The FCA Directory - A step towards transparency?
Author
Sean O'Neill
Senior Associate
Published
Tuesday 11 February 2020
Compliance
In July 2018, the Financial Conduct Authority (FCA) released a consultation paper (CP 18/19) to set out a proposal to establish a new online directory of Financial Services workers. This Directory will be freely accessible to the public to search for information on senior managers, directors & certified staff within the Financial Services industry. Previously, the FCA met their obligations to the Financial Services and Markets Act 2000 (FSMA) by maintaining a public record of all the firms and individuals that are regulated and approved by both the FCA and the Prudential Regulation Authority (PRA). This was known as the Financial Services Register (FS Register).
The FS Register is now about to change with the introduction of the Senior Managers and Certificate Regime (SMCR) and this new Directory. Under the SMCR, only senior managers at FSMA firms will be required to appear on the FS Register and all other certified roles will be displayed on the Directory. This means that the number of individuals directly approved by the FCA and PRA will be reduced to certain senior manager functions only, placing the responsibility on the firms to certify individuals in customer function areas as fit and proper.
The FCA’s aim with the Directory is to “empower customers and other stakeholders to make sure they only deal with senior manager functions or those who an authorised firm has assessed as fit and proper, or otherwise suitable, and those who have appropriate qualifications.” (1)
Who is in scope?
The FCA Directory goes beyond the range of individuals held within the FS Register, including:
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Certified persons within SMCR firms
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Directors of SMCR firms who do not hold a Senior Manager Function (SMF) or are a certified person
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Sole trader SMCR firms who deal with customers or their property
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Appointed representatives: those who are appointed representatives of SMCR firms or are employed by such firms, but who are not certified persons themselves.
What information will be held within the Directory?
The following information regarding in-scope individuals will now be accessible through the FCA Directory:
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Employer details
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Restrictions to the firm’s regulated activities
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Individual’s name
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Individual’s reference number
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Relevant roles
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Start and end date of each role mentioned above
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Type of business the individual is qualified to undertake
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Location of workplace
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Details of regulatory sanctions or prohibitions
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The date information was last updated
How will this impact firms?
Banking firms and insurers have a deadline of 9th March 2020 to submit all the necessary information to the Directory, which will go live shortly after. For solo regulated firms the deadline is 9th December 2020. Any information submitted prior to these dates will not be uploaded before the official deadlines.
Once up and running, firms have seven business days to update information on joiners, leavers and any change in circumstance around any of the information illustrated on the Directory. Previously, the FCA had only allowed one business day for firms to update this information but later extended this deadline to ensure greater compliance from the firms.
To incentivise firms to keep all their data up to date and accurate, an administrative fee of £250 will be levied for any incorrect data. This will be applied when firms do not complete their confirmation of accuracy, or supply late or inaccurate data submissions, or where a data error is reported to the FCA. However, if a firm self-identifies and corrects a mistake in their own data, they will not be charged the £250 administrative fee.
A health warning will also be included in the Directory to highlight where information may be out of date to users. This will be applied when firms have not made any changes to their data within 12 months and/or have not confirmed that the data is still accurate.
Benefits of the Directory
The Directory will have several benefits which will be felt across the entire Financial Services industry. From a client perspective, customers will have greater confidence as they can verify the identity of the persons selling or advising on financial products. They simply need to search the name of the certified person held within the Directory and all the necessary information previously listed will be available to them – free of charge.
From a firm’s perspective, the Directory will be utilised to verify the employment history of any new potential hire. This will make it harder for unsuitable individuals to gain employment or provide inaccurate information in a job application. The information on the Directory will also support the FCA to monitor and help identify higher risk supervision cases to protect the integrity of the market.
Conclusion
The introduction of the Directory is a step towards improving transparency and accountability in the Financial Services industry. By increasing the availability of information around certified persons in the sector, the Directory will provide extra protection to both customers and firms alike. It is crucial that firms consider their obligations to the Directory as part of their wider SMCR programme, as it will impact all aspects of their recruitment, vetting and internal HR systems. Firms will need to allocate extra resources to ensure they fulfil their duties in providing accurate and timely data to the Directory; or face the £250 administrative fee. This new Directory being introduced alongside the FS Register emphasises the level of transparency that the FCA is trying to promote within the Financial Services sector, thus helping to achieve their statutory objectives.
References:
1. https://www.fca.org.uk/publication/policy/ps19-07.pdf
2. https://www.fca.org.uk/publications/policy-statements/ps19-7-finalising-directory
3. https://www.cms-lawnow.com/ealerts/2019/03/the-fca-directory?cc_lang=en
About FinTrU
Founded in December 2013, FinTrU is a multi-award winning Financial Services company that is committed to giving local talent the opportunity to work on a global stage with the largest international investment banks. FinTrU provides its clients with high quality, cost-effective, near-shore resourcing solutions. FinTrU’s products are: Legal, Risk, Compliance, KYC, Operations and Consultancy. Its clients are all Tier 1 Investment Banks based in London, New York, Tokyo, Frankfurt and Paris. FinTrU currently employs 450 staff at its two Belfast city centre offices and Derry/Londonderry.