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FCA: ‘Fear can’t be the only source of motivation’

FCA interior 620x430The FCA has attempted to quell suspicion that its new Senior Managers Regime is trying to ensure compliance through more frequent fines and punishment for individuals.

In a speech with morning, executive supervision director Jonathan Davidson says that while the FCA will still use its enforcement powers where it needs to, the purpose of the new accountability regime was not to ensure compliance by scaring individuals into action.

Davidson says: “Many people fear that the accountability regime is all about enforcement. We will be upholding the standards through enforcement. But just because something goes wrong in your area of responsibility doesn’t mean you are automatically liable. Our approach will be to assess whether you took reasonable, and I mean reasonable, steps to prevent other people breaching the conduct rules.

“That being said, I sense that the ‘why’ in some areas in financial services is still about the money and about fear – including fear of the regulator. I talked recently to a senior executive who told me that fear had driven them to make radical and rapid change for the better.  However, she told me that it was a very effective source of motivation but it wasn’t personally sustainable for the long term.  So fear can’t be the only source of motivation.”

FCA reveals how it plans to extend Senior Managers Regime to advisers

The Senior Managers Regime will be introduced next year and will require top level staff to sign statements of responsibilities over what they will be accountable for. All individuals will have to live up to a new set of five conduct rules around integrity and treating customers fairly.

Davidson says that the regime is not intending to impose a prescribed business model or culture on firms though.

He says: “However much compliance officers may wish it, there is no off-the-shelf FCA approved culture package that you can download and install in your business (‘click here for good culture’).

“Each firm will have a different culture. And that’s fine – it is not the FCA’s role to dictate a firm’s culture any more than it would dictate its business model or strategy.”

It is understood that the FCA is soon to embark on a major communication programme with firms, including advisers, about implementing the Senior Managers Regime. A technical paper later this year will set out exactly how the regulator intends to check whether firms have adopted the required statements of responsibilities and whether or not these are appropriate.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Well anyone with half an ounce of sense knows that the most effective way of ensuring people do what you want them to is using a “Carrot AND Stick” approach.

    For senior managers and business owners it has tended to be the carrot approach (unless you step way, way out of line) approach, more stick is needed to create the balance.

    People need to know that the “personal gain” they might receive is not as large as the penalty.. For some people that is the only way that works.

  2. The very moment some-one comes out publicly to defend an action, a policy or even a miss-conception …. you know, initial suspicions are correct.

    Fear of enforcement is the driver…..

    Which demonstrates, with out a shadow of doubt, the regulator is the worst kind of parent. Physical, mental and financial punishment is common place to ensure discipline, compliance, and obedience.

    Now everyone knows this only makes matters worse, the parent will blame the child, the child in most cases is the scapegoat….. this kind of abuse works in one of two ways, you go completely of the rails or you become a drone, scared of you own shadow.

    “Davidson says: “Many people fear that the accountability regime is all about enforcement. We will be upholding the standards through enforcement. But just because something goes wrong in your area of responsibility doesn’t mean you are automatically liable. Our approach will be to assess whether you took reasonable, and I mean reasonable, steps to prevent other people breaching the conduct rules.”

    If that quote doesn’t stink of “guilty till you prove you are innocent” then i don’t know what does.

  3. Now who was it who said: Be afraid, be very afraid…?

  4. Reading the detail from the Regulator semms to very clearly indicate thst being a sole trader has distinct advantages. (As I have always maintained).
    You don’t carry the risk of others stupid (or venal) mistakes. You justhave to ensure that your borrom is clean and not worry about the nappies of others.

  5. I only have one comment on this .
    If fear improves performance, its about time the senior FCA staff became liable for the regulators actions.
    With millions being stolen every day they still do not act. If they were liable for the time delays in providing clear guidance, for the non suspension of cold calling of pensions freedoms, for the stolen consumer funds due to lack of action.
    I wonder if they had to answer why, in the same manor they conduct an inspection, asking why, why, why, continually, knowing dam well there is no right action, would they themselves would feel so comfortable, as they do today.

    • Nice idea but, as we know, no individual at the FCA is ever held to account for any failing or transgression. In fact, if your name is Briault and you screw up, you get a thumping great golden parachute (£612,000) and, if your name is Sants, despite having looked the other way whilst years of industrial-scale PPI mis-selling was going on, you get a knighthood.

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