It was this time last year that I wrote one of my first blog posts for IEO on the subject of how important training and events are in the financial services sector.
The specific topic was the use of attestations by the FCA as a regulatory tool.
At the time this appeared to be quite a scary subject. You only have to look at the title of that blog post to see that. And when you look at the content, you’ll see how the focus was on what a big deal being asked to complete one of these attestations would be if a senior individual within a firm was handed such a request by the regulator.
This blog post was written at a time when the FCA was starting to use attestations widely, and it looked like their use was going to be something firms needed to live with as a threat.
And the figures speak for themselves. Since the start of April 2014, the regulator has issued 61 attestation requests in total.
But the tide now appears to be turning.
A dramatic slowdown
A quick look at the latest figures published by the FCA shows a startling reduction in the number of attestation requests made; down from 38 in the previous quarter, to just seven for the most recently reported quarter (1 April – 30 June 2015).
In fact, if you look at the table produced by the FCA, this shows that the attestation numbers appear to have hit their peak at 38, and are now into a descent.
Which on paper looks like good news if you’re a senior manager or approved person. After all, the threat of being asked to complete an attestation now appears to be receding, doesn’t it?
If only it were that simple.
Behind the figures
So – how can we answer the question; why is the FCA not using attestations as much as it has previously?
Well, the first possibility is that actually, the figure of 38 from the previous quarter was an anomaly, and the numbers are now closer to the normal activity expected by the FCA over the quarter. In fact, in that particular quarter, there was a very strong focus on wholesale firms, who were on the receiving end for 27 out of 38 occasions.
At the time, the FCA had a particularly strong focus on market conduct within the wholesale industry, particularly around issues such as management of conflicts of interest and the integrity with which the market operated.
However, there’s nothing to suggest that any future areas of focus by the FCA won’t result in the same kind of treatment being meted out to the senior managers in the chosen sector.
Quality, not quantity
Look back at the previous blog post and you’ll see reference made to a letter written by the FCA to the Chair of the Practitioner Panel, which was designed to allay the Panel’s fears about the ways in which attestations were being used.
Of particular interest was the next steps laid out in the final paragraph of the letter. Here, the letter’s author, Clive Adamson, the then Director of Supervision, stated that supervisors would be given more internal guidance and supporting materials, together with a strengthened internal governance process before attestation requests are actually issued.
This means that the FCA’s focus has for the last year, been more towards the quality of the attestation requests made, rather than the quantity. So the numbers looking over the year as a whole appear to be spread in such a way to suggest a reasonably consistent approach, with the exception of one particular spike.
So, where does this leave us now?
So, is the threat of attestations receding, as the title suggests?
This doesn’t appear to be the case. The FCA doesn’t appear to be backing away from the use of attestations as a regulatory tool. It just appears to be using them in a generally steady and consistent manner. But at the same time, if a particular regulatory or sectoral theme emerges that the regulator deems requiring of an increased focus, it’s not afraid to use attestations in a more concentrated and intense manner.
So in fact, the perceived threat from attestations could be argued to be increasing rather than decreasing.
A question of accountability
With the introduction of the Senior Managers and Senior Insurance Managers Regimes in 2016, the extent to which the most senior persons in firms are being held personally to account is set to increase substantially. This is particular true in the banking and investment sectors, where the burden of proof on senior managers to demonstrate they exercised effective control over their areas of responsibility, is set to increase.
Although this has yet to be tested, the FCA could combine the use of attestations with the stated responsibilities for senior managers, as a way of focusing even further their attention on the governance frameworks for which they are responsible. Potentially this could be a substantial threat.
The core message remains the same
So, a year has passed, and the core message from the last blog post remains the same – training and knowledge are going to be absolutely vital if the continued threat from regulators towards senior individuals in particular, is to be met head on.
This can only be achieved with co-ordinated and effective training programmes that increase knowledge and understanding of the regulatory requirements, and in particular, the individual requirements. For a recap on how things have developed so far click IEO Blog - Senior Managers Under the Spotlight Part 1 and IEO Blog - Senior Managers Under the Spotlight Part 2.
Meanwhile, time is of the essence, as there are only a few months remaining before the new regimes take effect. Make the most of the time available and search for training opportunities, as well as making sure you keep up with new opportunities as they arise.
By Martyn Oughton a Professional Member of the International Compliance Association (ICA). Martyn now writes a regular blog for Industry Events Online focusing on the importance of training in all aspects of compliance. Read Martyn's other publications at Martyn's Writers' Residence website.
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