Happy New Year!

Welcome back – we hope that you enjoyed the Christmas and New Year break and are fully energised for the coming year!

In this issue we look at some of the documents that came out from FCA in the last gasps of 2015, and consider one of the news stories that came out over the holiday period.

All change?

George Osborne’s Mansion House speech of June last year was widely heralded as marking a change of tone in regulation. Out with the “banker bashing”, in with the “new settlement”.

Beyond the headlines, there was some evidence to support this reading of his speech – specifically the government’s dropping of FCA’s proposed reversal of the burden of proof with regard to the Senior Manager’s Regime and the decision not to renew Martin Wheatley’s contract as FCA CEO.

However the proof of the “new settlement” pudding would be better seen in the appointment of his successor – and if press comments over the holiday period are to be believed, the auguries are not all that favorable.

The Sunday Times reported on 3 January that the shortlist to replace Wheatley is led by Tracey McDermott, formerly FCA Head of Enforcement and currently acting CEO.

Whilst a former enforcer is not the most obvious choice for someone to lead the “new settlement” the fact that she is a leading candidate is no surprise. As a long-serving FCA director, she has a wealth of experience that cannot be overlooked.

But what was disappointing from The Sunday Times story was the fact that the rest of the shortlist comprised career regulators and civil servants. Not a person with recent – let alone current – experience of working in a regulated firm amongst them.

Perhaps this too is no surprise. Hector Sants, the last CEO to come from a firm, did not enjoy a happy tenure, although this is perhaps a judgment of hindsight due to the co-incidence of his term of office with the now discredited period of “light touch” regulation. However much Osborne may wish to move away from “banker bashing”, he would not want to give the press and Opposition a free headline by giving a fox the keys to the hen house.

So let’s then raise at least two cheers for Tracey McDermott, if she does get the nod. The Sunday Times reported an un-named chief executive of one British lender as saying “Tracey has proven to be a really strong regulator. It’s clear she has been briefed by the Treasury to take a more collaborative approach with the banks.”

Let’s hope so.

Suitability – again

On 9 December FCA released a Themed Review (TR 15/12) on “The suitability of investment portfolios”, particularly addressed at wealth management firms and private banks.

There was nothing strikingly new or indeed controversial in this Review. That is in fact the importance of the document – it represents continuity in FCA’s thinking and best practice since previous reviews in 2010 and a “Dear CEO” letter in 2011.

The importance of TR 15/12 for firms with discretionary or advisory portfolios is that in spite of some improvements, firms are still getting this wrong. There will be no hiding place for firms who continue to exhibit what FCA considers to be “poor practice”.

It is likely that FCA will follow up this Review with further visits, or require senior management to “attest” that their procedures are adequate.

Before this happens, any firm in this area must as a minimum review the “observations of good and poor practice” made by the FCA in Annex 2 to the TR and benchmark its own activities against the examples FCA gives.

Fulcrum Compliance will be working with clients in this area to ensure that the lessons of this TR have been absorbed and that should FCA come calling, they will not fall into the same traps. Should you be interested in such a review, do call us on the contact details below.

Confidential and Inside Information

Hard on the heels of TR 15/12 (in fact, the next day) came TR 15/13 on “Flows of Confidential and Inside Information”.

This called for a general tightening up of procedures in this area, with a particular emphasis on senior management’s role in identifying inside information, their taking an active interest and “championing” adherence to firm principles.

Many smaller firms will be forgiven as seeing this Review as directed specifically at larger multi-discipline houses who regularly deal and advise on listed securities. However FCA is a pains to point out that smaller or less complex firms still have to meet the same standards of compliance.

These include consideration of the systems and controls in place and regular review of risks. (Indeed, such issues often come up in FCA’s periodic questioning of Contact Centre managed firms.)

So now is a good time to review your procedures for handling such information – even if you only come into possession of it intermittently.


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