Martin Wheatley, then FCA chief executive, introduced the Senior Managers Regime, Certification Regime and Conduct Rules with the certainty that: “Today we have given clarity on rules that will embed personal accountability into the culture of the City. New conduct rules will add further momentum to improving standards across the industry.” Yet key questions remain unanswered or unclear. The following issues have been raised with us time and again as concerns in successfully implementing the changes.
Who should be checked and how often?
Every firm has a different risk appetite and focus on maintaining their reputation, and are therefore taking different approaches. The most robust are re-screening all their SMR and CR employees. For instance, some banks are planning on screening a percentage of their SMR and CR workforce each year and asking everyone else to self-certify. There may also be triggers for people to be re-screened (e.g. a conduct rule breach).
- Re-screening all your senior people thoroughly is the only way to be 100% sure that you cannot be criticised for your process.
- The practicalities and costs may make this challenging for some financial service firms.
- The next best approach is to re-screen everyone every two or three years.
- Anyone not being re-screened in a particular year should self-certify.
The risk you face if you re-screen a random sample of employees is that some employees may avoid re-screening for many years leaving you open to challenge by the regulators and employees.
What are the global implications?
There has been little advice from the FCA on how it expects companies to apply these roles to candidates applying from beyond the UK or whose work will bring them into contact with the UK operations of a firm, even for a very short period.
In many cases, such as in France, the rules’ requirements go beyond what is currently legally acceptable. The FCA asks for “best efforts” to be made to ensure that thorough checks are carried out.
- Use your UK screening policy as the starting point for discussions with your local in-country teams.
- Each financial service firm needs to decide whether it is legally permissible to conduct the in-country equivalent of the UK checks.
- If it is, get feedback from your local teams about the practicalities and acceptance levels around these checks. Find out if any local employee groups (e.g. works councils) need to be consulted.
- Once you’ve undertaken this review implement a clear, global policy for the approach you take for your UK employees and any international employees who are also subject to these regulations.
Can the candidate experience be maintained?
There is no getting away from the fact that the new rules will slow down the recruitment process and it will no longer be acceptable for senior people to start in a role without their full screening checks coming back.
Expectations of talent need to be managed by the UK financial services industry to ensure that the sector continues to attract, hire and promote the best talent.
- To prevent delays, recruiters need to make sure that CVs are entirely accurate.
- Businesses need to take a hands-on approach to making sure employees understand why they are being screened, and how they can help speed up the process by providing documentation quickly – or revealing details that may affect their appropriateness for a job.
Will the industry be ready in time?
It is going to be difficult for many financial service firms to have made all these changes by March 7 2016: this is a significant change to both culture and processes. With the regulation changes looming, the FCA has made it clear that financial service firms need to meet the spirit of the new rules. This is not a box-ticking exercise and cannot be treated as just another process.
Download the full whitepaper to see how you can get more information and advice on the new regulations.