What Is the Training and Competence Regime?
FCA training and competence requirements come from two places. The Training and Competence sourcebook (TC) sets detailed rules for staff who carry on the activities listed in TC Appendix 1 for retail clients, customers or consumers, such as investment advice, pension transfer advice, mortgage advice and insurance distribution. The general rules in SYSC 5.1 then require every FCA-authorised firm to employ people with the skills, knowledge and expertise their roles need. In short: assess staff as competent before they work unsupervised, supervise them until then, keep them competent, and keep records that prove it.
TC 1.1.1R applies the sourcebook where an employee carries on an activity in TC Appendix 1 for retail clients, customers or consumers. Firms carrying on MiFID business and insurance distribution follow adapted provisions in TC 4.1 and TC 4.2.
The fundamental principle is straightforward: a firm must not allow an employee to carry out a regulated activity unless that employee has been assessed as competent to do so, or is being supervised by a competent person while working towards competence.
Regulatory Framework
The TC sourcebook sits within the FCA Handbook and is supplemented by several related provisions:
SYSC 5.1 (Senior Management Arrangements, Systems and Controls) requires firms to employ personnel with the skills, knowledge and expertise necessary for the discharge of their responsibilities.
The SM&CR (Senior Managers and Certification Regime) imposes additional competence requirements on senior managers and certified persons, including annual fitness and propriety assessments.
SUP 10C (the Senior Managers Regime) sets the FCA approval process for people in senior management functions, and SYSC 27 sets the Certification Regime, under which the firm itself certifies certain staff as fit and proper each year.
Principle 3 (Management and control) requires firms to take reasonable care to organise and control their affairs responsibly and effectively, with adequate risk management systems, which includes having competent staff.
Together, these create a framework that covers recruitment, initial training, ongoing competence, supervision and record-keeping.
| Requirement | Where it sits | What it means in practice |
|---|---|---|
| Assess competence before unsupervised work | TC 2.1.1R | Staff show they are competent, and pass any required qualification modules, before the firm signs them off |
| Supervise until competent | TC 2.1.2R | A competent person oversees the trainee's work |
| Review competence regularly | TC 2.1.12R | Regular and frequent checks that staff remain competent |
| CPD for retail investment advisers | TC 2.1.15R and TC 2.1.16G | At least 35 hours a year, of which 21 should be structured |
| Keep records | TC 3.1.1R | At least 5 years for MiFID business, 3 years for non-MiFID business, indefinitely for pension transfer specialists |
| Competent staff in every role | SYSC 5.1 | Each role is filled by people with the right skills, knowledge and expertise |
| AML training | Regulation 24, Money Laundering Regulations 2017 | Regular training on spotting and handling money laundering, terrorist financing and proliferation financing |
Who Is in Scope?
The TC sourcebook applies primarily to employees who carry out activities listed in TC Appendix 1, including:
- Advising on and dealing in securities and derivatives
- Advising on and arranging pension transfers and opt-outs
- Advising on and arranging mortgages
- Advising on and arranging general insurance and protection products
- Managing investments
- Overseeing regulated activities on a day-to-day basis
Firms applying for FCA investment firm authorisation or FCA mortgage authorisation should be ready to describe their TC arrangements in the application.
However, the competence obligation is broader than TC Appendix 1. Under SYSC 5.1 and the SM&CR, firms must ensure that all employees involved in regulated activities, including those in compliance, risk management, and operational roles, are competent for their roles.
Payment institutions and e-money institutions sit outside TC and, where they hold no Part 4A permission, outside SYSC and the SM&CR. They still need competent staff. The Payment Services Regulations 2017 and Electronic Money Regulations 2011 require sound governance and internal controls, the FCA Principles for Businesses apply to them under PRIN 3.1.1A, and regulation 24 of the Money Laundering Regulations 2017 requires regular AML training. Staff in AML compliance, customer due diligence, complaint handling and safeguarding should be trained and assessed with the same discipline. Our guides to the UK electronic money institution licence and the UK authorised payment institution licence cover the wider requirements.
Achieving Initial Competence
Before an employee can carry out a regulated activity unsupervised, the firm must be satisfied that they have achieved competence. This typically involves:
Appropriate examinations. For many TC activities, the FCA specifies or recommends professional qualifications that employees must hold. These examinations establish a baseline level of technical knowledge. The FCA's TC Appendix 4 lists the examinations appropriate for each activity.
Structured training. Beyond examinations, firms must provide structured training covering the firm's products, processes, systems and regulatory obligations. This training should be tailored to the specific activities the employee will perform.
Supervised practice. During the period between joining the firm and being assessed as competent, the employee must work under the supervision of a competent person. The level of supervision should reflect the employee's experience and the complexity of the activities.
Competence assessment. The firm must formally assess the employee against defined competence standards before allowing them to act unsupervised. This assessment should cover technical knowledge, practical skills, and understanding of regulatory requirements.
Maintaining Competence
Achieving initial competence is only the beginning. Firms must ensure that employees maintain their competence throughout their career. This requires:
Continuing professional development (CPD). Employees should undertake ongoing training to keep their knowledge current. The FCA sets fixed hours for retail investment advisers: at least 35 hours of CPD in each 12-month period (TC 2.1.15R), of which at least 21 hours should be structured, meaning planned learning such as courses, seminars or e-learning with set learning outcomes (TC 2.1.16G). For other roles the FCA does not prescribe hours, so the firm sets a CPD standard that fits each role and records it.
Regular competence reviews. Firms should periodically reassess employee competence, particularly when there are changes to products, regulations, or the firm's business model. Annual competence reviews are standard practice.
Performance monitoring. Firms should monitor the quality of employees' work through file reviews, observation, customer feedback analysis and management information. Poor performance may indicate a competence gap requiring remedial training.
Regulatory updates. Employees must be kept informed of regulatory changes that affect their activities. This is particularly important in fast-moving areas such as payment services regulation, cryptoasset regulation and consumer protection.
Supervision of Trainees
The FCA expects firms to have robust supervision arrangements for employees who have not yet achieved competence. Key requirements include:
Proportionate supervision. The level of supervision must reflect the risk associated with the activity and the trainee's level of experience. Higher-risk activities (such as pension transfer advice) require closer supervision than lower-risk activities.
Named supervisors. Each trainee should have a named supervisor who is responsible for overseeing their work, reviewing their output and assessing their progress towards competence.
Documented supervision. Firms must maintain records of supervision activities, including reviews conducted, feedback given and any remedial actions taken.
Escalation procedures. Supervisors must know when and how to escalate concerns about a trainee's progress or competence. There should be clear procedures for extending supervised periods or, in serious cases, removing an employee from regulated activities.
Record-Keeping
The FCA expects firms to maintain comprehensive records of their training and competence activities, including:
- Training plans for each employee in TC scope
- Records of qualifications obtained and examinations passed
- Supervision logs and review outcomes
- Competence assessment records and results
- CPD records demonstrating ongoing learning
- Any remedial actions taken and their outcomes
TC 3.1.1R requires these records to be kept for at least 5 years after the employee stops the activity for MiFID business, 3 years for non-MiFID business, and indefinitely for pension transfer specialists.
Common Supervisory Findings
The FCA's supervisory work regularly identifies deficiencies in firms' training and competence arrangements:
- Inadequate competence standards. Firms define competence standards that are too vague or too generic, making it impossible to assess whether an employee has genuinely achieved competence.
- Insufficient supervision. Trainees are allowed to carry out regulated activities with minimal oversight, or supervisors lack the time or expertise to provide meaningful supervision.
- Poor record-keeping. Firms cannot evidence that training has been delivered, competence has been assessed, or supervision has been provided. Without records, the firm cannot demonstrate compliance.
- No ongoing competence assessment. Firms assess competence once and then assume it continues indefinitely. The FCA expects ongoing assessment to identify and address competence gaps.
- Generic training programmes. Training is not tailored to the firm's specific activities, products and customer base. The FCA expects training to address the particular risks associated with the firm's business.
- Failure to address competence gaps. When performance monitoring identifies potential competence issues, firms do not take timely remedial action.
Building an Effective Training Programme
Start with a training needs analysis. Identify all regulated activities performed within the firm, the employees who perform them, and the competence standards required for each activity.
Design role-specific training. Develop training programmes tailored to each role, covering technical knowledge, practical skills, regulatory requirements and firm-specific procedures.
Implement structured supervision. Establish clear supervision arrangements with named supervisors, documented review processes and defined escalation procedures.
Assess competence rigorously. Use a combination of examinations, practical assessments, file reviews and observation to assess whether employees have achieved and maintain competence.
Monitor and review. Regularly review the effectiveness of your training programme using management information such as complaint rates, error rates, customer outcomes and regulatory findings.
Embed in governance. Ensure that training and competence is a standing item on the compliance monitoring programme and is reported to senior management. The SM&CR makes clear that senior managers are responsible for ensuring their areas have competent staff.
Regulatory Outlook
The FCA continues to emphasise the importance of competence in delivering good customer outcomes, particularly in the context of Consumer Duty. Firms must ensure that their training programmes equip employees to deliver the outcomes that Consumer Duty requires, including fair value, appropriate products and helpful customer support.
The integration of training and competence with Consumer Duty represents an evolution in the FCA's approach: competence is not just about knowing the rules, but about understanding and delivering good outcomes for customers.
The Senior Managers and Certification Regime is also changing. The FCA's PS26/6 reforms took effect from 24 April 2026, and HM Treasury has confirmed it intends to remove the Certification Regime from FSMA so the regulators can replace it with simpler rules. Until that happens the current regime applies, and TC records remain the evidence that certified staff are competent.
Regulatory Counsel designs TC frameworks, competence assessments and record-keeping for regulated firms. Contact us for a written proposal.
Frequently asked questions
The FCA's Training and Competence (TC) regime, set out in the TC sourcebook, requires firms to ensure that employees who carry out regulated activities are competent to do so. Firms must assess employees as competent before allowing them to act unsupervised, provide structured supervision during the training period, and ensure ongoing competence through CPD and regular assessment.
While payment institution employees may not fall within the traditional TC Appendix 1 activities, firms must still ensure competence. The PSRs and EMRs require sound governance and internal controls, the Principles for Businesses apply under PRIN 3.1.1A, and regulation 24 of the Money Laundering Regulations 2017 requires regular AML training. Staff involved in AML compliance, customer due diligence, complaint handling, safeguarding and other regulatory functions must be adequately trained and assessed as competent.
TC 3.1.1R requires training and competence records to be kept for at least 5 years after the employee stops the activity for MiFID business, 3 years for non-MiFID business, and indefinitely for pension transfer specialists. Records should include training plans, qualifications obtained, supervision logs, competence assessments and CPD records.
The FCA's TC Appendix 4 lists the examinations appropriate for each regulated activity. These typically include qualifications from bodies such as the Chartered Insurance Institute (CII), Chartered Institute for Securities & Investment (CISI), and the London Institute of Banking & Finance (LIBF). The specific qualification required depends on the activity the employee will perform.
The FCA sets hours only for retail investment advisers: at least 35 hours in each 12-month period, of which at least 21 should be structured learning (TC 2.1.15R and TC 2.1.16G). For other roles the firm sets a proportionate CPD standard and records it.
No. TC applies where an employee carries on an activity in TC Appendix 1 for retail clients, customers or consumers (TC 1.1.1R). Every authorised firm must still employ competent staff under SYSC 5.1, so most firms run one competence framework that covers both groups.
Under the Certification Regime the firm must certify certain staff as fit and proper each year, and competence is one of the tests. TC records are the evidence. Since 24 April 2026, PS26/6 lets firms build recertification into appraisals and issue certificates by email.
Definitive guides on this topic
The permanent reference pages this article relates to.