CISI Guidance for Regulators and Firms

Transcription

1 ESMA Final Report: Guidelines for the assessment of knowledge and competence CISI Guidance for Regulators and Firms Developed to help firms fulfil their obligations under Articles 24 & 25 of MiFIDII 1

2 Contents 1. Introduction 1 2. About the CISI 2 3. ESMA Final Report: Guidelines on the assessment of knowledge and competence 3 4. How can the CISI help firms meet ESMA guidelines? 4 i) Qualifications 4 a) For Information Givers 4 - International Introduction to Securities and Investment (IISI) 4 b) For Investment Advisers 9 - International Certificate in Wealth & Investment Management (ICWIM) 9 - International Certificate in Wealth Management (Spain) 14 ii) Continuous Professional Development (CPD) 15 a) CISI CPD Scheme 15 b) Member Benefits 17 fc) CPD Log 18 d) Superuser 18 iii) Business ethics 19 a) CISI Code of Conduct 19 b) Integrity Matters 20 c) Interactive Workshops 20 d) Professional Refresher Contact Us 22 2

3 Introduction Welcome to this guide produced by the Chartered Institute for Securities & Investment (CISI), which provides information and practical support surrounding the implications of the ESMA Final Report: Guidelines for the assessment of knowledge and competence which was released in December 2015 and comes into effect in January This booklet focuses on the requirements in three of the main areas detailed in the ESMA Guidelines, namely: 1) holding an appropriate qualification; 2) undertaking and being able to demonstrate continuous professional development; and 3) demonstrating adherance to standards of business ethics. The CISI looks forward to supporting regulators, members, firms and the wider public in the delivery of these new standards. The CISI will do everything it can to enable firms to ensure that its staff fully comply with the ESMA Guidelines. We will provide a cost effective and efficient service to enable firms to monitor and measure progress of their staff towards meeting the requirements, as well as offering relevant and timely CPD for individual members. Simon Culhane, Chartered FCSI Chief Executive, CISI Background to the regulatory changes On 17 December 2015 the European Securities and Markets Authority (ESMA) published its Final Report: Guidelines for the assessment of knowledge and competence, which addresses the MiFID II requirements set out under Articles 24 and 25. These guidelines will affect staff who, under MiFID II, are defined as either giving information or giving investment advice. 1

4 About the CISI The Chartered Institute for Securities & Investment (CISI) is the professional body of choice for professionals in the securities, investment, wealth and financial planning sectors in the UK and in a growing number of major financial centres globally. Formed in 1992 out of the London Stock Exchange as a not for profit organisation, we have a global community of more than 40,000 members in 116 countries, and last year more than 40,000 CISI exams were sat in 80 countries. The CISI is proud to work with regulatory authorities in 37 countries. Within the EU, these links include authorities in Cyrpus, Germany, Greece, Malta, Netherlands and the Republic of Ireland. Our mission statement is: To set standards of professional excellence and integrity for the securities, investment, wealth and financial planning professionals, providing qualifications and promoting the highest level of competence to our members, individuals and firms. By professional excellence or professionalism, we mean the combination of knowledge, skills and behaviour. Knowledge Gaining the initial competence to do your job through professional qualifications Professionalism Skills Continuing Professional Development (CPD) and ongoing learning which enables you to maintain competence through professional body membership Behaviour Upholding the highest standards of integrity by signing up to a professional body s code of conduct We support these standards through our offerings in the areas of qualifications, continued learning, and integrity & ethics - areas where we are recognised as a premier body within the industry. This brochure focuses on all three components, and neatly aligns to the ESMA Final Report: Guidelines for the assessment of knowledge and competence published on 17 December

5 ESMA Final Report: Guidelines on the assessment of knowledge and competence Under the ESMA guidelines, firms will be required to: 1) Ensure that staff providing relevant services to clients are assessed through the successful completion of an appropriate qualification and have gained appropriate experience in the provision of relevant services to clients 2a) Carry out an internal or external review, on at least an annual basis, of staff members development and experience needs, assess regulatory developments and take any action necessary to comply with the ESMA requirements. This review should also ensure that staff possess an appropriate qualification and maintain and update their knowledge and competence by undertaking continuous professional development 2b) Ensure that they submit to their regulator, on request, records concerning knowledge and competence of staff providing relevant services to clients 3) Ensure that staff providing relevant services possess the necessary knowledge and competence to meet relevant regulatory and legal requirements and business ethics standards These requirements will be applicable for relevant staff providing either information or investment advice to clients. 3

6 How can the CISI help firms meet ESMA guidelines? The CISI has products to meet the requirements set out in the ESMA Guidelines in the areas of Qualifications, continuous professional development (CPD) and Business Ethics as outlined in the sections below. Appropriate Qualifications Under the ESMA guidelines, firms will be required to: Ensure that staff providing relevant services to clients are assessed through the successful completion of an appropriate qualification and have gained appropriate experience in the provision of relevant services to clients The CISI offers qualifications appropriate to both Information Givers and Investment Advisers. Information Givers The following qualification fully incorporates the ESMA Guidelines for Information Givers: International Introduction to Securities and Investment (IISI) Award The International Introduction to Investment qualification provides a comprehensive introduction to the financial services industry with a specific focus on investments from a global perspective. It is the first step in the CISI s qualification pathway, and it is taken by many practitioners as it is the foundation exam for higher level CISI qualifications. Who should study the International Introduction to Investment? It is intended for new entrants and staff who are beginning their career in the financial services industry. The broad topics covered make the qualification suitable for all staff including, but not limited to, those giving information about investment products, investment services or ancillary services. 4

7 Syllabus Summary Introduction Economic environment Financial assets and markets Equities Bonds Derivatives Investment funds Financial services regulation Other financial products Study 80 hours of study is required for this exam. You can choose to self-study for the exam using the CISI workbook and elearning or have formal training with one of our Accredited Training Partners (ATP). To find an ATP visit cisi.org/atp Assessment A one-hour exam consisting of 50 multiple-choice questions. The pass mark for the exam is 70%. The exam is delivered by Computer Based Testing (CBT). Visit cisi.org/cbt to find your nearest venue. cisi.org/iintro 5

8 Specific coverage of ESMA guidelines within the International Introduction to Securities Award Syllabus ESMA Criteria for knowledge and competence for staff giving information about investment products, investment services or ancillary services a) Understand the key characteristics, risk and features of those investment products available through the firm, including any general tax implications and costs to be incurred by the client in the context of transactions. Particular care should be taken when giving information with respect to products characterised by higher levels of complexity b) Understand the total amount of costs and charges to be incurred by the client in the context of transactions in an investment product, or investment services or ancillary services CISI Introduction to Securities and Investment (International) Syllabus Know the characteristics of fixed-term and instant-access deposit accounts Understand the distinction between gross and net interest payments be able to calculate the net interest due given the gross interest rate, the deposited sum, the period and the tax rate Understand the risks associated with owning shares/stock Understand the characteristics and terminology of bonds Know the potential advantages and disadvantages of investing in government bonds Know the potential advantages and disadvantages of investing in corporate bonds Know the potential advantages and disadvantages of investing in the derivatives and commodity markets Understand the potential advantages and disadvantages of collective investment Know the basic features and risk characteristics of retirement funds: Understand the characteristics of the mortgage market Understand the basic principles of life assurance Know relevant sources of information for investment products, costs and charges 6 c) Understand the characteristics and scope of investment services or ancillary services Know the role of the following within the financial services industry: retail banks/commercial banks; savings institutions; investment banks; private banks; retirement schemes; insurance companies; fund managers; stockbrokers; custodians; thirdparty administrators ; industry trade bodies; sovereign wealth funds

9 8.1.2 Understand the main aims and activities of financial services regulators d) Understand how financial markets function and how they affect the value and pricing of investment products on which they provide information to clients Know the basic structure of the foreign exchange market Know the role of stock markets Know the types and uses of the main global stock exchange indices Understand the factors that affect the price of closed-ended investment companies e) Understand the impact of economic figures, national/regional/global events on markets and on the value of investment products on which they provide information Understand the impact of the following economic data: gross domestic product; balance of payments; level of unemployment Know the role of central banks Know how shares are traded Know the difference between active and passive management f) Understand the difference between past performance and future performance scenarios as well as the limits of predictive forecasting Know relevant sources of information for investment products, costs and charges Understand the role of credit rating agencies and the difference between investment and non-investment grades g) Understand issues relating to market abuse and anti-money laundering Understand the terms that describe the three main stages of money laundering Know the action to be taken by those employed in financial services if money laundering activity is suspected h) Assess data relevant to the investment products on which they provide information to clients such as Key Investor Information Documents, prospectuses, financial statements, or financial data Know relevant sources of information for investment products, costs and charges: Key investor information documents; prospectuses; financial statements; financial data i) Understand specific market structures for the investment products on which they provide information to clients and, where relevant, their trading venues or the existence of any secondary markets Know the role of the following within the financial services industry: retail banks/ commercial banks; savings institutions; investment banks; private banks; retirement schemes; insurance companies; fund managers; stockbrokers; custodians; third-party 7

10 administrators; industry trade bodies; sovereign wealth funds Know the role of central banks Know how goods and services are paid for and how credit is created Know the characteristics of fixed-term and instant-access deposit accounts Know the difference between a capital market instrument and a money market instrument Know the basic structure of the foreign exchange market Know the differences between the primary market and the secondary market Know the role of stock markets Know the types and uses of the main global stock exchange indices Know how shares are traded Understand how settlement takes place Know the function of a derivatives exchange and the products traded Know the characteristics and different types of open-ended fund/mutual fund Know how closed-ended investment companies shares are traded Understand the characteristics of the mortgage market j) Have a basic knowledge of valuation principles for the type of investment products in relation to which the information is provided Be able to calculate the share dividend yield Know the different methods of quoting securities ratios Be able to calculate the flat yield of a bond Understand the role of credit rating agencies and the difference between investment and non-investment grades Understand the factors that affect the price of closed-ended investment companies Know the meaning of the discounts and premiums in relation to closed-ended investment companies 8

11 Investment Advisers The following qualification fully incorporates the ESMA Guidelines for Investment Advisers: International Certificate in Wealth & Investment Management (ICWIM) ICWIM covers the essentials of financial advice, private client asset management, fund management, advisory functions and investment analysis from a global perspective. It offers an overview of the range of assets and investment products available in the market. Candidates will learn about the range of assets and investment products available in the market and gain the knowledge to provide financial advice and find appropriate solutions to meet the investment, retirement and protection planning needs for clients. Who should study the qualification? ICWIM is suitable for individuals engaged in private client asset management as well as wealth managers and retail investment advisers. Syllabus summary The financial services industry The function of the financial services industry, macroeconomics analysis Microeconomic theory and financial markets Industry regulation Financial services regulation, financial crime and corporate governance Asset classes Cash, property, bonds, equities, derivatives and commodities Fiduciary relationships Fiduciary duties, advising clients and determining client needs Investment analysis Calculating statistics, financial mathematics, fundamental and technical analysis, yields and ratios and valuations Investment planning Investment services, investment funds, other investment vehicles including structured investment funds, hedge funds, private equity, commodity funds and sukuk investments, risk and return, portfolio construction theories, investment strategies and performance management Lifetime financial provision Retirement planning, protection planning, estate planning and trusts, business tax, personal tax and overseas taxation 9

12 Study 130 hours of study time is recommended and you can self-study for the exam using the CISI workbook and accompanying elearning material or have formal training with one of our Accredited Training Partners (ATP). To find an ATP visit cisi.org/atp Assessment A two-hour 100 multiple-choice question exam. The pass mark is 70%. The exam is delivered by Computer Based Testing (CBT). Visit cisi.org/cbt to find your nearest cbt centre. cisi.org/icwim 10

13 Specific coverage of ESMA guidelines within the International Certificate in Wealth & Investment Management (ICWIM) Syllabus ESMA Criteria for knowledge and competence for staff giving investment advice a) Understand the key characteristics, risk and features of the investment products being offered or recommended, including any general tax implications to be incurred by the client in the context of transactions. Particular care should be taken when providing advice with respect to products characterised by higher levels of complexity b) Understand the total costs and charges to be incurred by the client in the context of the type of investment product being offered or recommended and the costs related to the provision of the advice and any other related services being provided CISI International Certificate in Wealth & Investment Management Syllabus know the role of money as a financial asset know the key features of bonds risk, interest rate, repayment, trading, nominal value and market price, coupon, credit rating know the key features of property investment understand the benefits of holding shares know the following characteristics of Futures know the following characteristics of Options understand the main features of commodity markets, and how the physical characteristics, supply and demand, and storage and transportation issues influence prices understand the benefits of collective investment now the characteristics and application of Structured investment funds now the characteristics and application of Structured investment hedge funds now the characteristics and application of Private equity now the characteristics and application of commodity funds now the characteristics and application of Sukuk investments understand how investment strategy and product selection are influenced by: Tax status understand the direct and indirect taxes as they apply to individuals know when fiduciary responsibilities arise and the main duties and responsibilities of a financial adviser Know the extent of an adviser s duty to disclose material information about a recommended investment know the requirement for disclosure of charges and commission know the requirement for product disclosure 11

14 c) Fulfil the obligations required by firms in relation the suitability requirements including the obligations as set out in the Guidelines on certain aspects of the MiFID suitability requirements Know the definition of client s best interest and the implications of this rule for a financial adviser understand client categorisation Understand the know your customer rules and their impact on investment planning understand the suitability and appropriateness of advice know the meaning of execution-only sales d) Understand how the type of investment product provided by the firm may not be suitable for the client, having assessed the relevant information provided by the client against potential changes that may have occurred since the relevant information was gathered e) Understand how financial markets function and how they affect the value and pricing investment products offered or recommended to clients Understand the know your customer rules and their impact on investment planning understand the suitability and appropriateness of advice understand the key stages in investment planning and determining investment objectives and strategy know the function of the financial services industry in the economy know the role of the main institutions/ organisations understand the roles of the following: Wealth managers; private banks; platforms understand how price is determined and the interaction of supply and demand know the difference between fundamental and technical analysis f) Understand the impact of economic figures, national/regional/global events on markets and on the value of investment products being offered or recommended to clients know how national income is determined, composed and measured in both an open and closed economy know the stages of the economic cycle understand the composition of the balance of payments and the factors behind and benefits of international trade and capital flows know the nature, determination and measurement of the money supply and the factors that affect it g) Understand the difference between past performance and future performance scenarios as well as the limits of predictive forecasting Understand the concepts of behavioural finance: key properties; heuristics; prospect theory; cognitive illustrations understand how risk is measured volatility, the significance of standard deviation as a measure 12

15 of volatility, the importance and limitations of past performance data h) Understand issues relating to market abuse and anti-money laundering understand the role of the Financial Action Task Force know the main offences associated with money laundering and the regulatory obligations of financial services firms know the stages of money laundering know the client identity procedures know the offences that constitute insider dealing and the instruments covered know the know the offences that constitute market abuse and the instruments i) Assess data relevant to the type investment products offered or recommended to clients such as Key Investor Information Documents, prospectuses, financial statements, or financial data know the extent of an adviser s duty to disclose material information about a recommended investment understand the suitability and appropriateness of advice know the requirement for disclosure of charges and commission know the requirement for product disclosure know the elements to be included in a recommendation report to clients j) Understand specific market structures for the type investment products offered or recommended to clients and where relevant their trading venues or the existence of any secondary markets know the role of the main institutions/ organisations Know the main characteristics of order-driven markets and quote-driven markets and the differences between principal trading and agent trading, and on-exchange and over-the-counter k) Have a basic knowledge of valuation principles for the type of investment products offered or recommended to clients Know the basic structure of the foreign exchange market: currency quotes; settlement Understand yields: running yields; yields to redemption; capital returns; volatility and risk; yield Curves Understand the benefits of holding shares: dividends; subscription rights; voting rights Know the following characteristics of futures: definition; key features; terminology Know the following characteristics of options: 13

16 definition; types (calls and puts); terminology Understand the main features of commodity markets, and how the physical characteristics, supply and demand, and storage and transportation issues influence prices: agricultural; metals; energy Know the characteristics of types of investment products: authorised funds and unauthorised funds; open-ended funds; closed-ended investment companies Know the difference between fundamental and technical analysis: primary objectives; quantitative techniques; charts; primary movements; secondary movements; tertiary movements Know the basic concept behind shareholder value models: Economic Value Added (EVA); Market Value Added (MVA); Gordon s Growth Model l) Understand the fundamentals of managing a portfolio, including being able to understand the implications of diversification regarding individual investment alternatives Understand the correlation and covariance between two variables and the interpretation of the data Understand the varying investment returns from the main different asset classes riskfree rates of return and the risk premium Understand the measurement of total return and the significance of beta and alpha Know the main principles of Modern Portfolio Theory (MPT) and the Efficient Markets Hypothesis (EMH) Understand the use of different asset classes within a portfolio International Certificate in Wealth Management (Spain) This qualification fully incorporates the ESMA guidelines for Investment Advisers. For more information please contact Praneet Shivaprasad at praneet.shivaprasad@cisi.org 14

17 Continuous Professional Development Under the ESMA guidelines, firms will be required to: a) Carry out an internal or external review, on at least an annual basis, of staff members development and experience needs, assess regulatory developments and take any action necessary to comply with the ESMA requirements. This review should also ensure that staff possess an appropriate qualification and maintain and update their knowledge and competence by undertaking continuous professional development; b) Ensure that they submit to their regulator, on request, records concerning knowledge and competence of staff providing relevant services to clients CISI CPD Scheme CPD is categorised as either Structured or Unstructured learning. Structured Structured CPD is defined as an activity undertaken for the express purpose of learning. Examples: Attending CPD events Watching webcasts Undertaking exams/tests Unstructured Unstructured CPD includes unplanned activities, where there is no predetermined learning objective and outcome. Examples: Undertaking research Reading publications Exam revision 15

18 Structured/Unstructured All online CPD activities and events undertaken with the CISI are automatically recorded on the CISI scheme and do not require evidence to be submitted in a CISI CPD audit. Structured Structured learning CPD must be a purposeful learning activity, ie, an activity undertaken for the express purpose of learning, such as a training course, or a company briefing on a new market, ie, where there are defined learning outcomes to be achieved, such as learning about a specified new market or type of fund. It must be verifiable, eg, through attendance records, or through the independent logging of an elearning revision course. Please note that all structured CPD must be a minimum of 30 minutes. Minimum hours: 21 I have attended a: Company briefing/update/ team meeting with an explicit briefing remit Exam training course Conference CPD event Lecture Seminar Training course Workshop Professional forum I have developed others by: (maximum 20 hours, minimum one hour for Chartered members) Chairing or presenting at an industry-relevant event Member of industry-related board, panel or committee Developing and assessing exam questions Syllabus exam panel Training or briefing staff and colleagues on industry relevant topics Writing industry articles, workbooks and journals Contributing towards learning materials Unstructured This element includes unplanned activities, where there is no pre-determined learning objective and outcome. This also includes unaccompanied learning activities. Maximum hours: 14 I have attended an: Informal meeting with no predetermined learning purpose I have developed others by: Informal coaching and mentoring staff on industry relevant topics I have watched or listened to: Television programmes on relevant topics Unverifiable podcasts Unverifiable webcasts Unverifiable live webstreams I have undertaken (maximum ten hours) Research I have read (maximum five hours) CISI s Change - the Regulatory Update Financial Times Securities & Investment Review Trade magazines Online news services Industry journals CISI s Investment Management Review I have watched or listened to: Verifiable webcast with questions or test Verifiable podcast Verifiable webcast Verifiable live webstream I have undertaken: Exams (benchmark qualifications not accepted as CPD) Verifiable elearning Exam revision material Studying material The CISI recommends undertaking 35 hours of CPD, of which 21 hours minimum are structured on an annual basis. I have read* (maximum five hours): Quality educational material with specific learning outcome 16

19 CISI CPD Member Benefits The CISI has developed an extensive range of CPD benefits for members, including: Professional Refresher a range of over 70 online learning modules, covering topics such as MiFIDII, UCITS, EMIR, Cyber Crime and Best Execution Events and conferences CISI TV where our best events are recorded and made available online to members, on topics such as Brussels for Brunch, Europe and the next generation and The cost of trust gone wrong Publications This range of benefits makes it easy for individuals to fulfil their obligation to complete CPD on an annual basis. For CISI members, use of CISI s online resources or publications, or attending events, is automatically added to their CPD record. External activities can be uploaded by individuals or by firms with the Superuser function. 17

20 CISI Online CPD Record The CISI has developed its own online system that can be used to record an individual s Continual Professional Development (CPD), giving each member an auditable record. There is a Superuser function to make it easy for firms to track, and report to the regulator on, employees ongoing training and development. CISI CPD Superuser To make managing and overseeing your staff s development programme as easy as possible, the CISI has a Superuser function, where you can monitor the CPD activities of your staff. It enables you to view the CPD records of all your employees who have an active record and have allowed Superuser access. Benefits of Superuser include: Reports can also be used to monitor the CPD activities undertaken by individuals. You can monitor completion of specific CISI Online Refresher modules. You can create bespoke CPD activities and apply it to one, or all, of your staff s CPD records. Details can be imported or exported via Excel files. s can be sent to selected staff registered on the scheme. It is imperative for professionals working in the ever-evolving financial services industry to ensure the currency of their knowledge. CPD helps individuals maintain and add to their expertise and understanding, resulting in a deeper, and more rounded, level of professionalism. Petros Florides, Chartered FCSI, Regional Governance Advisor 18

21 Business Ethics Under the ESMA guidelines, firms will be required to: Ensure that staff providing relevant services possess the necessary knowledge and competence to meet relevant regulatory and legal requirements and business ethics standards CISI Code of Conduct Professionals within the securities and investment industry owe important duties to their clients, the market, the industry and society at large. Where these duties are set out in law, or in regulation, the professional must always comply with the requirements in an open and transparent manner. Additionally, CISI members are required to meet the standards set out within the CISI s Principles. These Principles, which are also known as the Lord George Principles in recognition of the contribution made to standards of integrity by the late Lord George FSI(Hon), impose an obligation on members to act at all times in a way beyond mere compliance and to support the underlying values of the Institute. Principles 1. To act honestly and fairly at all times when dealing with clients, customers and counterparties and to be a good steward of their interests, taking into account the nature of the business relationship with each of them, the nature of the service to be provided to them and the individual mandates given by them. 2. To act with integrity in fulfilling the responsibilities of your appointment and to seek to avoid any acts, omissions or business practices which damage the reputation of your organisation or the financial services industry. 3. To observe applicable law, regulations and professional conduct standards when carrying out financial service activities, and to interpret and apply them to the best of your ability according to principles rooted in trust, honesty and integrity. 4. To observe the standards of market integrity, good practice and conduct required or expected of participants in markets when engaging in any form of market dealings. 5. To be alert to and manage fairly and effectively and to the best of your ability any relevant conflict of interest. 6. To attain and actively manage a level of professional competence appropriate to your responsibilities, to commit to continuing learning to ensure the currency of your knowledge, skills and expertise and to promote the development of others. 7. To decline to act in any matter about which you are not competent unless you have access to such advice and assistance as will enable you to carry out the work in a professional manner. 8. To strive to uphold the highest personal and professional standards at all times The CISI has developed products and services where the highest standards of integrity are embedded and regularly tested. 19

22 IntegrityMatters IntegrityMatters is an online integrity test designed to highlight dilemmas practitioners may face at work, and has been taken by over 30,000 industry professionals to date. This elearning tool highlights the importance of integrity and enables users to test their ability to make ethical decisions in the workplace. Interactive Workshops Our interactive workshops, which can be tailored to suit firms and delivered in-house, have been developed to get staff across your company thinking about how they can, and would, respond to potential issues, and include interactive and anonymous voting. Integrity Matters This workshop explores real-life ethical challenges experienced in the workplace and offers attendees the opportunity to vote on how they would respond should they be faced with the challenge. Speak Up Professional Refresher This workshop provides you and your colleagues with the opportunity to discuss and debate a series of true to life scenarios, and gives you the tips and tools to speak up with confidence. Professional Refresher is an online learning system, including a self-administered test, and is free for CISI members. It offers learning modules to support the latest regulatory and industry changes. Modules include: Integrity & Ethics Speak Up High level view Ethical behaviour An ethical approach Compliance vs ethics Obstacles to speaking up Legislation Best practice The future Restoring trust is essential for our sector. Working with the CISI is a clear and tangible demonstration of our employees commitment to professionalism and integrity. Isidro Fainé, Chairman of CaixaBank 20

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24 Contact details If you have any question about the products and services we offer, or would like to know more about becoming involved with the CISI, please contact us. cisi.org Kevin Moore, Chartered MCSI Director, Global Business Development Praneet Shivaprasad International Manager Hayley Brown ACSI International Manager Daniel Boucher International Manager