‘I confess it was him’ is an old joke intended to highlight how, when something goes wrong, the blame is often passed around so that nobody ends up accepting responsibility.
For the Financial Conduct Authority and its predecessor, the problem of pinning responsibility for wrongdoing onto particular individuals has been critically important.
Indeed, when the banking crisis hit a decade ago, putting the blame on specific individuals proved virtually impossible, revealing a glaring hole in the regulator’s ability to regulate wrongdoing.
We have seen time and again that the wrongdoers hide under the umbrella of the corporate structure and avoid individual responsibility.
The FCA introduced the Senior Managers and Certification Regime for banks and other large financial companies initially, but the rules are now being extended to all financial companies.
At its heart, the paper sets out the need to identify, in a risk-based and proportionate way, good practice within a firm.From December next year, practically every area of activity within a regulated firm will require a specific, named individual to be personally responsible to the regulator for their actions.
As a foretaste of what will be required, the FCA has published a guidance consultation paper on what the statements of responsibilities and responsibility maps for regulated firms should look like, and I would strongly recommend every firm downloads it.
At its heart, the paper sets out the need to identify, in a risk-based and proportionate way, good practice within a firm and ensure that a named individual is directly responsible to the FCA for each and every regulated activity.
In particular, it urges you to ask yourself if your ‘statement of responsibilities’ would enable someone unfamiliar with the business to understand how the firm is organised and, most importantly, which individual is directly responsible for each regulated activity.
I believe this last point is the most crucial one as it will enable the FCA to identity, virtually instantaneously, who is personally responsible for whatever has gone wrong and then hopefully act quickly to do something about it. Let us hope that this is what happens in practice.
If it does, there will be fewer claims on the Financial Services Compensation Scheme, and less cost to the thousands of responsible and well-run IFA businesses and the individuals within them – and being able to blame someone else will become a distant memory.
Ken Davy is chairman of SimplyBiz Group
