News & Articles

FSA Changing Its Spots & Methodology

30th April 2009
Lee Werrell

More Principles, Less Rules

In these uncertain financial times and amidst the economic turbulent there is one certainty - there will not be less regulation. The Financial Services Authority (FSA) is changing its Method and Execution, adopting a very low, almost zero tolerance for some activities and all regulated firms and their Approved Persons are well advised to understand the implications of this.

Previously we had More Principles Based Regulation, what some misinformed and sensationalist journalistic commentators have incorrectly called "light touch" regulation, but there is now a sea change coming. Hector Sants, the FSA Chief Executive has publicly informed regulated firms - "people should be very frightened of the FSA".

What about?

Quite simply greater intervention and enforcement and consequential discipline and fines particularly against senior managers of companies. Being a rogue and a law breaker used to be the cause of problems with the Regulator but now if you run your company badly or less than competently (in the FSA´s view) or treat your customers unfairly then the FSA may want to feel your collar and worse the contents of your pocket. The latest broker to feel the FSA wrath can be found here.

There is a view all FSA´s ire is taken out on banks and former CEO's, former Chairmen and trading floor staff bonuses. This is a mere spot on the horizon and perhaps has overshadowed the fact that the FSA is not in a mood to take prisoner. There should be a sign on the FSA door announcing "Under New Management" and this being the case they have effectively served notice on all firms, large and small, that they are fair game. Any discrepancies found will be exposed, promulgated and serve to assist them in getting the message regarding their new intensive supervisory strategy across. There are a number of Enforcement cases in the pipeline and they concern firms of all sizes. In 2008 200 Financial Promotions were removed or changed (107 mortgage related) by the FSA. In the last 3 years the FSA has fined mortgage brokers over £1.5M. Details can be found here.

What should directors and senior managers who are Approved Persons do?

Make sure you understand your responsibilities to the Regulator and can evidence that you have fulfilled them.

• Are your responsibilities clearly and accurately recorded?
• What evidence have you got of their fulfilment?
• How can you evidence your competence?
• Can you prove TCF is embedded in your firm?
• Can you show you received appropriate management information?
• Can you show how you acted upon it and how it was followed up?
• Have you taken account of the impact of the extension to the Common Platform on April 1st 2009?

If any of these questions cause you to wonder about your own arrangements, please contact CEI Compliance for assistance.

Bibliography

Lee Werrell FInstSMM MSI is the Owner and Principal Consultant of CEI Compliance Limited, a Compliance Consultancy. CEI provide a broad range of expertise having worked with governance, risk and compliance functions for a number of years.