Confusion and Collapse

Was there ever a harder implementation than MifID II? Was there ever a set of regulations that were as broad in extent and deep in detail? Was there ever an implementation where so many aspects were still uncertain so late in the day?

As 2017 faded out, firms and their compliance departments could be forgiven for being in a state of near exhaustion as they grappled with the many-headed hydra that was MiFID II. And all of this, when added to the other challenges posed by business as usual and forthcoming changes in Accountability II and data protection (see elsewhere in this Newsletter).

It has created an unprecedented burden for firms, their compliance teams and advisers leading to a state of near burn-out as 2017 drew to a close. And this is all before we’ve even started on the implications of Brexit.

At least FCA has been alive to these issues. And why wouldn’t they be? It must have been as difficult for them to implement as everyone else – and there’s room for thinking that they don’t even regard it as their no.1 priority in any event. In a speech in September, Mark Steward, FCA’s Director of Enforcement, said of FCA’s approach to MiFID II enforcement: “We are very aware of how much work many firms have been engaged in for a very long time now in re-tooling and preparing for next year. This means we have no intention of taking enforcement action against firms for not meeting all requirements straight away where there is evidence they have taken sufficient steps to meet the new obligations by the start-date…”

So two cheers for the FCA. Let’s hope that Steward’s commendably pragmatic and realistic attitude filters throughout his organisation as we all pick ourselves up of the floor and gird our loins for whatever 2018 has to offer.

Don’t Watch That – Watch This…

So sang Madness in their 1979 hit. And for FCA, the implementation of the Senior Management & Certification Regime at some time in 2018 really is “One Step Beyond”.

At the FCA’s Annual Meeting back in July, no less a person than FCA chairman John Griffith-Jones described SMCR as possibly “the most single significant issue that we have dealt with in the last four years” since FCA had been founded. So if you’re in any doubt about where to focus your scarce compliance resources in 2018, now you know.

We wrote about the FCA’s initial Consultation Paper CP17-25 in the September issue of Compliance Monitor. See our article here. Just before Christmas FCA released three further CPs on various practical aspects of this implementation. Whilst these latter CPs did contain some relief for “core” firms, the following remain true:

All firms will need to look at and almost certainly improve their recruitment processes. For smaller firms which lack dedicated HR functions, this will be a challenge;
All firms will need to improve the documentation of their key decision making processes – for the sake of the firm and of the individual directors making those decisions. Again, this will prove challenging for smaller firms used to a minimum of bureaucracy.

We’ve been majoring on these points with client firms throughout 2017, and will continue to do so as we head towards the still unspecified start date. And on that last point, given the importance FCA place on SMCR you’d hope that they’d encourage the Treasury to signal an implementation date as soon as possible. Anything else would be – Madness?

And Finally…

The General Data Protection Regulation comes into force this May. This poses significant challenges for all firms holding personal data, not just financial services firms.

Firms will need to look beyond their client data, which should in any event be up to date, to the wider lists of contacts who receive the firm’s mail shots and marketing communications. Do those recipients still want to receive the mailings? Are the contact details correct? These and other questions will need to be considered.

In that spirit, Fulcrum Compliance will itself be reviewing its own processes to ensure that our own processes are in order. So if you no longer wish to receive this Newsletter, do advise us.

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