The Financial Conduct Authority has attempted to allay fears of the new senior managers and certification regime rules, by setting out the circumstances it would seek to apply the new regime and the steps that a senior manager should take to rebut it.
In final rules to make those in the banking sector more accountable, published on 7 July, the FCA warned the certification regime may cause a two-tier system between those financial advisers who are subject to the new certification regime because they are employed by banks and those who remain subject to the ‘approved persons regime’ because they work for financial advisers.
Mr Wheatley said the changes to the senior managers and certification regime rules were part of a wider agenda of cultural change within firms.
Speaking at the City and Financial conference in London today (14 July), Martin Wheatley, FCA chief executive, said: “We should remember – this is about reasonable steps.
“I understand it worries firms that the FCA cannot say ‘if you do X, Y and Z you’ll be fine’; but in the same breath, it is equally true that senior managers are not automatically going to be fined.
“What we deem to be reasonable steps must turn on the specific circumstances at the time. And we mean that. Not the steps that the regulator or the firm wish had been taken in hindsight. It will be based on the known facts at the time.
“By way of example, we may look for you to demonstrate that you have established and tested your control frameworks.”
He re-iterated that the certification regime applies to anyone who could pose a risk of significant harm to the firm or any of its customers – for example staff who give investment advice or administer benchmarks.
Mr Wheatley said: “We won’t pre-approve these people, in the way that we did under our approved persons regime. Instead, firms will certify that they are fit and proper for their roles on an on-going basis, formally confirming this annually.
“We want to see standards of individual conduct rise across firms at all levels. The regime is designed to be inherently proportionate, and to fit with the realities of running complex financial services firms.
“Although certification represents a shift in onus, from a regulator run gateway to a firm based assessment of fitness and competence, this should not be new.
“Firms should already know who their key staff are that can cause them or their customers damage. And these people should already be acting appropriately. Certification builds on this concept – it doesn’t invent it.”
In the coming weeks, Mr Wheatley said the FCA will also bring forward near final rules on the regime for overseas branches and consult on strengthening regulatory references.
The certification regime is set to come in from 7 March 2016, while firms have a year after this, to prepare for the wider application of the conduct rules to other staff.
emma.hughes@ft.com
