Regulation  

FCA reveals approved person regime could be changed

FCA reveals approved person regime could be changed

The FCA has revealed it is still considering whether to make wider changes to the approved persons regime once the new accountability regime is in place for banks.

Advisers have expressed concern on the new ‘certification regime’, warning there is potential to create a “two-tiered” regime for financial advisers, however the FCA says it does not believe there is a “conflict” between the two regimes.

In final rules to make those in the banking sector more accountable, published today (7 July), the FCA said feedback to the consultation paper 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.

The certification regime applies to staff who could pose a “risk of significant harm” to the firm or any of its customers such as those who who give investment advice or submit to benchmarks.

These staff will not be pre-approved by regulators and firms’ preparations will need to include putting in place procedures for assessing for themselves the fitness and propriety of staff, for which they will be accountable to the regulators.

The regulator said that while it has “acknowledged” the potential for regulatory inconsistency between investment advisers employed by banks and independent financial advisers, it is still considering whether to made wider changes to the approved persons regime once the new accountability regime is in place for banks.

The policy paper said: “We do not believe that there is any conflict between the new certification regime and the rule put in place following the RDR.

“It is also important to recognise, though, that firms will in future have greater responsibility in relation to retail investment advisers, who will no longer be subject to FCA pre-approval.

“Firms will need to be fully equipped to identify their retail investment advisers, ensure that they are fit and proper and qualified to the minimum standards introduced by the RDR, and that they have appropriate statements of professional standing.”

The paper added that the importance of SPSs, which were introduced by the RDR and are issued by accredited and professional bodies, “remains unchanged”.

“We recognise, though, that there is an operational issue to be resolved, owing to the fact that SPSs currently make use of individual reference numbers under the approved persons regime.

“Working with the affected bodies, we will seek to announce a solution to this operational problem in the coming months.”

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

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 that staff who will be subject to the new rules are aware of the conduct rules and how they apply to them, the paper added.