 2001 in Personnel Today Related posts:No related photos. Failure to comply with new recruitment and development regulations can landfinance firms in hot water, yet many HR departments have yet to review theirresponsibilities, reports Ben WillmottEmployers in the finance sector must comply with stringent new regulationson staff recruitment and development introduced at the beginning of this month– or risk being fined or named and shamed. Despite the potential penalties, many HR professionals are unaware of theirresponsibilities under the Financial Services and Markets Act 2000, accordingto its regulator, the Financial Services Authority. The Act will apply to more than 10,000 firms and has been introduced toimprove standards of financial advice. The FSA’s training and competence rules,which apply to all members of a company from the chief executive to most juniorstaff, specify that employees must be competent, supervised and regularlyreviewed. “There is anecdotal evidence suggesting many HR departments don’t knowthat these rules affect them,” said David Jackman, head of industrytraining for the FSA. “There needs to be an effective partnership betweencompliance, the line management and HR to make these requirements work. “We find it is often compliance officers who attend our workshops androadshows and we are therefore not particularly confident that HR departmentsare being fully involved. “The underlying basis is identifying, developing and demonstratinggroups of competencies and this surely is the expertise of the HR area,”said Jackman. The Employers Forum on Statute and Practices also stresses the vital role HRmust play in helping employers comply with the Act. Robbie Gilbert, chief executive of the EFSP, said, “This is a majorpiece of legislation which affects more than 10,500 companies. HR departmentshave an important role to play in ensuring their business is fully compliantwith the new measures. “According to the regulator, the FSA, there is a lack of awarenessamong HR departments of just how much the Act impacts on the personnelprocess.” Gilbert said the FSA is encouraging businesses to develop systems thatactively motivate people to comply. “This is a positive approach andcompanies should react accordingly and look to introduce appropriate managementsystems and controls – an area in which HR has particular expertise to offer,”he said. HR must work closely with compliance and risk managers if companies are toadapt successfully to the regulations, confirms Nadine Majaro, a partner atPricewaterhouseCoopers. She explained, “HR needs to be an integral part of the function of theoverall management of risk. “HR has focused on what it needs to do to comply. What it has not donein some cases as part of the risk management function is look at what it mustdoto best serve the business it is working with. “HR must try and achieve this holistically for the whole business. Mosthave achieved bits of this but have not thought about the whole picture.” The FSA is particularly keen to see that employees receive sufficienttraining on regulatory requirements and keep up to date with changes in themarket. FSA’s Jackman said, “The important element is that training is timelyand properly planned, structured and evaluated. This will give a focus totraining departments and help to ensure a balance between training and other HRactivities.” Under the Act, HR professionals may be called upon by their company to do athorough re-check on the CV details of staff already registered by the FSA orthose who will now come within the new “approved persons” regimeunder the Act. Gilbert emphasised the need for these checks to be accurate. “The FSAhas indicated that HR directors of each firm will have to send a report onemployees wishing to become approved and that possible negligence claims couldarise for misrepresentation. “These measures clearly fall with the HR function’s remit. The processof recruitment, training and ongoing competency of employees will all need tobe revisited by the HR team in light of the new measures. We would encouragefirms to act now.” The FSA emphasises that one of the most significant areas the newregulations will affect is how employers in the finance sector recruitemployees. The rules include the need to relate the skills and knowledge of aparticular employee to the knowledge and skills required for the role concernedand to take reasonable steps to obtain information about a potential employee’sprevious relevant activities and training. Gilbert told Personnel Today that all new applicants for financial servicesjobs will be required to submit their employment details to the FSA under thenew approved persons regime. In addition directors will have to be approved, which could include many HRdirectors. “Pre-employment screening is also affected. Under the new regimecompanies must carry out checks to ensure references are taken from suitablesources. “Companies now have to establish that given appropriate training andsupervision, new employees should be able to achieve competence in the role forwhich they are intended. “Therefore it is vital that at the time of recruitment an initialassessment of the new employee’s relevant knowledge and skills should also becarried out to determine the training required,” said Gilbert. But the Act could be an opportunity rather than a threat for HR. AlisonWilsher, head of training and professional development at the British VentureCapital Association, believes the Act will help HR departments within thefinance sector to become more central to the business. “This will mean that HR is in the centre of business strategy, whichall HR departments should welcome because it will raise their profiles,”she explained. “I don’t think this is something HR should be frightened of as long asit welcome it and doesn’t ignore it. “HR departments need to realise that the FSA is not saying anythingnew. This [the requirements under the Act] is mandatory for good HR practice. FSA regulations guideFirms must ensure under the newtraining and competence rules that:– Employees are competent– Employees remain competent– Employees are appropriately supervised– Employees’ competence is regularly reviewed and the level ofcompetence is appropriate to the nature of the businessThe training and competence rules include more detailed rulescovering:– Recruitment– Training– Approved examinations– Continuing competence– Supervision– Record keepingThese rules affect employees involved in:– Advising and dealing in investments– Managing investments– Advising on investments– Advising on broker funds and pension transferswww.fsa.gov.uk Comments are closed. Previous Article Next Articlelast_img read more