RegulationAug 26 2014

FCA introduces reviews to counter panel concerns

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Governance processes that will require senior management ‘attestations’ to be signed off by a head of department and subject them to reviews similar to those for skilled person requests, will be introduced by the Financial Conduct Authority, following concerns raised by its Practitioner Panel.

Graham Beale, chairman of the panel, wrote to Clive Adamson, director of supervision, in April, following issues raised at the group’s March meeting.

In the letter, published on the FCA website today (26 August), Mr Beale cited concerns at the “increasing use” of attestations, the reliance on “senior managers attesting that they will take action”, and the “governance and monitoring arrangements”.

Others have warned attestations, which require senior managers to ‘attest’ that they will undertake actions to remedy particular failings, could be less effective than more interventionist action, or conversely that they could place too much of a burden on management to self-regulate.

The panel had similarly said there was a risk that use of attestations could ‘skew’ prioritisation of risk at affected firms.

In a response dated Friday (22 August) and also published online, Mr Adamson defended the use of attestations, which he said are only ever issued after supervisors have taken “into account other issues being addressed”, but added the FCA has taken steps to boost transparency and oversight.

Governance processes have been strengthened to require head of department sign off, while attestations will also be subject to reviews by a “central quality assurance function similar to the one used for skilled person reviews”.

Mr Adamson explained that internal guidance had been revised to emphasise the “importance of clarity and transparency when using attestations”, and revealed the FCA is looking to “publish data on attestations on a quarterly basis”, similar to skilled person requests.

He added that the aim of these tools was to ensure that accountability is clear and “senior management focus on specific issues where the FCA would like to see change within firms, without ongoing regulatory involvement”.