Get back (Part II)

In our March Newsletter we advised that firms should get back to the office as soon as possible.

We felt – and still do feel – that this is the best way to minimise the risk of enforcement action against firms – and their senior managers – for breaches which took place during Lockdown, when staff were at home and, FCA will allege, not being appropriately supervised.

Since then FCA has dramatically raised the stakes on this issue, publishing on its web site on 11 October its “Remote or hybrid working expectations for firms”. It’s clear from this that FCA wish to draw a line under the past and that if firms wish to continue with a WFH or hybrid model, they must consider the risks of their new working practices from first principles.

FCA is particularly concerned that such arrangements may, inter alia, not be in the best interests of consumers, may increase the risk of financial crime and inhibit oversight functions. FCA also gives a non-exhaustive list of things which need to be proven when adopting a hybrid model – and the well-being of staff is only one of these.

FCA further points out that if your new hybrid arrangements represent a “material change” to how your firm intends to operate, you may have to notify FCA before you implement them. It may be the case that this is only likely to be required in instances of fundamental re-structuring, but firms should in any event consider whether they might have a notification requirement. And what they would do if FCA is minded not to approve their plans.

All of which takes us back to the point from which we started. If everybody is back in the office, none of this arises. If only a few persons are working flexibly, on a few days, with appropriate safeguards in place, risk should be minimised. So as we said previously – get back. Get back to where you once belonged.

Faster decisions, worse decisions

Recently FCA has issued two consultation papers (CP21/25: “Changes to the FCA’s decision-making procedure” on 29 July and CP21-28: “New cancellation and variation power” on 9 September) in which it considers streamlining its decision making processes. In CP21-28 FCA proposes acquiring new powers to allow it to make decisions about firms and at the same time removing the right for those firms to challenge the decision.

Thus firms would be unable to challenge any notice issued by the FCA, the right to make representations to FCA would be reduced and the existing right to appeal to the Upper Tribunal circumscribed. This is all in the cause of greater speed and efficiency of decision making, and generally centres on FCA’s desire to remove or vary a firm’s permission.

It’s tempting to think “that’s something that would never happen to me” – but bear in mind that the triggers for FCA commencing such an action are really small and are much easier for FCA to pull in a remote / hybrid working environment.

Thus FCA states that it will start this process when it considers that a firm appears to be carrying on no regulated activities, and as evidence of this they would point to the following non-exhaustive list of minor administrative breaches, any of which might be more likely to happen when you’re not in the office:

• failing to pay a periodic fee;
• failing to provide the FCA with information required;
• failing to respond substantively to the FCA’s correspondence;
• correspondence to the firm’s address or email address is returned to the FCA or is otherwise notified as undelivered.

And Fulcrum Compliance has experience of clients who have got into this situation because FCA emailed them at an old email address that was no longer used. FCA took the firm’s non-reply as indicative of their being inactive.

So think hard about your hybrid working arrangements and who is receiving FCA correspondence. Have you checked all the pages of your FCA static data on the FCA Register for old email addresses?

If you’re using your registered office for physical correspondence purposes, are you confident that they are forwarding mail to you?

Faster decisions are good, but don’t let yourself be on the wrong end of a wrong decision due to nothing more than an administrative oversight.

Diversity

We wrote in our August Newsletter of some of the issues arising from FCA’s Discussion Paper 21/2 “Diversity and Inclusion in the financial sector”. We’ve expanded on these in the October issue of Compliance Monitor – see here.