FCA’s new regime for banks and investment firms unveils who’s to blame for misconduct

A recent Social Media Compliance roundtable sought to better explain the implications of SMR to the UK’s financial services industry – with senior managers being held directly responsible for the actions of their juniors unveiled to be one of the most crucial factors companies should keep in mind.

It was suggested that the new regime will require an audit to allow tracking of responsibility to individual senior managers. If a junior member of staff breaches regulation, then the person responsible for overseeing their work would have to answer for their misconduct. Therefore it is important that senior managers understand their responsibilities, the roundtable debate found, and properly supervise all work flows, feedback and problems. 

It was also brought to light that recent changes to the regulatory landscape have meant that past mistakes by members of staff can still be investigated and therefore pose reputational risk. This, the company said, is a particular problem if an individual has left a business and delisted, because this makes it impossible for any internal investigations to take place. As such, it was suggested that bosses ensure they have training available to help employees understand compliance and how it affects both them and the company.

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Another crucial point highlighted was that while recruiting, firms should be able to demonstrate that an applicant’s background was researched before the position was offered. Before employing a senior manager, it is best practice to follow proposals and find references for a potential employees’ past six years of service.

But for any financial firm, the most significant risk of regulatory breach or reputational damage is the use of personal social media. Due to the instantaneous nature of social media and the potential lack of appreciation of the risks by an employee, the only way to minimise risk and ensure compliant behaviour is continuous education and training.

With the SMR now having been launched, bosses need to make sure they don’t fall foul of the law. Though senior managers are currently the only ones who will be directly affected by the SMR, the Conduct Rules and obligations of it will apply widely from March 2017, with everybody employed by financial services institutions being responsible for compliant communications. Therefore it is crucial that managers at all levels begin adopting practices now in order to ensure their compliant status in the future.

Kitty Parry, CEO and founder of Social Media Compliance said: “Given the ramifications of the SMR guidance, senior members of any department will be very cautious when it comes to financial regulation. As an industry we need to find a way to thrive in this new regulatory environment and together determine how to communicate best practice procedures internally. 

“It is crucial that emphasis be placed on training, especially for junior staff, to ensure individual employees understand what they can and cannot do, which will ultimately  help senior managers ensure they are managing the risks the SMR poses.”

Nobody likes being blamed for something. With that  in mind we unveil four times that CEOs chose to blame a sticky situation on others.

Image: Shutterstock

By Shané Schutte

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