ECO 1.1.6 R has the effect that this chapter does not apply to an incoming ECA provider acting as such.1

Principle 3 requires firms to take reasonable care to organise and control their affairs responsibly and effectively. This includes making proper arrangements for any employee associated with a regulated activity carried on by the firm to achieve, maintain and enhance competence.

Principle 3 is amplified in SYSC. A firm must take reasonable care to establish and maintain such systems and controls as are appropriate to its business (SYSC 3.1.1 R and SYSC 4.1.1 R to SYSC 4.1.5 R2). Also, a firm's systems and controls should enable it to satisfy itself of the suitability of anyone who acts for it (SYSC 3.2.13 G and SYSC 5.1.2 G2). This would include the competence of the individual for the role.

Under threshold condition 5 (Suitability), firms are required to satisfy the FSA that they are fit and proper persons having regard to all the circumstances including, amongst other things, the nature of the regulated activity the firm carries on or is seeking to carry on and the need to ensure that the firm's affairs are conducted soundly and prudently. This involves an assessment of the competence of management and staff as a whole. The suitability of a member of staff who performs a controlled function is assessed under FIT.

Section 59 of the Act (Approval) requires firms to take reasonable care to ensure that no person performs a controlled function without approval from the FSA. Before it can grant an application for approval, the FSA must be satisfied that the person is fit and proper. Under section 61 of the Act (Determination of applications) the fit and proper test for those requiring such approval includes assessing qualifications, training and competence.

Where there are no specific training and competence requirements for a controlled function, the commitments in TC 1.2 apply. Where there are specific training and competence requirements for a controlled function (the investment adviser function, for example), the rules and guidance in TC 2 apply, as well as the commitments. This is because the controlled functions cover a wider range of activities than the activities specified in TC 2. Also, there are some rules in TC 2 for activities which are not controlled functions (the overseers of administrative functions, for example).

The purpose of this sourcebook is to define the standards which firms should achieve. The FSA expects firms to make their own arrangements to meet these standards.