Now that 2014 is well under way it’s a good time to look forward to what’s likely to be occupying our time in the coming months.

Here are Fulcrum Compliance’s suggestions for things to watch out for this coming year.

Conduct Risk

“Conduct Risk” was given extensive coverage in April in FCA’s inaugural Risk Outlook.

This developed the concept of “Conduct Risk” from its 2011 definition by FSA as “the risk that firm behaviour will result in poor outcomes
for customers”.

Last year, major banking groups were asked submit their conduct risk policies to FCA. That involved their having to come up with their own definition of what conduct risk meant in the context of their business and implement procedures / training accordingly.

FCA has since then been tight-lipped on their specific expectations of firms – there are no new rules to follow or FCA templates to adapt. But our expectation is that in their usual manner, FCA will follow their exercise in the banking sector with an equivalent exercise in the investment sector.

Initial press comment indicates that FCA will be holding a series of roadshows for advisory firms. These will be followed up by meetings, phone calls or on-line questionnaires.

Given the lack of substantive guidance available to firms from FCA, Fulcrum Compliance is developing a “least pain” implementation template to allow clients to demonstrate that they have considered conduct risk issues in their business, and have in place the proper procedures / monitoring routines.

This will allow them to evidence their addressing FCA’s concerns, and provide them with some prompts to action. If you think your firm would benefit from such a exercise, do contact us.

Behavioural Economics

Behavioural Economics was also “new” material last year.

This subject was introduced to the regulated world on 10 April 2013 by FCA CEO Martin Wheatley in this first speech after formally taking office and supported by two FCA Occasional Papers published simultaneously. See our Article from the June edition of Compliance Monitor Regulation, Jim – but not as we know it… for our initial thoughts.

Since then, there’s been a similar lack of specifics from FCA – but expect them to ask firms – especially those with extensive retail bases and who issue their own products – how they have considered the issues raised.

Boards will be expected to know what are their highest earning products – and why they are such. And have a ready answer to the question “would you sell this to your mother?”.

It’s the basics that matter

Notwithstanding the forgoing, it remains the case that firms still have to get the basics right.

That means being able to evidence proper due diligence on client take on, assessment of suitability and control of client money and assets, to name but three. It’s easier for FCA to make a successful case where the issues are clear-cut and relate to rules that have been around for a while. And lack of evidence or documentation in any area is, in FCA’s eyes, clear-cut evidence that the process has not taken place – irrespective of the outcome.

FCA Themed Visits

Fulcrum Compliance has been working with clients ahead of FCA Themed Visits on Client Money and Transaction Reporting.

We have delivered training to operational staff on the wider issues involved in both areas, so that the firm can show that it doesn’t think in silos and the staff can show a broad understanding of the issues involved outside of the confines of their own rôle.

If you believe that you might be in a similar position, or would benefit from an hour’s refresher, do get in touch.

Controllers & Close Links Annual Reports

Having just got used to submitting these as “non-Gabriel Paper Returns”, these are now to be submitted through Gabriel for periods ending after 31 December 2013.

That’s REP001 for Close Links and REP002 for Controllers. They should appear in your Gabriel schedule automatically.


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