1. (1)

   This chapter applies, subject to (2), to every firm to the extent indicated in TC 2.1.4 G, except that:

   1. (a)

      for an incoming EEA firm or an incoming Treaty firm, this chapter applies only in so far as responsibility for any matter it covers is not reserved by a European Community instrument to the firm's Home State regulator; and

   2. (b)

      this chapter applies to a UCITS qualifier only in so far as it is relevant to the manner in which a firm communicates or approves a financial promotion.

2. (2)

   This chapter does not apply to an authorised professional firm with respect to its non-mainstreamregulated activities, see PROF 5.2.

1. (1)

   In relation to designated investment business:2

   1. (a)

      unless (aa) applies, 5this chapter applies to a UK domestic firm in respect of its employees who engage in or oversee activities (to the extent indicated in TC 2.1.4 G):2

      1. (i)

         from an establishment maintained by the firm (or its appointed representative) in the United Kingdom; and2

      2. (ii)

         with or for a client in the United Kingdom.2

   2. (aa)

      5if the designated investment business constitutes insurance mediation activity, this chapter applies to a UK domestic firm in respect of its employees who engage in or oversee activities (to the extent indicated in TC 2.1.4 G):

      1. (i)

         from an establishment maintained by the firm (or its appointed representative) in the United Kingdom; or

      2. (ii)

         from a branch established in another EEA State;

   3. (b)

      unless (bb) applies, this 5chapter applies to an overseas firm in respect of its employees who engage in or oversee activities (to the extent indicated in TC 2.1.4 G) from an establishment maintained by the firm (or its appointed representative) in the United Kingdom.125

      5
   4. (bb)

      5if the designated investment business constitutes insurance mediation activity, this chapter does not apply to an overseas firm which is an EEA firm.

2. (2)

   In relation to regulated mortgage activities2 carried on with for a customer, this chapter applies if the customer is resident in:2

   1. (a)

      the United Kingdom; or2

   2. (b)

      another EEA State, but in this case only if the activity is carried on from an establishment maintained by the firm or its appointed representative in the United Kingdom only;2

   at the time that the 2regulated mortgage activity is carried on.2

3. (3)

   5In relation to insurance mediation activities in respect of non-investment insurance contracts carried on with or for a customer, this chapter applies to any such activity carried on by a UK domestic firm:

   1. (a)

      from an establishment maintained by the firm (or its appointed representative) in the United Kingdom; or

   2. (b)

      from a branch established in another EEA State.

A contravention of the rules in TC does not give rise to a right of action by a private person under section 150 of the Act (and each of those rules is specified under section 150(2) of the Act as a provision giving rise to no such right of action).

If a firm intends to recruit an individual with a view to that individual engaging in or overseeing an activity with or for private customers, the firm must as part of its recruitment procedures:

1. (1)

   take into account the knowledge and skills of the individual in relation to the knowledge and skills required for the role; and

2. (2)

   take reasonable steps to obtain sufficient information about the individual's previous relevant activities and training.

If a firm's employees engage in or oversee an activity with or for private customers, the firm must:

1. (1)

   at intervals appropriate to the circumstances, determine the training needs of those employees and organise appropriate training to address these needs; and

2. (2)

   ensure that training is timely, planned, appropriately structured and evaluated.

A firm must not permit an employee to engage in or oversee an activity unless:

1. (1)

   the employee has been assessed as competent in that activity in accordance with TC 2.4.5 R; or

2. (2)

   the employee engages in or oversees the activity while under appropriate supervision; or

3. (3)

   the employee has been assessed in accordance with TC 2.4.5 R as competent to engage in or oversee a particular activity, but then engages in or oversees in a different activity, then the employee is appropriately supervised until assessed as competent in that new activity.

1. (1)

   A firm which permits an employee to engage in an activity with or for a private customer under supervision must ensure that:3

   32
   1. (a)

      the employee has first passed the relevant regulatory module of an appropriate examination; and3

   2. (b)

      the firm has satisfied itself that the employee has an adequate level of knowledge and skills to act with or for private customers while under supervision.3

2. (2)

   (1)(a) does not apply when this activity is an insurance mediation activity in relation to a non-investment insurance contract3 or is providing basic advice on stakeholder products5.

   32

If a firm permits an employee under supervision to engage in:

1. (1)

   advising on investments which are, and dealing with or for clients in, securities (other than stakeholder pension schemes or broker funds), derivatives or both such securities and derivatives; or2

2. (2)

   the activity of a broker fund adviser; or

3. (3)

   advising on syndicate participation at Lloyd's; or

4. (4)

   the activity of a pension transfer specialist;

the firm must ensure that the employee has first passed an appropriate examination before permitting the employee to engage in the relevant activity.2

1. (1)

   A firm must not assess an employee as competent to engage in or oversee an activity unless the employee:3

   3
   1. (a)

      has been assessed as competent to apply the knowledge and skills necessary to engage in or oversee the activity without supervision; and3

   2. (b)

      has passed each module of an appropriate examination.3

2. (2)

   (1)(b) does not apply when this activity is an insurance mediation activity in relation to a non-investment insurance contract3 or is providing basic advice on stakeholder products5.

   32

1. (1)

   A firm must ensure that an employee under supervision passes an appropriate examination within the time specified in TC 2.5.1A R, and, for this purpose, a firm must record the date on which the employee began engaging in or overseeing the relevant activity.2

2. (2)

   For the purposes of calculating the time spent by an employee under supervision, a firm must:

   1. (a)

      aggregate periods of time spent engaging in or overseeing the activity during different periods of employment; and2

   2. (b)

      disregard any period of 60 business days or more during which the employee is continuously absent from engaging in or overseeing the activity.

3. (3)

   A firm must ensure that any employee who does not pass an appropriate examination within the specified time:2

   1. (a)

      ceases to engage in or oversee the activity; and

   2. (b)

      does not resume the activity or oversee the activity without first passing an appropriate examination.2

A firm must ensure that an employee does not recommence engaging in the activity of advising on investments which are, and dealing with or for clients in, securities (other than stakeholder pension schemes or broker funds), derivatives or both such securities and derivatives if:

1. (1)

   the employee has not engaged in that activity for 12 months; and2

2. (2)

   two years have elapsed since the employee passed an appropriate examination for that activity;2

unless the firm can demonstrate that the employee has sufficient experience and has kept his technical and regulatory knowledge up to date. If the firm cannot do so it must require the employee to pass an appropriate examination.2

1. (1)

   Except as described in (2) and (3), if a firm is satisfied that an employee:

   1. (a)

      has at least three years' up-to-date relevant experience in the activity in question obtained while employed outside the United Kingdom;

   2. (b)

      had not previously been required to comply fully with the relevant examination requirements as stipulated in TC 2.4.5 R (1)(b)2; and

      2
   3. (c)

      has passed the relevant regulatory module of an appropriate examination;2

   then the requirement to have passed each module of an appropriate examination in 2TC 2.4.5 R (1)(b)2 does not apply for that employee.

   2
2. (2)

   Paragraph 1 does not apply for an employee engaging in the following activities:

   1. (a)

      advising on investments which are packaged products, if that advice is given to private customers;

   2. (b)

      the activity of a broker fund adviser;

   3. (c)

      advising on syndicate participation at Lloyd's;

   4. (d)

      the activity of a pension transfer specialist.

3. (3)

   Paragraphs (1)(b) and (c) do not apply for an employee who would perform:

   1. (a)

      the investment adviser function; or

   2. (b)

      the corporate finance adviser function; or

   3. (c)

      the investment management function;

   but for the 30-day rule, unless the individual is advising private customers on packaged products or is a broker fund adviser.

4. (4)

   In (3), the '30-day rule' means the provisions of:

   1. (a)

      SUP 10.10.7 R (3); or

   2. (b)

      SUP 10.10.13 R (2); or

   3. (c)

      SUP 10.10.20 R (2);

   as appropriate.1

3If a long-term care insurance contract provides that:

1. (1)

   long-term care benefits are available after commencement of the policy at the option of the policyholder; and

2. (2)

   as a result of the exercise of that option a new contract of insurance is offered to the policyholder;

an employee engaged in the activities referred to at TC 2.1.4 G 1(ha) need not, in respect of the contract containing the option, be required to pass an appropriate examination for long-term insurance contracts.

A firm must have appropriate arrangements in place to ensure that an employee who has been assessed as competent to engage in or oversee an activity maintains competence.

If a firm's employees engage in an activity with or for private customers, the firm must ensure that if an employee is not assessed as competent, but is permitted in accordance with TC 2.4.2 R to engage in a particular activity under supervision, the employee is appropriately supervised until assessed as competent in that activity.2

2[Deleted]

If an employee who is not assessed as competent is engaging in the activity of giving advice on investments which are packaged products2(other than basic advice) 3to private customers, the firm must ensure that the individual supervising that employee:

1. (1)

   has passed an appropriate examination; and1

2. (2)

   has the technical knowledge, assessment skills and coaching skills to act as supervisor, before acting as supervisor, and that this competence is maintained.

2A firm must have arrangements in place to ensure that an employee who is engaging in an activity with or for private customers and who has been assessed as competent is appropriately monitored.

2If an employee who is engaging in an activity with or for private customers falls below the standard expected of a competent employee, the firm must make arrangements for supervising the employee, having regard to the provisions of TC 2.7.1 R and TC 2.7.5 R.

1. (1)

   A firm must make appropriate records to demonstrate compliance with the rules in this chapter.

2. (2)

   The records in (1) must be retained by the firm for at least three years after an employee ceases to engage in or oversee an activity, except for the records of pension transfer specialists, which must be retained indefinitely.1