After the financial crisis and the increased criticism put onto the FSA over their handling and response to the situation changes were demanded to be made. The biggest FSA changes were effectively handing over the power of the organization over to a newly formed one named the FCA. This was done aiming to bring in a more controlled marketplace within the financial services sector. Seeking to improve the experiences of consumers while also avoiding mistakes that were previously made.
One key focus area that has seen changes was regulation. Firstly, new regulation was seen in the form of “The Senior Managers Regime”. This addresses the senior staff of financial firms who play important key roles and hold a lot of responsibility. To comply with the new regulation, firms must produce statements detailing each senior manager and the responsibilities they manage. Individuals who are in a senior role are still required to be pre-approved by the FCA, however the change seeks to require firms to implement procedures and controls to ensure their staff members are suitable.
Furthermore a set of Conduct Rules have been introduced. The basic set of rules outlines what standard of behaviour is expected to be met by firms. This will require firms to follow the rules and ensure all staff are aware of what they are and how they are used. This change has recently been introduced, with key staff members requiring to abide by them after the 7th of March. Staff in more general roles in the wider application will have a year to ensure they are up to date and understand them.
More responsibility is being placed on the firms themselves after the changeover to the FCA. This is seen in the introduction of the “Certification Regime”. This is directly related to all staff who act in a capacity where they could pose financial risk or harm to a firm or customers. Examples being those who work as mortgage advisors, or an employee who provides investment advice to clients. While staff in these roles do not need to be pre-approved by the FCA unlike senior managers, the company itself is responsible to ensure there are proper procedures in place to assess the fitness of staff members in these roles. The Certification Regime plays a critical and important part, and should be used not only when staff are hired or placed into these roles, but when they are re-assessed annually.
All these newly introduced rules and regulations are significant changes that relevant firms will need to address. While a period is given to ensure compliance, it may still create a burden on firms and eat into their profits. However, they should have an overall positive effect, and should be the first of many ways in how the FCA will act differently to the FSA.
