Informal – to a fault

A constantly recurring theme of our advice to clients is that Board meetings should be minuted. Where the Board itself does not meet regularly, the same applies to the management committee or whatever is the routine forum of discussion.

Smaller firms pride themselves on their ability to act swiftly, and can see such routine disciplines as regular meetings as at best an unnecessary complication (“we’re all in the same room together!”) or at worst a waste of valuable time (“we all know what we need to do!”).

We would never suggest burdening a one-room firm with the bureaucratic overhead of a clearing bank. But some degree of formality does help. It allows discussions to proceed in a rational, ordered, manner and crucially, provides evidence to FCA that senior management are considering all relevant issues.

Some recent confirmation of FCA’s thinking on this was containing in the September issue of “Market Watch”. Speaking of a recent review of commodity firms, they said “we found less effective governance arrangements, for example, informal committee structures and arrangements, unclear escalation procedures and no formal records of board or committee debates or decisions. These firms were also less able to demonstrate that senior management had clear sight and control of the conduct risks presented by the front office in terms of conflicts of interest or more serious issues…”

These faults aren’t confined to small firms. Part of the FCA’s case against BNY Mellon in April this year was that their CASS governance structures lacked the appropriate degree of formality for a global custodian. And that led to an £128m fine.

So the message is clear – whether you’re large or small, get into the habit of a routine meeting, and get someone to take notes!

A paper trail?

FCA’s paper forms have long since ceased to be used by firms for actual application, most requiring direct input into FCA’s on-line systems.

However the hard-copy forms are still valuable, providing firms with templates for their own documents and drafts for applicants to complete prior to input.

The introduction of the Senior Manager’s regime for banks has led to the amendment to some well used FCA forms – particularly the Form A used to register individuals. These changes have led to a further proliferation of papers which, when combined with the changes to the structure of the FCA Handbook on-line, have had some interesting effects.

Specifically, users needing to locate Form A for a normal CF30 applicant will need to dig deeper into the Supervision Manual than previously. As this display defaults to “Sort by latest”, the old unchanged Form A has been pushed back to page 3, and is no longer grouped with its fellow forms relating to individuals. A “Sort by title” brings all the “Forms” together (from page 8) – unless it’s a “Short form” you’re looking for – in which case, go to page 24…

When Yes Means No

Always say what you mean – that’s a good motto for life, as for financial services. Unless, apparently, you’re completing an FCA return, when you may have to say the opposite!

See our