Today (7 July) the Financial Conduct Authority published its policy paper on individual accountability, finalising rules on the new compliance and certification regime.
FTAdviser has trawled through the 400-plus page paper to give you the eight key takeaways you really need to know:
1) One-off costs amount to £260.88m.
One-off costs to firms that fall under the FCA and the Prudential Regulation Authority will amount to £260.88m, while ongoing costs will amount to £26.75m for both FCA and PRA-regulated firms.
2) Approved persons regime could change.
Due to the potential for regulatory inconsistency between retail investment advisers and financial advisers, the approved persons regime may be widened once the new accountability regime is in place.
However, the regulator added that it did not believe there is any conflict between the new certification regime and the rules put in place following the Retail Distribution Review.
3) Identification of activities.
A firm will need to identify the activities it carries out that are caught by the new senior managers regime and then allocate responsibilities, in accordance with both PRA and FCA rules.
They will have to identify those individuals that hold core senior management functions, allocate the prescribed responsibilities that are relevant to the firm’s activities to individual senior managers and also identify the overall responsibilities of senior individuals for any other activities, functions or business areas of the firm.
All this needs to be recorded on individual statements of responsibilities and a summary should be provided in the firm’s responsibilities map.
The FCA has amended its rules on ‘statements of responsibilities’ to make clear that it expects firms to combine all such statements in a single document, which the regulator updates.
4) Individuals must be genuinely accountable.
Firms need to keep in mind that the new regime applies to individual legal entities, rather than to a banking group as a whole.
Therefore, when considering which individual has overall responsibility for a particular area, firms need to ensure they identify the individual who is “genuinely accountable in regard to the entity in question, regardless of whether or not he or she is a director or employee of that particular entity”.
If the person is not a director or employee, it will be necessary for some other arrangement to exist between the entity and the individual, the regulator added.
5) Simplified statement of responsibilities templates.
The FCA has simplified a statement of responsibilities template and has introduced a slightly modified version to be used prior to commencement for grandfathering purposes. The regulator believes it is “important” that the statement remains a self-contained document which does not cross-refer or include links to other documents.
This will help to ensure that only relevant information is included in these documents and that they are practical and usable. It has also retained a 300 indicative word limit to describe each responsibility. “We consider that this should be sufficient to provide succinct and clear information for each responsibility.