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FCA to test firms' remote working arrangements

FCA to test firms' remote working arrangements

The Financial Conduct Authority is to evaluate firms considering remote or hybrid working on a case-by-case basis. 

In an update yesterday (October 11), the FCA said firms will be required to prove that the remote working does not or is unlikely to cause detriment to consumers, damage the integrity of the market, increase the risk of financial crime and reduce competition. 

It said remote working should not affect the firm’s location in the UK, or its ability to meet the threshold conditions for the regulated activities it has permission for.

The City watchdog said firms should also be able to prove that the hybrid working model will not prevent the FCA receiving information about a company, nor will it reduce the accuracy of the Financial Services Register for others if, for example, consumers are not able to contact the firm at the place of business shown on the register.

Firms will be evaluated on these characteristics to ensure they comply.

Prior to making any temporary arrangements permanent, the FCA said firms must also prove that there is satisfactory planning in place, which is to be reviewed periodically to identify new risks.

In addition to this, firms must prove there is appropriate governance and oversight by senior managers under the Senior Managers regime. 

Firms must prove an appropriate culture can be put in place and maintained in a remote working environment and that the firm’s activities do not require the presence of an office location. 

Companies who are considering remote working will also be required to prove:

  • Control functions such as risk, compliance and internal audit can carry out their functions unaffected, such as when listening to client calls or reviewing files. 
  • It’s considered any data, cyber and security risks, particularly as staff may transport confidential material and laptops more frequently in a hybrid arrangement. 
  • It has appropriate record keeping procedures in place. 
  • It can meet and continue to meet any specific regulatory requirements, such as call recordings, order and trade surveillance, and consumers being able to access services. 
  • The firm has considered the effect on staff, including wellbeing, training and diversity and inclusion matters.
  • Where any staff will be working from abroad the firm has considered the operational and legal risks.

The FCA said: “The above is an indicative and non-exhaustive list. It's important any form of remote or hybrid working adopted should not risk or compromise the firm's ability to follow all rules, regulatory standards and obligations, or lead to a failure to meet them.

“Firms should consider if their details on the FS Register need updating. For example, if your firm intends to use a private residential address as its principal place of business, it should consider the effect on any individuals and got necessary approvals. This includes those living at the property who aren’t employees.

“We should be able to access firms’ sites, records and employees. It’s important that firms are prepared and take responsibility to ensure employees understand that the FCA has powers to visit any location where work is performed, business is carried out and employees are based (including residential addresses) for any regulatory purposes. This includes supervisory and enforcement visits.”

The regulator said under Principle 11 of the FCA’s Principles for Businesses, any material changes to how a firm intends to operate may require the company to notify it first. 

Last month, FTAdviser spoke to a number of firms about their experience of providing advice post-lockdown, as well as their return to office premises, and found a range of contrasting views, with some saying the Covid-19 pandemic had produced a permanent shift to some clients' preferences.