People risk – the biggest Conduct Risk?

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Who would have thought that December 2014 would be so busy?  To be honest 2014 has been a blur with the blizzard of regulator announcements and new businesses coming under the wing of the FCA.  The PRA have, from our experience also been very busy with visits.  Although strictly speaking we expect the FCA to champion the issues of conduct, the PRA have been straying into this territory with their scrutiny of governance and board activities and even competence.

All the pointers seem to be that there is intense focus on people risk and in light of recent news who can blame them.  The banning for life of a former managing director of Blackrock from holding an Approved Person role for fare evasion by the FCA earlier this month, highlights this for our colleagues and brings this into sharp relief.  A number of commentators on the various articles published on this topic have referenced the “he who is without sin” biblical quotation and suggested that on a number occasions since its inception the FCA has not always acted itself with integrity, honesty or with competence and capability.  But before we get too carried away bashing the regulator let us just stand back from this a moment and ask ourselves, who is prepared to put up with this type of behaviour?  Certainly not the public, who are the end of the day we are trying serve.

Last year the FCA banned 43 people from working in senior financial services role for failing the “fit and proper” rules

Our highest earners and income generators cannot be seen to be above the law or beyond the reach of the regulator.  It is the basic premise of FCA CP14/13/PRA CP14/14 Strengthening accountability in banking: a new regulatory framework for individuals.  Although this is currently covering Banks, Private Banks and Designated Investment Firms only, should we not all be taking heed of its content?

Last year the FCA banned 43 people from working in senior financial services role for failing the “fit and proper” rules but the former Blackrock is only the second time it has banned someone for wrongdoing unrelated to his job.  The first, incidentally, was handed out to someone who was censured by a high court judge for dishonesty.   Again is this the sort of behaviour we are prepared to tolerate in our organisation?

We need to make it very clear to all employees but especially Approved Persons that their responsibilities to act in a proper way at all times are an expectation of the job.  It should become, if not already, part of demonstration of continued competent, not just lip service to a values or TCF statement they might see everyday as they walk passed the staff notice board or coffee machine.

Keep asking these questions: Do we want this type of behaviour in our organisation? Are we prepared to accept this behaviour as normal?  Can we take the risk that the regulator will not ask us some very difficult people risk questions when our conduct risk visit comes around?

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Julia Kirkland

Through our award winning training and consultancy partnership FSTP LLP we hope to become a trusted provider of services to client firms across Financial Services. Specialties: Training and consultancy, project and interim management from regulatory issues through to management development and board services. Chartered Member of the Chartered Institute of Securities & Investment

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