RegulationAug 4 2017

Sesame's Cowan warns against FCA senior managers changes

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Sesame's Cowan warns against FCA senior managers changes

Appointed representatives should be responsible for their own duties under the senior managers regime, John Cowan has said.

The executive chairman of Sesame Bankhall Group said it would be “counter-intuitive” to differentiate between directly authorised and appointed representatives on this issue.

The Financial Conduct Authority will shortly be publishing its proposals for how the senior managers regime will affect networks and appointed representatives.

Under the regime, anyone who holds a senior management function at an advice firm will need to be approved by the FCA and every senior manager will need to fill out a statement of responsibilities explaining what they are responsible for.

This will need to be approved by the FCA when it is first filled out and when there are changes to it.

The regime sets out a series of “prescribed responsibilities” which firms will need to give their senior managers, but these will not apply to some firms – including sole traders of firms – and larger firms will have more responsibilities.

However these rules are currently designed around directly authorised firms. Last month, when the FCA published them, it said it would consult separately on how appointed representatives will be affected.

But Mr Cowan said: “Although networks are responsible for the regulated activities of their appointed representatives, it would appear to be contradictory to the aims of the regime to remove approved persons functions entirely from individuals who are business owners of firms that are separate legal entities from the network itself.

“Such a regime would not accurately reflect the dynamics of the relationship between an appointed representative and its principal, which is one of businesses working together to ensure good customer outcomes.

“Business owners of appointed representatives and directly FCA authorised firms currently have the same responsibilities in terms of the statements of principle and code of practice under which they must operate, even though a network will carry the advice liability for the appointed representative.

“It would be counter-intuitive to differentiate between the business owners of the two types of firms within the proposed new conduct rules.”

Mr Cowan added that making networks the senior managers of their appointed representatives would result in firms being removed from the FCA register.

He said this would be a “regressive” step which would lead to less transparency.