Banks told how to hire and monitor investment advisers

Banks told how to hire and monitor investment advisers

The Financial Conduct Authority has set out requirements for how banks and building societies must recruit and monitor their investment advisers.

While the bulk of the rules published today (7 July) focus on top executives at banks, the FCA and PRA’s new certification regime applies to other staff who could pose a risk of “significant harm” to the firm or any of its customers.

The FCA states these other members of staff include those who give investment advice or submit to benchmarks.

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The rules state that while bank’s investment advisers will not need to be pre-approved by regulators, the big high street names must put in place procedures for assessing for themselves the fitness and propriety of staff, for which they will be accountable to the FCA and Prudential Regulation Authority.

The FCA stated these preparations will be important not only when recruiting for roles that come under the certification regime but when reassessing each year the fitness and propriety of staff who are subject to the regime.

Martin Wheatley, FCA chief executive, said: “Today we have given clarity on rules that will embed personal accountability into the culture of the City. New conduct rules will add further momentum to improving standards across the industry.”

It was back in June 2013 that the Parliamentary Commission for Banking Standards published its report setting out the 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 with a new regulatory framework for individuals.

While the senior managers regime will ensure that senior managers can be held accountable for any misconduct that falls within their areas of responsibilities, the new certification regime and conduct rules aim to hold individuals working at all levels in banking to appropriate standards of conduct.

The senior managers regime focuses on individuals who hold key roles and responsibilities in relevant firms.

Preparations for the new regime will involve allocating and mapping out responsibilities and preparing statements of responsibilities for individuals carrying out senior management functions.

While individuals who fall under this regime will continue to be pre-approved by regulators, firms will also be legally required to ensure that they have procedures in place to assess their fitness and propriety before applying for approval and at least annually afterwards.

The conduct rules set out a basic standard for behaviour that all those covered by the new regimes will be expected meet.

Firms’ preparations will need to include ensuring staff who will be subject to the new rules are aware of the conduct rules and how they apply to them.

Individuals subject to either the SMR or the certification regime will be subject to conduct rules from 7 March 2016, while firms will have a year after this to prepare for the wider application of the conduct rules to other staff.