Compliance Forum Development in T & C and the Impact on SII Ruth Martin Managing Director

FSA and FSSC Potential “deregulation “wholesale” Potential changes in Controlled Functions Potential changes in Anti-Money Laundering Implications for Appropriate exams

FSA Current review of T & C Handbook Part of Business Plan for FSA Consultation Paper due end June 05 Contain proposals to no longer require intermediaries to have appropriate examinations

FSA (cont.) Appropriate examinations limited to “retail” Rationale linked to senior management responsibilities TC1 will continue to be required, but not TC2 Rationale linked to FSA commitment to reduce burden for Firms

Potential Changes to Controlled Functions Proposed to reduce and/or merge Controlled Functions Rationale linked to reducing burden and complexity

Potential Changes to Anti-Money Laundering SII not involved in discussions to date – have members of Compliance Forum been involved?

Changing Dynamics FSA & FSSC “Appropriate” list will no longer cover wholesale as MOU between FSA & FSSC will include “retail” only.

Changing Dynamics FSA & FSSC FSA will be unable to enforce “wholesale” sector to use FSSC as FSSC role in wholesale limited to non-exam standards activities such as “performance” standards. FSSC likely to try and focus increasingly on these standards to try to keep a link.

Changing Dynamics FSA & FSSC Performance Standards need to be used as a guide in shaping new examinations and FSSC likely to try and make these more important. The proposed Compliance Standards and Anti-Money Laundering Standards fall into this category.

Changing Dynamics FSA & FSSC Major impact of FSA proposals on SII examinations if Firms no longer have to ensure staff pass examinations.

Implications for Firms Initial discussions indicate that many Firms will welcome the changes and seek informal arrangements between Trade Bodies and SII to provide for examinations for the future.

Implications for SII are: Reduction in “Certificates” exam entries Careful review of “retail” definition, bearing Mifid in mind, as it relates to SII products More modular and bespoke exams for Firms in wholesale sector likely Impact on Compliance professionals?

Next Steps SII Board will discuss developments tomorrow