FCA Calls for Individual Responsibility with New Proposal for Regulated Firms

FCA proposes to make its certification regime mandatory for all regulated firms.

In a bid to promote individual responsibility and integrity, the Financial Conduct Authority (FCA) has extended the Senior Managers and Certification Regime (SM&CR) to all sectors of the financial services industry.

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The FCA views these measures as a tool to further protect clients from harm, and to improve the integrity of the market as a whole, by bringing in individual responsibility and diligence.

The FCA has proposed that all the firms that it regulates adhere to a specific set of requirements, which it calls the ‘core regime’, and for those very large and complex firms it proposes an extra set of requirements, called an ‘enhanced regime’.

The FCA proposes three parts to the SM&CR:

1. Five conduct rules that will apply to all financial services staff at FCA authorised firms. This simple set of rules means that individuals must act with integrity, due care, skill and diligence, be open and cooperative with regulators, pay due regard to customer interests and treat them fairly, and observe proper standards of market conduct.

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2. The responsibilities of senior managers will be clearly set out and, should something in their area of responsibility go wrong, they will be personally held to account. Senior managers will be approved by the FCA and appear on the FCA register.

3. Under the certification regime, firms will certify individuals for their fitness, skill and propriety at least once a year, if they are not covered by the senior managers regime but their jobs significantly impact customers or firms.

Individual responsibility

Jonathan Davidson,  Executive Director of Supervision- Retail and Authorisations at the FCA, said: “Culture and governance in financial services and its impact on consumer outcomes is a priority for the FCA. The extension of the Senior Managers and Certification Regime is key to driving forward culture change in firms.”

He added: “This is about individuals, not just institutions. The new Conduct Rules will ensure that individuals in financial services are held to high standards, and that consumers know what is required of the individuals they deal with. The regime will also ensure that Senior Managers are accountable both for their own actions, and for the actions of staff in the business areas that they lead.”

Up until now, when things went wrong the focus was on the companies and not an individual or a group, even though the latter are the ones at fault.

By making sure that the responsibility is distributed to individuals as well, the FCA would look to ensure that employees also understand the regulatory requirements and feel responsible to act accordingly and keep customers interests paramount while making decisions.

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