The Financial Conduct Authority (FCA) has shown that it will adopt a more robust approach to regulating Financial Services firms. Last year saw the FCA hand out a total of £472,262,738 worth of fines, a significant increase to the £311,569,256 handed by its predecessor the Financial Services Authority (FSA) in 2012.
In line with this, the FCA has begun to place more focus on Senior Management of Financial Services firms through the use of attestation requests, a trend that is expected to increase in 2014, writes Daniel Isokariari, compliance manager and deputy MLRO, Telefónica UK.
This will be in the form of a letter sent to CEOs, chairmen or other relevant positions of authority, asking them to declare that their firm’s systems and controls are compliant with the FCA’s rules. In doing so, the individual is accepting liability if the firm’s controls are found to be insufficient.
In adopting this strict approach, the FCA hopes it will force senior management to invest more time and money into ensuring any issues in their firm’s systems and controls are identified and dealt with accordingly. It is unlikely that a CEO would agree to sign such a document unless they had seen enough evidence to demonstrate their firm adheres to the FCA Principles.
Currently, it is not a legal requirement for senior management to agree to the attestation requests. However, refusal could lead to FCA becoming suspicious of the firm, and not adhering to Principle 11 of the FCA’s Principles for Business; “A firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice.”
CEOs may still be held accountable even after they have left the firm. If the FCA found a firm’s systems and controls to be unsatisfactory, they could pursue whoever’s signature appears on the attestation letter regardless of whether or not they are still involved with the company. Furthermore, a CEO new to a firm does not automatically inherit accountability for the attestation letter signed by his or her predecessor. Nonetheless it is in their best interests to conduct an independent review to satisfy themselves that the firm’s systems and controls are satisfactory.
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