FCA issues new guidance on fitness and propriety assessments in the financial services sector
In its most recent Newsletter Market Watch 66, the FCA sets out its expectations on firms for recording telephone conversations and electronic communications when alternative working arrangements are in place, including increased homeworking. This heralds the end to the leeway the FCA gave to firms last year when they were relocating to an alternative site or increasing home working in order to cope with the pandemic. In particular firms should comply with the recording obligations in the Senior Management Arrangements, Systems and Controls sourcebook (SYSC 10A), wherever their workers are situated.
The FCA are concerned that compliance teams and managers are less able to monitor those who are homeworking, which in turn increases the risk of the use of unmonitored or unencrypted apps, such as WhatsApp, for sharing potentially sensitive or confidential information. The FCA identifies that the use of such apps can be a significant compliance risk and that any such use for in-scope activities needs to be recorded and auditable.
The FCA reminds readers that it has “acted against individuals and firms for misconduct which involved the use of WhatsApp and other social media platforms to arrange deals and provide investment advice.”
Although not specifically referred to in the newsletter, examples of such action include in March 2017, when the FCA fined a former investment banker for breaching Statement of Principle 2 (failure to act with due skill, care and diligence) for sharing confidential information over WhatsApp. It was accepted that there was no actual or anticipated dealing related to the disclosures. Then in September 2019, a former banker at VTB who was under investigation for suspected insider dealing offences, was charged by the FCA over deleting his WhatsApp messages in 2018. He was found not guilty in September 2020 following a trial at Southwark Crown Court.
In this edition of Market Watch the FCA reminds firms that, as the technological and working environment changes, the onus is on them to review their recording policies and procedures and that this includes having robust and effective policies and procedures for homeworking arrangements. Such policies might need to cover the use of privately owned devices and the scope for effective monitoring and recording communications on them. If such a review results in the revision of policies and/or guidance on the use of technologies, there is an expectation from the FCA that this will be introduced with an appropriate level of training.
For further information on any issues raised in this blog post, please contact our specialist FCA investigations team.
Louise Hodges is a specialist in corporate crime, financial crime, FCA investigations, and serious and complex fraud. She is widely recognised as a leader in this field and leads Kingsley Napley LLP's cross practice financial services team and internal investigations team.
Louise is well known for representing individuals subject to financial regulatory and/or criminal investigations for market abuse or market misconduct including insider dealing and misleading the market, mainly dealt with by the Financial Conduct Authority (FCA) or the SFO.
Louise has particular experience in advising corporates on issues of corporate crime, bribery and corruption and fraud offences including advice in relation to internal investigations. These cases tend to be multi-jurisdictional, complex and of high value and frequently involve support from KN's employment and dispute resolution teams.
Partner and Head of Department
On 13 May 2022, the FCA published a final refusing Alexander Jon Compliance Consulting Ltd.’s (“AJCC”) application for authorisation to provide regulatory hosting services. There is no specific definition of what a regulatory host is, but the FCA generally regards it as a commercial arrangement whereby an authorised Principal firm appoints and oversees a number of unconnected Appointed Representatives (“ARs”) which operate across a range of markets.
In a case that attracted national media coverage and emphasises the crucial importance of regulatory compliance and the highest standards of professional conduct in the financial services sector, the High Court dismissed a breach of contract claim brought by an investment manager.
For the fourth year the FCA has published research on the changing relationship between consumers and cryptoassets. In spite of the pandemic, the strong upward trend in public engagement and media coverage has continued, with the FCA estimating 2.3 million adults now hold cryptoassets.
Global financial markets are preparing to transition away from the use of the London Interbank Offered Rate (“LIBOR”) and adopt an appropriate alternative risk free rate (“RFR”) by the end of 2021. What are the reasons for the move away from LIBOR, the progress to date in terms of identifying the Sterling Overnight Index Average (“SONIA”) as the most appropriate alternative rate in the Sterling markets, and the steps still required to be taken to ensure such markets are ready for the phasing out of LIBOR by the end of the year
At the end of last month, the Competition and Markets Authority (CMA) published a letter written to Danske Bank concerning its breach of the Small and Medium-sized Enterprise (SME) Banking Behavioural Undertakings 2002, following loans it had offered under the ‘Bounce Back Loan Scheme’.
As of 10 January 2021, all cryptoasset firms are required to be registered with the Financial Conduct Authority (FCA) under the Money Laundering Regulations.
FCA focuses on risks associated with unmonitored communications, including the use of unencrypted apps, such as WhatsApp, for sharing potentially sensitive or confidential information when working from home.
As we near the first anniversary of the extension of the Senior Managers & Certification Regime (SM&CR) to solo-regulated FCA firms, the first round of annual fitness and propriety assessments will be topping the to-do lists of many compliance professionals.
One of the impacts of the Covid-19 pandemic is that national income has fallen dramatically. In response to concerns from homeowners unable to meet their mortgage repayment requirements due to a drop in income, the Treasury and Financial Conduct Authority announced a ‘mortgage payment holiday’. This was the result of banks agreeing to allow mortgage-holders suffering from a drop in income to pause their repayments. A ban on home repossessions was put in place at the same time
The FCA announced on 5 November that it has banned three individuals from working in the financial services industry for non-financial misconduct.
How should regulated firms respond when issues come to light which call into question the fitness and propriety of a member of staff? In the second part of their series of fitness and propriety blogs, Jill Lorimer and Nick Ralph consider best practice. You can read the first part of the series by clicking here.
The Financial Conduct Authority (“FCA”) has recently provided information to their regulated firms as to good and bad practice relating to, amongst other things, the carrying out of fitness and propriety (“F&P”) assessments.
Research recently undertaken by the FCA has found that 5.35% of the UK population hold (or have previously held) cryptoassets where in 2019 this figure was 3%. For several years now the Government, the Bank of England and the FCA have been consulting on and considering how best to regulate this burgeoning market.
The news that Stephen Jones, head of UK Finance, has quit over "thoroughly unpleasant" personal comments he made in 2008 about financier Amanda Staveley, is a stark reminder to executives that their past behaviour may one day come back to haunt them.
The indications are that an increasing number of individuals are coming forward, particularly in the financial services sector, to call out wrongdoing.
Whilst the prime minister's broadcast on 10 May did not open the floodgates to City employers requiring staff to "return to work" enmasse, most firms are already drawing up plans for how that should be organised and many of us will have been thinking about what will happen when employers start to update their 'work from home' advice.
In a startling opening to a recent Newsnight, presenter Emily Maitlis began with the words “They tell us Coronavirus is a great leveller. It’s not. It's much harder if you’re poor."
Partners need to do what they would advise their own clients to do: be well prepared.
The moral arguments may well still apply but where salaries are less stellar, there may be more for an individual to lose on a relative basis and thornier issues to weigh on a practical level.
While plenty of people in all sectors are now working from home, designated key workers in the financial services industry are still being forced to go to work.
Skip to content Home About Us Insights Services Contact Accessibility