The financial services industry brings substantial responsibilities for those working within it, often far beyond other professions. After all, dealing with money brings significant consequences when managed incorrectly. The outcomes of improper financial management, unethical behaviour, and conflicts of interest can impact not only the lives of clients but also financial advisers who fail to meet the standards of regulators or their firms.
It is also critical for advisers to act in the best interests of their clients, especially when dealing with members of the public. In a similar way to Medical Practitioners having a duty of care for the health and well-being of patients, financial advisers can hold a person’s (or company’s) financial future in their hands. They must, therefore, act with knowledge, ethics, and integrity in all dealings.
Continuing Professional Development programs (CPD programs) are an essential tool for financial firms to ensure their advisers are up-to-date with industry regulations, codes of conduct, and best practices.
However, compliance issues can arise when Compliance Officers lack proper oversight of CPD program adherence and certifications. Without visibility, continuing education and training requirements may lapse, resulting in a greater risk of non-compliance, misconduct, or even conflicts of interest.
This article explores vital tactics for overcoming compliance issues and ensuring participation in CPD programs of all relevant employees in your financial firm.
A Continuing Professional Development program (CPD) is a continuing education and training process for financial advisers to develop their skills and knowledge, and stay up-to-date with developments as they work within the finance industry.
When financial advisers comply with CPD program requirements, it demonstrates their commitment to stakeholders, clients, colleagues, and regulators in upholding the standards of their firm and the broader financial services industry.
While it is important that CPD programs align with the standards of the firm, it is essential to operate in line with regulatory compliance requirements.
Regulators and monetary authorities have clear guidelines about the Continuing Professional Development programs (CPD programs) that must be undertaken. Therefore, financial firms and their compliance teams need a clear understanding of the regulatory requirements of CPD programs to reduce their risk of compliance issues. Compliance Officers must also check regularly for policy updates from authorities in their region. Here are some of the regulations established by authorities within Asia Pacific (APAC).
Under the MAS Financial Advisers Act, competence and capability are inclusions of the authority’s Guidelines on Fit and Proper Criteria. MAS details continuing education and training as a key criterion for financial advisers to demonstrate that competence and capability.
By mandating regular, structured CPD activities, MAS aims to ensure financial clients are always provisioned with appropriate services by skilled, knowledgeable advisers that will uphold a robust financial market.
Additionally, MAS highlights the role of the financial firm’s principal (such as the CEO, Founder, or another executive authority figure) to see that training requirements are completed. MAS explicitly states that every principal must review and follow up on each of its appointed representatives’ structured CPD training needs on an annual basis; and ensure those representatives have completed the minimum hours of CPD training within the stipulated period.
The Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 is part of the Corporations Act 2001, which sets out the necessary education, training, and ethical standards for financial advisers. Professional standards have also applied to these reforms since 2019 for anyone advising retail clients on relevant financial products.
ASIC (Australian Securities and Investments Commission) mandates that financial advisers complete 40 hours of CPD training each year, have an approved qualification, and pass the relevant exam. It also stipulates compliance with the Financial Planners and Advisers Code of Ethics 2019 (Code of Ethics), which is a set of principles and core values in the areas of ethical behaviour, client care, quality process and professional commitment.
Additionally, AFS licensees must ensure their authorised financial advisers comply with professional standards set out in the Acts, hold the relevant qualifications, and have a CPD policy where they approve at least 70% of their advisers’ required 40 hours of annual CPD.
In 2016, the Hong Kong Monetary Authority (HKMA) launched several initiatives in collaboration with the Hong Kong Institute of Bankers (HKIB) to build the capacity of Hong Kong as an international financial centre, including an enhanced competency framework (ECF). To date, nine ECF modules have been released, covering different professional workstreams to support the banking and financial industry.
Most recently, Fintech and Compliance modules have been added to the ECF. These inclusions highlight the critical roles of technology and compliance staff in driving professionalism and compliance in the Hong Kong financial industry.
While the ECF is not a mandatory licensing regime, banks are strongly encouraged to adopt it as the benchmark for enhancing the level of core competence and ongoing professional development of banking practitioners. Compliance with CPD training is, however, a requirement for HKIB Professional Members with clear guidelines on necessary modules and hours.
Updates and changes to regulations can happen frequently and be announced with little time before enforcement dates. So keeping up with these changes can be a complex and time-consuming task, particularly in financial firms operating across multiple jurisdictions.
With regular updates from your compliance team, financial advisers can better prioritise and adjust their CPD activity to prevent non-compliance with regulatory changes.
As seen in the Australian jurisdiction, advisers must complete 40 hours of CPD each year, with 70% of the activity approved by their AFS licensee. Be proactive in outlining your firm’s priorities for training to ensure the approval-dependent portion is in line with company expectations.
The financial services industry is constantly evolving, with new regulations and industry standards being introduced frequently. A critical step to ensuring continuing education and training addresses compliance needs is understanding the regulations that apply to your program, along with any internal policies and procedures and developments in the broader financial industry. Regularly review and update your CPD program to see that it remains effective and covers regulatory compliance updates.
Technology can be a valuable tool in keeping advisers up-to-date with CPD programs and reducing your firm’s risk of non-compliance. For example, MyComplianceOffice (MCO) is a comprehensive regulatory compliance management platform for tracking employee training and certifications, monitoring regulatory changes, and quickly generating compliance reports.
MCO brings a specific Authorisations, Registrations, and Licensing (ARL) module with in-depth functionality that provides compliance managers with data collection tools, workflows, communications, alerts, approvals, and reporting. As a result, compliance teams can easily track advisers’ progress with CPD programs and many other licensing and registration requirements to know that company policy and regulatory compliance requirements are being upheld.
RegTech is now taking the hard work out of staying up-to-date with compliance requirements, reducing the risk of non-compliance and potential legal or financial consequences.
MCO's Representative Registrations and Licensing (RRL) solution helps financial firms track and manage licences, registrations and certification renewals across locations and jurisdictions through a single, centralised platform. RRL can also integrate with internal systems to bring visibility and consistency to HR and Compliance Teams across your organisation.
By leveraging RegTech (Regulatory Technology) solutions such as MCO’s ARL, compliance teams can easily manage high volumes of data and be automatically alerted to exceptions. With streamlined, technology-driven processes, firms can rest assured that licensing and continuing education and training requirements are being met and compliance requirements for CPD programs are being upheld.
See our on-demand webinar on a Better Way to Track Registrations and Licences.
And access your Know Your Employee Brochure to discover how your firm can engage employees with a simple, intuitive interface and help them fulfil their compliance obligations with minimum effort.