In January 2020, Jonathan Davidson, Executive Director of Supervision, Retail and Authorisations at the Financial Conduct Authority (FCA) fired a warning shot across the bow of general insurers, financial advisers and asset managers by publishing ‘Dear CEO’ letters, which establish the FCA’s concerns around poor culture and conduct and the risks that arise if left unmonitored.
These three letters follow a very similar ‘Dear CEO’ letter from the Prudential Regulation Authority (PRA) to Insurance Firms in November of last year, which identifies common areas of focus for supervisory activity and potential interventions.
FCA and PRA: what are the key areas of concern?
Both the FCA and the PRA need constant assurance that the behaviours of individuals within financial firms under their jurisdiction are not causing harm to consumers, market participants, employees or markets. Therefore, it is vital that compliance efforts are effective. The following principles create the bedrock of exemplary compliance:
- Good culture
- Effective governance
- Proper conduct
The key drivers of healthy culture are:
- Leadership
- Purpose
- Approach to rewarding and managing people
- Governance, systems and controls
Technology solutions such as Ideagen’s Pentana Compliance can give these firms the clarity they need in SM&CR, giving them the tools required to meet the Regulators’ standards, demonstrate effective leadership and deliver positive culture change.