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David Woolcock 07-Aug-2017 16:08:56 5 min read

Nothing like a bombshell just in time for the Summer holidays…….


Just as everyone heads out for the summer holiday a small (but flagged) bombshell arrives (along with a 392-page document)! Not one that I would describe as light reading for the beach. I am not referring to the ECB’s strident calls for all banks and market participants to sign up to the Global Code. Readers of our blog have been well prepared for matters Code-like and therefore the Global Code should not be responsible for feeling guilty of spending the summer reading the latest beach page-turner!

No, I refer instead to CP17/25 that snappy little title for the consultation paper from the FCA regarding “Individual Accountability: Extending the Seniors Managers & Certification Regime (SM&CR) to all FCA firms.” Move over Jilly Cooper and Jeffrey Archer! However, it is something that a lot of firms and individuals need to take seriously and you have a chance to reply to the consultation with comments due back at the end of the autumn. For those brought into the fold of the SM&CR it is a long read.

In a nutshell, the proposal is to extend the SM&CR to almost all regulated firms. The new regime will essentially replace the Approved Persons Regime (APR). I can hear a sigh of relief from the banks and building societies as they are already subject to SM&CR but I have bad news I am afraid.  The FCA is proposing changes that will also affect you too. An 'approved person' is an individual who is approved to do one or more activities by the FCA, in what they call a 'controlled function' for an authorised firm. These “fit & proper” persons must comply with the Statements of Principle and Code of Practice.

The FCA recommends that if you are a firm regulated by them and are currently subject to the APR, you should read the Consultation Paper. Luckily, the parts to concentrate on are in Chapter 10 and relate to practical concerns regarding cover for sudden absences and the like. The main implication of replacing the APR is that individual approval processes will change.  As it currently stands, once an individual has been approved, they are approved for the duration of time that they work for you, but this will change to the firm having to confirm that they are still a fit and proper person to be approved.  A senior manager will be responsible for that statement annually and will need to conduct assessments.

Conduct rules apply to various obligations for firms, including requirements to make staff aware of the rules, training staff appropriately, and reporting disciplinary action taken by the firm against individuals for breach of the rules to the regulator. They also apply to a firm’s regulated and unregulated financial services activities, including any related ancillary activities. Therefore, spot FX activities are included for example and for the implications see my blog – “Do you have systems in place to enable adherence to the Global Code for FX?” as similar recommendations will apply here. Obviously, detection of breaches become key and will require a structured approach.

Now, if your thinking is to just lie in the sun and ponder as your thoughts turn to Gordias,  the current Gordian Knot in Financial Markets seems to be (according to commentators) between MiFID II and GDPR. With Article 16(6) and Article 16(7) requiring financial institutions to keep records of all client interactions and provide regulators with quick access to client data. In the meantime, GDPR Article 32(1)(a) requires the introduction of new safeguards and encryption procedures to make sure client data is always kept securely. Equally, how do you square retention periods required by regulation with the ability of a client to require you to remove all trace of their data? Not sure, who will find the Alexandrian solution but as Shakespeare noted in Henry V “Turn him to any cause of policy, The Gordian Knot of it he will unloose, Familiar as his garter” so we just need a Henry V in Brussels? Would certainly help with MiFID II!

One thing you can bank on, is that when you return from the summer break, MiFID II will still be there and will come into effect in January 2018. In the meantime, I will sign off for August and hope for better clarity when I return especially (following a recent committee meeting) regarding the use of ISIN’s in FX! More of that when I am back at the desk……… Enjoy your summer.


David Woolcock

David Woolcock is an independent consultant and Director, Business Consulting at Eurobase. In addition, David is Chair of the Committee for Professionalism at ACI – The Financial Markets Association as well as Vice-Chairing the ACI FX Committee. He is also a member of the Market Practitioners Group for the Bank of International Settlement's FXWG that wrote the FX Global Code.