FCA: Enforcement and Supervision

No sooner had the FCA issued its policy statement on Enhanced Supervision (‘Tackling serious failings in firms‘ – see previous article in this Regulatory Roundup) than the Regulator published its ‘Enforcement-focussed’ June Regulation round-up .

The Welcome page, written by Tracey McDermott, Director of Enforcement and Financial Crime, reminds us that apart from addressing an issue with a particular firm, Enforcement action is also intended to send a message to the industry as a whole about the consequences of serious misconduct and to consider any lessons learnt from such actions which may be applicable to other firms.

The March 2013 statement on ‘Enforcing’ – which is accessed by way of a link in the Regulation round-up – confirmed that the then FSA’s policy of ‘credible deterrence’ would remain central to the Regulator’s enforcement approach as it transitioned to the FCA. The declared intention was to build upon progress already made by bringing more enforcement cases, pressing for tough penalties for infringements of rules and by pursuing more cases against individuals and holding members of senior management accountable for their actions.

It may, or may not, be a coincidence that the June Regulation round-up (‘Enforcement focussed’) also contains an article on the supervision of C4 firms (which the vast majority of firms – around 25,000 as at March this year – fall into). In essence, all firms are assigned to one of four categories of conduct supervision: C1 to C4 with C1 at the ‘large end’ covering around 11 major groups.

Complyport’s Regulatory Roundup 54 provides a link to the publication ‘The FCA’s Approach to Supervision for C4 firms’ which sets out further details, including the ‘three Pillars’ supervision model being Pillar 1 (proactive), Pillar 2 (reactive) and Pillar 3 (issues and products).

The article informs us that the Pillar 1 approach is already underway for retail intermediary and credit union firms. Sector-specific approaches will begin from this July to C4 firms in other sectors. We are promised that all C4 firms can expect to receive a four-yearly assessment, whether face-to-face, telephone interview, online or paper-based.

In the light of the above, and the FCA’s Enhanced Supervision model, we recommend firms review their business with particular emphasis upon:

  • frontline business processes;
  • systems and controls;
  • culture;
  • governance; and
  • business model

With its core team of regulatory and compliance professionals, including former regulators and senior practitioners in the industry, Complyport can offer such a FCA Supervision review to both current clients as an additional service and to non-clients. Apart from the advantage of not having to divert your essential business resources to conduct an in-house review, the appointment of Complyport would ensure an independent assessment based upon our experience of working with many types of firms in the industry.

If you would like more information on the services we can provide then please contact us at info@complyport.co.uk.