Lawyers at London-based firm Ashurst say the impacts of the UK's new regulatory framework for individuals will be wide-ranging, as a higher number of financial firms' staff will be affected under proposed rules released for comment in July. Besides a strengthened regime for the regulation of senior persons, firms will need to establish and maintain a 'responsibilities map', and assess the fitness of any employees who could pose a risk of significant harm to the firm or any of its customers.

 

"If something goes wrong in an institution, then it's usually individuals that are responsible. This new regulatory framework is an attempt to remove the problem of not being able to prosecute anybody," says Rob Moulton, partner at Ashurst.

 

The new rules, proposed by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), are in response to recommendations by the Parliamentary Commission on Banking Standards and aim to enhance individual accountability and clarify senior manager responsibility.

By implementing a senior managers' regime, as well as enforcing certification and conduct rules, the regulators are in effect looking for stronger evidence to take enforcement action if a manager fails in their stated duties. Regulators can more easily examine the way a business is run, as well as the conduct of individual bankers. This comes on top of the FCA's rising use of attestations, whereby senior managers need to respond in writing, guaranteeing that their systems and controls are fit for purpose.

 

"The new senior managers regime will require managers to write down their responsibilities, and the manager must show that they took all reasonable steps to manage these risks," he says. Previously, it was the regulator's job to show the manager was personally culpable. The nature of traditional deal-making may also be affected by wider regulatory reporting requirements. Moulton points to the fact that many industry relationships are still carried out within a 'wine and dine' culture. But under European regulators' revised Market Abuse Directive, all market soundings with potential investors will need to follow a template script. This applies to all soundings, irrespective of whether they may include inside information.

 

"It will impact the major players, certainly. It's the subtle changes such as requiring scripts, responding to attestations, and other requirements under the Market Abuse Directive that will create a seismic change in conduct. Not particularly the younger people in the industry who are more adept to change, but the more established players who are set in their ways," Moulton says.

 

Full article (Risk.net subscription required)