Investments  

How to continue meeting FCA governance requirements

  • Explain what governance means in the context of regulation
  • Explain what has happened with SM&CR so far
  • Identify ways in which to assess a firm and individual's competency
CPD
Approx.30min
How to continue meeting FCA governance requirements

A hot topic today and one of the questions we are asked most in our conversations with wealth managers, is how they can continue to meet the regulator’s ongoing governance and systems and controls requirements.

As a starting point, it is necessary to define the term ‘governance’.

Very simply, it refers to how, and why, a business is governed.

It is the framework that enables the management team to deal more effectively with the challenges of running a business and ensures that the appropriate decision-making processes and controls are in place, so that the interests of all stakeholders are balanced.

Governance provides the framework for a firm to demonstrate how it puts its processes in place, through which it sets its objectives and pursues them.

It could be argued that this process begins when a wealth manager is looking at recruiting individuals to join their business. 

As part of any robust regulatory regime, the competence, experience and integrity of individuals involved in the provision of financial services must be of the highest standard.

It is an FCA requirement that an individual’s fitness and propriety is checked both prior to recruitment and on an ongoing basis.

If your firm is intending to recruit an investment manager or investment adviser you must, as part of your recruitment procedures, take into account the knowledge and skills of the individual in relation to the knowledge and skills required for the role. 

You must also take reasonable steps to obtain sufficient information about the individual’s previous relevant activities and training, while taking reasonable steps to obtain information about the knowledge and skills of the individual, including appropriate examination passes.

It is worth reiterating that a firm must not permit an employee to engage in an activity unless the employee has been assessed as Fit and Proper (FIT).  

When the investment adviser, or investment manager, has gone through the recruitment process and been assessed as Fit and Proper, they will then be subject to the ongoing requirements of the Senior Managers & Certification Regime (SM&CR).

When the SM&CR regime commenced on 9 December 2019, firms should have identified their Senior Managers and Certified Persons and these individuals should have been trained on the Conduct Rules. 

SM&CR requirements

In the twelve months that follow, firms will be required to gather evidence and complete Fit and Proper assessments on Senior Managers and any Certified Persons.

This process must be completed by 9 December 2020; a consultation to extend this deadline to 31 March 2021 for firms who have been ‘significantly affected’ by Covid-19 is currently underway.  

We believe that the FCA will expect the majority of firms to be still working towards the 9 December deadline, and we would encourage firms, where possible, to aim to have these assessments completed and their Certified Persons uploaded to the directory by the original date of 9 December 2020.