A remote possibility..?

Now that the long march back to the office has begun, it’s worth considering what changes the last months of working from home have left us with.

Firms have certainly got used to the efficiencies which Zoom, Teams etc. can offer, and many firms will continue to use these for meetings, irrespective of the risks of participants not turning on their cameras and not being truly “in the room”.

We’ve written previously (see our Newsletters March 2021 and October 2021) of the risks to management oversight that WFH presented. Whilst systems may allow management to view all trades, they don’t allow management to view all traders. Systems controls may allow oversight by one or a few people, but the fact remains that when someone is in the office, their actions are overseen – to a greater or lesser extent – by everyone in that office.

Furthermore there is genuine reluctance on the part of some staff to return to the office, and the firm’s powers of compulsion over staff – should they even want to use them – are uncertain.

FCA recognised all of this when it issued its advice to firms on remote / hybrid working back in October 2021 (see our newsletter “Get Back” of that month).

They wrote then that “It’s important that firms are prepared and take responsibility to ensure employees understand that the FCA has powers to visit any location where work is performed, business is carried out and employees are based (including residential addresses)…”

At the time, we thought that a home visit from FCA was a remote possibility, but now, with a general drift back to the office, those continuing to work from home look like easy to identify outliers, and FCA will certainly be asking management how it’s supervising these home workers.

In our view, it’s insufficient to point to systems controls and 1-1 meetings on days when the home worker is in the office. If FCA feel that something is lacking, they may want to push the point they raised on 11 October and visit the worker at home.

One way of forestalling this is to beat FCA to it. FCA’s desire to visit your staff member at home may be averted by your already having done that for them. Go yourself.

Go now. You’ll need to evidence your visit – have a checklist of things you want to see at their home, and make a file note from your visit – and you’ll need to make that trip on a regular basis.

FCA wanting to do this may be a remote possibility. But your having done it already will make that less likely still.

It’s not a wind up…

Word reaches us from FCA on the recent implementation in MiFID firms of the new prudential regime, which came into force on 1 January.

Whilst the first returns under the new rules have yet to be completed, our sources tell us that FCA is equally interested in firms’ plans to avoid disorderly wind-downs. This will become a part of firm’s ICARA process, but the obligation already exists for all firms – including non-MiFID firms – as required by FCA’s Guidance in FG20-1“Assessing Adequate Financial Resources” of June 2020. Our regular readers will recall our Newsletter of December 2020 and related article “Winter Is Coming” on this subject.

Fulcrum Compliance is working with retained clients to review and update these plans. After the experience of the last 12 months, there will inevitably be changes to make – even if only minor – to these policies. FCA’s expectation will be that these policies are regularly reviewed.

A demotion of promotion

Firms distributing funds to retail investors should take urgent note of FCA’s January Consultation Paper CP22-2 “Strengthening our financial promotion rules for high-risk investments, including cryptoassets”.

FCA’s proposals will require extensive re-engineering of firm’s promotional processes, web sites, printed material and investor on-boarding processes. Their expectation is that firms will be in compliance with their proposed rules three months after the publication of the expected Policy Statement, which they intend to publish “in summer 2022”. Whenever that turns out to be, it’s not very far away.

FCA has included in the bracket of “Non-mass market investments” non-authorised funds currently categorised as non-mainstream pooled investments. This includes funds that are generally anything other than an authorised Unit Trust or ICVC. FCA’s proposals are that these funds should be no longer be mass marketed and will only be available to a more tightly monitored set of certified investors, after new risk warnings and a cooling off period.

FCA is frank about its distaste for the self-certification (“We still believe that self-certification is fundamentally not the right approach…”) and look forward to HMT amending the Financial Promotions Order to require firms to come to the “reasonable belief” that investors meet the conditions.

Clearly there’s much to be done to get ready for this. Our advice is not to expect many substantive changes to FCA’s proposals in between now and “summer 2022”. In between time, Fulcrum Compliance will be working with its affected clients to help get them ready for the three-month deadline.