Out-Law News 1 min. read
20 Mar 2014, 9:43 am
The FCA confirmed that it will proactively engage with businesses in the sector to assess their culture and other aspects of firms' operations so as to "identify emerging risks and work with you to take pre-emptive action where necessary". The regulator's comments were contained in new documents it has published which outline its approach to supervising the UK's financial services industry.
"We are putting a particular emphasis on understanding the culture within a group: the way you conduct your business, what you expect of your staff, and your attitude towards your customers," the FCA said in its new handbooks. "Your culture underpins everything you do, setting the tone for the behaviours you promote and reward. You must decide what type of culture is suitable for your group, and demonstrate it from the top down."
"An effective culture will ensure that you treat customers fairly in everything you do, and that you do not abuse the markets you operate in," it added.
The regulator said that it wants to know more about how businesses in the financial services industry are "really run" and not just about how they control risks. It said it wanted to understand how businesses "aim to make money" and their financial health and how organisations' "culture and strategies support fairness for consumers and markets".
"If we find firms, groups, products or behaviours that could have an adverse effect on competition – for example, a large, established firm making it difficult for customers to switch to a competitor – we will consider the most appropriate action to take," it said. "We will examine the following areas to see how you put the integrity of the market and the fair treatment of consumers at the heart of how you do business: business model and strategy; culture; front line business processes; systems and controls; governance."
Financial regulation expert Monica Gogna of Pinsent Masons, the law firm behind Out-Law.com, said: "The series of guidance follows on from the ongoing discussion that the FCA has brought to light on the importance of culture within firms. It is a clear indicator that the FCA is seeking to ensure that they have a joined up approach with regulated firms on this matter irrespective of the different kinds of business being performed and the different levels of risk facing each category of firms."