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FCA: Busy bosses are no excuse for conduct failure

FCA05The FCA has said it will not let senior managers at financial firms off the hook for conduct failures because they are too busy.

The regulator today released a bundle of documents focused on firms’ culture, six months after it started its senior managers regime in banks and insurance companies. The regime is intended to make top staff more accountable for failures and clarify lines of responsibility.

Proposing further guidance on managers’ duty of responsibility, the FCA said it wanted to clarify that bosses would not escape punishment for misconduct just because they had other issues to deal with.

The regulator says: “We also want to avoid giving the impression that senior managers will not be guilty of misconduct under the duty of responsibility merely by demonstrating that they were faced with competing priorities, or that it is acceptable for a busy senior manager to deprioritise concerns about conduct.”

Whether a senior manager had taken reasonable steps to manage their competing priorities will also not be relevant to the FCA, the regulator adds.

However, the FCA says it would not retrospectively judge managers when deciding if they were responsible for cultural failures.

The regulator says: “Our guidance states that when apply the duty of responsibility, we will consider what steps a competent senior manager would have taken at that time in that specific individual’s position with that individual’s role and responsibilities in all the circumstances.”

Among the seven documents released today, the FCA also says it intends to extend some of its conduct rules to non-executive directors, as well as bring in a new requirement for UK branches of overseas banks to tell their UK based employees about the whistleblowing services offered by the FCA and the Prudential Regulation Authority.

The senior managers regime will be extended to all regulated financial services firms, including advisers, from 2018, but the FCA has so far not been clear on how it would apply to small firms.

Since it was introduced in March, the regulator says it had identified issues in documents supplied by firms. In some cases, the regulator saw “overlapping or unclear allocation” of responsibilities and, in other cases, there were examples of firms sharing responsibility among junior staff, which obscured who was responsible.

FCA chief executive Andrew Bailey says: “Knowing who is responsible for what is critical for firms and regulators and we have seen genuine engagement on this from the board down.”

He adds: “Generally, we have observed that firms are taking their responsibilities seriously and have broadly got the regime right. But we recognise culture change takes time and there is still more to do. So we have to keep a watchful eye on the progress firms are making.”

“Responsibility, accountability and governance in financial services firms and their impact on conduct has been, and remains, a priority for the FCA with a focus on the most significant drivers of good or poor mindsets and behaviours. This includes incentives and remuneration, and the steps firms take which address associated risks.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. May we know just what steps the FCA has taken to improve the individual accountability of its own senior managers since Hector Sants’ repeated refusal to give the TSC a straight answer on this very point back in March 2011?

  2. And too much theory and navel gazing is no excuse for poor regulation. (Banks could advise less savvy customers).

  3. More sticking plasters over broken rules

    You do have to wonder at the IQ level and lateral thinking of those at Canary Wharf

  4. It’s a shame that Tyrie wasn’t more on the ball back in March 2011 when attempting to grill Sants. He could have boxed him into a corner by asking “So, Mr Sants, are you saying that, as CEO of the FSA, you don’t know who’s responsible for what within the organisation of which you’re supposed to be in charge? This can be the only basis on which you seek to ascribe the FSA’s failures as having been collective and not attributable to any specific personnel.”

    Sants naturally would hotly have rejected such a suggestion, to which the next question would have been “So are you saying that you DO, in fact, know which individuals are responsible for what within the FSA? If so, why are you refusing to tell the Committee just which of those individuals failed in their duties?”

    In a court of law, Sants would have been held in contempt for refusing to give a straight answer to a straight question. Then again, does the regulator ever give a straight answer to any straight questions?

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