What will the ‘new directory’ mean to your firm?

0

In July the Financial Conduct Authority (FCA) proposed creating a new Directory to help consumers and firms check the status and history of individuals working in financial services. Many see this as an improvement on the original proposal that post-SMCR only senior managers would be included.

The new directory will now include all those who hold Senior Manager positions requiring FCA approval and those whose roles require firms to certify that they are fit and proper and will include mortgage advisers for the first time. It will include details of where they work, what roles they hold and what type of business they are qualified to do.

When announcing the proposal, Jonathan Davidson, Executive Director of Supervision (Retail and Authorisations) at the FCA, said:

The obligation will be to report this information no later than the end of the individual’s first business day performing the relevant role.

“We’ve listened to feedback from firms and consumers about the importance of being able to check the status of financial services staff. Introducing the Directory will make it easier for people to be confident they can find the right people to deal with.

“Today’s publications are all about making sure that consumers can interact confidently with financial services professionals by setting clear standards for the behaviour of those individuals and making available information about their fitness and propriety.”

The hope is that the directory will be user friendly, practical and easy to understand – it is expected, for example, that consumers will be able to search by location to find local advisers. Importantly it will show the history of advisers which will limit the ability of ‘bad apples’ to move around without leaving a trail.

The SMCR requirement for regulatory references will reinforce this message: it will no longer be acceptable for firms just to confirm job title along with start and end date. If there are regulatory issues or questions as to someone’s fitness & propriety, then these will have to be disclosed to the firm proposing to recruit an individual. Additionally, whether there are any regulatory sanctions or prohibitions against individuals will be shown on the register.

Apart from senior managers who will still be subject to individual approval, many people in client facing roles will require their employing firm to certify them. The new directory would mean that firms have to report certain information on these people, including any appointed representatives. This will not be to the same level of detail as currently required for authorisation and the firm won’t have to wait for approval. The obligation will be to report this information no later than the end of the individual’s first business day performing the relevant role.

When an individual ceases to perform a role covered by the directory, the firm is required to update the directory no later than one business day after they have left their role.

As usual when a new rule or procedure is introduced, the FCA have reminded firms that failure to comply could leave a firm open to enforcement action. T&C or compliance teams will need to work closely with their colleagues in HR (wonder how many people reading this are saying to themselves all those roles are mine??). In the recruitment process there will no longer be a delay between recruitment/induction and approval – I’m sure no one currently uses that gap to get any last bits of paperwork sorted.

One major challenge will be ensuring that robust records support the enhanced information in references. I anticipate fees to legal advisers rising, at least initially until firms have a pattern which they can use to provide the information without leaving the firm open to legal claims from departing employees. Some firms will be reviewing their tools for assessing fitness and propriety such as annual declarations and meeting observation tools to ensure that they provide evidence of the points required in a regulatory reference.

Anticipate specific questions such as ‘Has the firm concluded that the person was not fit and proper’ and ‘Was any disciplinary action taken against the individual in regard to conduct rules’. The FCA’s template goes on to include:

Are we aware of any other information that we reasonably consider to be relevant to your assessment of whether the individual is fit and proper? This disclosure is made on the basis that we shall only disclose something that:

  1. occurred or existed:
    (a) in the six years before your request for a reference; or
    (b) between the date of your request for the reference and the date of this reference; or
  2. is serious misconduct.
    Is your current approach sufficiently robust?

 

Share.

About Author

Compliance Cubed Financial services is constantly changing - my passion is helping firms function effectively and in compliance with FCA regulation

Leave A Reply