The FCA has laid bare concerns about potential misselling risks created by sales incentives schemes at firms dealing with retail customers.
The document lays out the FCA’s approach for all firms dealing with retail consumers, and comes following an increase in whistleblowing and evidence of instances of poor practice.
While the regulator says it has not identified evidence of widespread issues, it remains concerned inappropriate performance management could lead to too much emphasis on sales.
The FCA says: “This type of undue pressure may be hidden, which means there is a risk that the reality of daily life for some sales staff can be very different from the tone set at the top by senior staff or boards.”
In particular, it notes that pressures on middle managers to balance corporate objectives with monitoring staff behaviour could make them particularly likely to face conflicts of interest.
The regulator is calling on firms to satisfy themselves that misselling risks are being managed by considering how pressure on sales results is passed down from management, and how conflicts of interest are managed effectively.
It says “intensive micro-measurement” of sales results and the potential for individuals to face “humiliation” as a result of their performance being shared with their peers could create poor incentives for front-line staff.
The FCA says: “We will continue to focus on performance management, and this report is the first step in a dialogue with industry on evolving practice in this area.”
“Through our firm supervision work we will continue to assess how firms are managing this risk and what to change they have made in response to this report, taking action where needed.”
It comes as the FCA publishes detailed feedback on how it plans to implement the new senior managers regimes, which is due to come into force from March 2016.
Following consultation, the regulator has decided the regime will not apply to non-execs without delegated responsibilities.
FCA chief executive Martin Wheatley says: “How a firm conducts its business and treats its customers must be at the heart of how it operates and this has to start at the top.
“Today’s policy measures are an important step in ensuring that regulators have the tools at their disposal to hold individuals to account and they build on the cultural change we are beginning to see in the boardrooms of firms across the country.”