RegulationDec 3 2015

FCA says ‘don’t just pay lip service’

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FCA says ‘don’t just pay lip service’

The Senior Managers Regime will put an end to financial services firms “paying lip service” to regulatory demands, according to the Financial Conduct Authority’s acting chief executive.

Speaking at yesterday’s (2 December) City & Financial conference on personal accountability in the industry, Tracey McDermott laid out her priorities for the new rules, set to come into force next March.

The first is a clear focus from firms on meeting the spirit of the new rules, rather than approaching this with a narrow focus on what the letter of the law requires.

The second, is that firms must take ownership of the regime and embrace the opportunities it presents for their business.

“On the former, it does appear that the closer we’ve come to implementation, the louder the lobbying has become,” she stated, noting partners from one law firm describing the SMR as ‘draconian’ and leading to a brain drain from the City.

“Really? Is it such a shocking thought that you should understand who is responsible for what in your business,” Ms McDermott responded.

“There is no doubt there is practical complexity in the detailed implementation of the SMR, that is because many of these firms affected have complex businesses.

“But to be clear, the most important conversation firms need to be having is around how that complex, practical implementation can support the principles of the new regime.”

She continued that one of the things that has contributed to the general disillusionment with financial services over the last few years has been the sense that some players, some firms and some individuals always took the fewest steps necessary to comply.

“They paid lip service to what they were asked to do rather than seeking to deliver the best outcome. We cannot let SMR be the same.”

Ms McDermott admitted that implementation of the SMR will be “a massive test”, but if embraced and embedded as an exemplar of good business, rather than just another compliance task, it has the capacity for a sea change in how UK financial services is seen by all parties.

As part of the final rules to make those in the banking sector more accountable, published in 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.