These latest proposals from the Financial Conduct Authority, with the SMCR “near-final rules” issued, as well as details of a proposed replacement to the FCA Register, should be viewed with optimism by the industry.
They add much needed transparency and demonstrate that the watchdog is willing to listen to the concerns and criticisms raised through the consultation process. Most notably, this is highlighted by alterations to the previous suggestions regarding the Directory of financial services workers.
The developments in that area are, of course, the biggest news to come out of the latest proposals, and are a positive development for both firms and customers alike.
The scope of the Directory is now very broad, covering all certified staff, non-Senior Management Functions (SMF) directors, executive and non-executive, sole traders and appointed representatives.
It is a huge increase in listed personnel, and fills the problematic void that would have otherwise existed where most currently registered individuals would simply disappear from any public register.
The developments here are a two-way street – for firms, there’s the benefit of cross-checking information on individuals across the market which will be useful for references, market monitoring and analysis, and for due diligence when dealing with individuals at other firms.
Firms will however now become responsible for keeping this information up to date, for timely and accurate reporting on an ongoing basis and for ensuring suitability of all Directory Persons appointed.
Meanwhile, for customers, there’s the additional confidence of knowing they can check the reputability of individuals before doing business with them, both in greater depth and for a wider range of roles than just Senior Managers.
As well, there’s the guarantee that this service will be free of charge, with user-friendliness and accessibility at the forefront of the watchdog’s agenda.
In essence then, these proposals are a notable step in the right direction.
That said, it’s going to be yet another administrative burden on firms, and reporting timescales are tight.
For instance, reporting on new individuals in relevant roles must be undertaken by the end of first business day - or no later than one business day after a person has moved or left – by industry standards, this is a very quick turnaround.
Reporting will be stringent too, fines are threatened for late or inaccurate information, and anyone who has not made changed role for 12 months will have to confirm that they are still in place.
Nevertheless, firms should benefit from the up-to-date and informative details contained in the Directory.
Beyond developments to the Directory, there were few major surprises in this latest regulatory update. The final rules for the Senior Managers Regime remain almost unchanged from the proposed rules as set out in the Consultation Paper
Overall, it’s a good outcome. Firms can now consider the requirements of the SMCR and assess the impact on their business, identifying and rectifying issues ahead of the deadline which has been confirmed as 9th December 2019.
Firms will have 12 months from this date to complete fitness and propriety checks for all their certified staff.
Mark Turner is managing director of Duff & Phelps
