The FCA published a speech by Emily Shepperd, COO of the FCA on the importance of culture within FAC regulated firms. You can read the summary here on the FCA website.
Key factors in her speech include the importance of culture in setting the tone; that growth engenders risk but that in healthy cultures this can be appropriately managed; that toxicity in cultures signals failure and increased risk which is to be avoided; and that the role of senior leaders in setting the tone is vital.
Headline points include:
- when the FCA investigates failures of consumer protection or market conduct, it finds the same root cause: failings in culture and governance
- failings in culture and governance are not coincidental as culture drives conduct and it shapes decisions and actions at every level
- poor decisions, whether they are made on the trading floor or in the boardroom, directly impact outcomes for consumers, markets and the economy
- the government has been clear that economic growth is its number one mission and the FCA supports this. Growth will involve taking on greater risk and there is no getting away from this
- the FCA encourages more open discussion about risks and in particular who should bear them and with regard to the level of risk that individuals are prepared to take
- it is clear to the FCA that the risk-taking required for long-term growth will rely on a foundation of healthy firm cultures – strong, inclusive cultures where diverse perspectives prevent groupthink and support better decision-making
- a clear warning sign for the FCA of an unhealthy culture is non-financial misconduct – bullying, harassment, discrimination. How such behaviours are dealt with in firms is a key indicator of the health of the culture.
- healthy cultures are not only a moral concern they are a regulatory concern.
We anticipate more from the FCA in short order on what it proposes in relation to non-financial misconduct. Given the vital role of leaders the Senior Managers and Certification Regime (SM&CR) is under review with the objective of making it more efficient and effective. The PRA and the UK Treasury will participate with the FCA in this review.
Check out our website on FCA regulatory work at https://didlaw.com/fca-regulatory-work. We routinely advise on capability and conduct matters for senior managers who are being mistreated by regulated firms.
