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Financial institutions to take greater accountability in new FCA regime

18th March 2016
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Employees at banking and other financial institutions are now subject to greater levels of personal accountability in a new regime recently rolled out by the Financial Conduct Authority (FCA). Since 7th March (insurers have been subject to the new regime since 1st January) it has become much easier for regulators to hold senior executives accountable for regulatory breaches.

The new regime stipulates that financial organisations focus improving risk management practices and operations, and comes as a response to the 2008 financial crisis and subsequent 2013 Banking Reform Act. While the main focus is on senior managers, the regime also aims to ensure that all individuals are working within appropriate standards of conduct. The regimes will apply to employees at UK incorporated banks, building societies, credit unions, insurers, reinsurers and PRA designated investment firms in the UK.

There are three parts to the new regime:
• Senior Managers Regime
• Certification Regime
• Conduct Rules

As CV screening partners to a large number of financial institutions, we’ve been looking at the new regime in detail – and outline the key points here:

What are the new regimes and who is impacted?

Senior Managers Regime
Q. Who is affected?
A. Individuals holding key roles and responsibilities, e.g. Senior Managers and Executives.

Q. How will the regime affect them?
A. Statements of Responsibilities will need to be mapped out for individuals carrying out Senior Management Functions (SMFs). They will continue to be pre-approved by regulators and firms will also be legally required to ensure that they have procedures in place to assess their fitness and propriety before applying for approval and at least annually afterwards.

Certification Regime
Q. Who is affected?
A. Non Senior Management staff who could pose a risk of significant harm to the firm or any of its customers. For example, staff who give investment advice or submit to benchmarks.

Q. How will the regime affect them?
A. The regime replaces the Approved Persons Regime. As these staff are not be pre-approved by regulators, the biggest onus of this regime is on the business. An organisation will need to put in place procedures to make their own assessment of the fitness and propriety of their staff, which needs to be measured annually. It is particularly important that these procedures are used during recruitment stage for roles which are affected by this regime.

Conduct Rules
Q. Who is affected?
A. Everyone who is affected by the two other regimes – Senior Managers and staff affected by the Certification Regime.

Q. How will the regime affect them?
A. Rather than a regime, the Conduct Rules form a basic standard of behaviour for everyone affected by the new regimes. Again, the responsibility lies predominantly with the business. They must ensure that individuals understand the conduct rules and how they apply to them as individuals. In the first instance, individuals who are affected by the Senior Managers Regime or the Certification Regime must understand the Conduct Rules. By 7th March 2017, businesses must have rolled out the rules to all of their employees.

Read more on the FCA website

What impact will the new rules have on financial businesses?

While the main aim of the new regimes is to place greater responsibility with individuals, there is of course a significant impact for the businesses within which they are working. Recruiting the very best Senior Managers will have more importance than ever.

At CV Insight we are experts in pre-screening for the financial services industry. We know and understand your need to recruit individuals who possess the appropriate qualifications and skills for the role they are applying for. We offer a range of screening and background services that will ensure that you remain fully compliant, and provide you with piece of mind that you have taken the best steps to protect your reputation.

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CV Insight

CV Insight

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