In a 94-page paper published today, the Financial Conduct Authority says a “significant body” of people questioned the additional responsibility being placed on banks and building societies for assessing fitness and propriety of investment advisers being placed on firms.
Under the FCA’s new certification requirements, part of the senior persons regime that is replacing the discredited approved person process, bank bosses must obtain regulatory references and conduct criminal records checks on prospective investment advisers and brokers.
“It follows that firms will cease to have reassurance provided by the regulators through their assessment of the fitness and propriety of applicants, in the process of deciding whether or not to pre-approve individuals, as occurs now.
“We note, though, that we will continue to maintain the prohibition register. As previously proposed, our final rules will reflect the fact that the responsibility for the assessment of fitness and propriety is on firms.
“We will consider whether we can offer further practical guidance that may be of assistance to firms in discharging these duties.”
Plans to offer more detailed guidance on how the FCA will apply the ‘presumption of responsibility’ test at banks are also promised.
Under this provision, when a bank contravenes a relevant requirement then the senior manager with responsibility for the management of any of the firm’s activities in relation to which the contravention occurred is considered guilty of misconduct.
They can only be found not guilty if they satisfy the relevant regulator that they took such steps as a person in their position could reasonably be expected to take to avoid the contravention occurring.
Today’s guidance sets out the circumstances in which the FCA would seek to apply the presumption of responsibility, how the FCA would apply it and the steps that a senior manager should take in order to rebut the presumption of responsibility.
Martin Wheatley, chief executive of the FCA, said: “How a firm conducts its business and treats its customers must be at the heart of how it operates and this has to start at the top.
“Today’s policy measures are an important step in ensuring that regulators have the tools at their disposal to hold individuals to account and they build on the cultural change we are beginning to see in the boardrooms of firms across the country.”
It was back in June 2013 that the Parliamentary Commission for Banking Standards published a report titled Changing Banking for Good, setting out recommendations for legislative and other action to improve professional standards and culture in the UK banking industry.
This was followed by legislation in the Banking Reform Act 2013 to replace the approved persons regime for banks, building societies, credit unions and PRA-designated investment firms.
emma.hughes@ft.com
