The changing role of the Compliance Officer

Since our last Newsletter there have been a number of significant straws in the wind, blowing in from Canary Wharf, indicating that FCA’s expectations of Compliance Officers are changing.

The Compliance Officer has always played a key role in the firm, supporting the Board and advising the Board on how best to ensure compliance. This was traditionally seen as a supporting role, allowing the key decisions to be made by the Board.

Two recent pieces from FCA indicate that FCA may now require the Compliance Officer to play a far more pro-active role within the firm. The first of these was a “Dear Compliance Officer” letter written on 20 June. This letter was, in general, not without precedent, but this particular letter was unusual in that it required the recipient to attest back to FCA as to the soundness of the firm’s procedures for distributing Unregulated Collective Investment Schemes (UCIS). Such a declaration would normally be made by a director, if not the Chief Executive. Indeed, the CEO would normally be the recipient of such letters.

Hard on the heels of this letter came FCA’s wider proposals for UCIS, contained in Consultation Paper CP12/19, released on 22 August. One of FCA’s proposals is that all retail promotions of UCIS within a firm should be individually signed off by the holder of the CF10 (Compliance Oversight) function.

It may be reading too much in to these to point to FCA starting to re-focus on the holder of the CF10 function. However it’s wise not to ignore these trends, particularly if you are a Compliance Officer who holds multiple controlled functions, such as governing (director) and customer facing functions.

Fulcrum Compliance cannot make this issues disappear. But we can lighten the load of the Compliance Officer so that they are able to focus on what really matters in their firm – including any enhanced expectations that FCA may have of them.

And the Gold Medal goes to…

Now that the athletes have left town, we take a sideways looks at the recent Olympics and consider what financial services might learn from them in our leading article from the September issue of Compliance Monitor.

Access it here.


In a speech on 5 September, incoming FCA Chief Executive Martin Wheatly outlined a new phase of FCA and FCA’s work on remuneration.

A Guidance Consultation was released simultaneously, seeking responses by the end of October.

Essentially, Wheatley is concerned at the extent to which commission-based remuneration systems lead to poor outcomes for retail consumers. His speech and the Guidance are full of examples of highly geared sales incentive schemes, all designed to motivate the sales force, and all having “features that significantly increase the risk of mis-selling”.

Firms will be required to review their own commission systems to ensure that they take account of what is likely to become FCA’s finalised guidance.

This is not an issue which is confined to high street firms with extensive sales forces. FCA makes clear that it saw poor practice in investment advisory and intermediary firms, all of whom will be covered by this Guidance.

Thus remuneration systems which include nothing more complex than a flat percentage need to be considered in the light of the FCA’s Guidance.

Fulcrum Compliance will be working with its clients to ensure that their remuneration systems meet the regulator’s expectations. Firms should expect continued scrutiny in this area, as Wheatley has nailed his personal colours to this mast.

In his own words: “I am going to be personally involved in getting this right”.

Not the beginning of the end…

With the Financial Services Bill due to complete the last stages of its Parliamentary progress this early autumn, the end of the beginning of the new regulator really does look to be in sight.

Royal Assent is expected by the end of 2012, and the new institutions look set to be operating by the end of Q1 / beginning of Q2 in 2013.

FCA’s recently released a Q&A on the “Journey to the FCA”, but this gave away little new information away, deferring most issues until the issue in October of its “Approach Document”. Fulcrum Compliance will be considering this in detail and advising clients of any specific implications.

However, there were some nuggets of fact there that will answer some basic questions. Firstly – no firm currently regulated by the FCA will need to apply to either of the new regulators. All currently regulated firms will be advised by the new bodies, either by email or post, and automatically transferred.

Secondly – the regulatory disclosure (“authorised and regulated by…”) will be changing, and FCA will consult on what its new format should be. But it does look as though there will be a six-month transition period in which old stocks of letterhead and cards can be run down. Thirdly – and no surprises here – fees are unlikely to go down.

But as to the big themes for 2013, the Q&A defers to the Approach Document. But this is unlikely to contain many surprises, as all of these have been well trailed or are already core to the FCA’s current mission. So expect more on senior management responsibility, the use of judgement and product intervention.


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At the point of balance