FCA executive director of enforcement Mark Steward gave a virtual speech to the professional graduate law school of New York University (NYU Law).
In his online address, Steward talked about how the FCA’s Senior Managers Regime (SMR) has changed the way UK firms allocate responsibilities, align those responsibilities to relevant controls, and ensure oversight of how these controls play out in practice.
He described how the FCA’s Five Conduct Questions (5CQ) start with tone from the top but increasingly focus on tone from within, requiring everyone across an organisation to be personally accountable and engaged.
Every employee of a regulated firm, he said, is subject to individual conduct rules, which impose a broad range of obligations.
He also discussed how SMR and 5CQ require firms to think about how a system or function might fail because of non-compliance, and encourage firms to focus on risk – right across the fabric of their organisation.
He said enforcement actions taken by the FCA frequently highlight how the problems they address are not necessarily failures of compliance, as such, but the consequences of choices made by individuals.
The FCA’s changing expectations around compliance and culture are increasingly important for regulated firms to understand. Its growing concern with culture and accountability at all levels within an organisation underlies the regulator’s thinking across everything from SM&CR to diversity and inclusion.
On that basis, it’s well worth taking a few minutes out of your day to read Steward’s speech in full here.
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