SYSC 5.1 Skills, knowledge and expertise

A firm's systems and controls should enable it to satisfy itself of the suitability of anyone who acts for it. This includes assessing an individual's honesty and competence. This assessment should normally be made at the point of recruitment. An individual's honesty need not normally be revisited unless something happens to make a fresh look appropriate.

Any assessment of an individual's suitability should take into account the level of responsibility that the individual will assume within the firm. The nature of this assessment will generally differ depending upon whether it takes place at the start of the individual's recruitment, at the end of the probationary period (if there is one) or subsequently.

The FSA's requirements on firms with respect to the competence of individuals are in the Training and Competence sourcebook (TC).

The requirements on firms with respect to approved persons are in Part V of the Act (Performance of regulated activities) and SUP 10.

The effective segregation of duties is an important element in the internal controls of a firm in the prudential context. In particular, it helps to ensure that no one individual is completely free to commit a firm's assets or incur liabilities on its behalf. Segregation can also help to ensure that a firm's governing body receives objective and accurate information on financial performance, the risks faced by the firm and the adequacy of its systems.

A common platform firm should normally ensure that no single individual has unrestricted authority to do all of the following:

1. (1)

   initiate a transaction;

2. (2)

   bind the firm;

3. (3)

   make payments; and

4. (4)

   account for it.

Where a common platform firm is unable to ensure the complete segregation of duties (for example, because it has a limited number of staff), it should ensure that there are adequate compensating controls in place (for example, frequent review of an area by relevant senior managers).

Where a common platform firm outsources its internal audit function, it should take reasonable steps to ensure that every individual involved in the performance of this service is independent from the individuals who perform its external audit. This should not prevent services from being undertaken by a firm's external auditors provided that:

1. (1)

   the work is carried out under the supervision and management of the firm's own internal staff; and

2. (2)

   potential conflicts of interest between the provision of external audit services and the provision of internal audit are properly managed.