The 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.”
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.