What FCA rules mean for senior managers

Personal accountability is a central feature of this new regime and for this reason I think it is more suitably referred to as the accountable person regime. The significant rise in the number and level of fines levied against individuals (13 in 2014 compared to only three in 2007) is a clear reminder of the regulators’ intent to use their powers to enforce personal accountability.

If this moderated attitude is really a signal of a more confident and mature regulatory approach – what many board members would welcome – then it pays for firms to start engaging in a manner that serves to develop a regulatory model that is capable of sustaining and rebuilding trust in our industry. The risk otherwise is a perpetuation of the costly pendulum swings of regulatory activity of the past decade.

These sentiments were expressed by FCA acting chief executive, Tracey McDermott, in her speech at a conference last December when she called for firms to take ownership of their destiny through the new accountable person regime. Defending the regime’s principles-based approach, Ms McDermott stated that the FCA recognises that firms are well equipped and best placed to assign responsibilities and assess competent performance of senior management.

Significant fines can be attributed to the actions of a small number of individuals residing in the front line rather than within the confines of the boardroom

Rather poignantly, she stated that the FCA recognises that it is the firm which possesses the entrepreneurs who can innovate and define success that is meaningful for the business. Being overly prescriptive is therefore thought to be unhelpful. While the new regime contains some procedural intricacies, at its heart is a set of principles that aim to encourage firms to take control of their resources and the running of their businesses.

Taking control – or regaining control in some cases – refers to how the principles of sound risk management and control are embedded within key functions in the business. These principles refer effectively to the culture of governance and ownership of risk-taking in the front line and across the firm, areas of which are expected to be covered in the FCA’s culture review in firms.

In such a review, a firm that is able to demonstrate clear ownership of the risks and self-regulative control will be well placed to assure the regulators, and more importantly, its own board that they have control over their own destiny.

Clear line of sight