On 18 September 2020, the FCA published a speech by Marc Teasdale (Director of Wholesale Supervision – Supervision Investment, Wholesale & Specialists Division) entitled A regulatory perspective: the drivers of culture and the role of purpose and governance.
Key points in the speech include:
- When the FCA refers to culture, it means the typical, habitual behaviours that characterise a particular organisation. A firm’s culture in that sense is little more than the cumulative effect of the ways in which it acts.
- The FCA has identified 4 factors that it thinks are particularly important in defining culture – leadership, people policies, governance and purpose.
- The FCA sees a firm’s purpose as being a description of its economic function, and how it makes money. On one level, this is just a description of a firm’s business model. But the FCA goes further, to understand how a firm’s purpose drives its culture, there needs to be an understanding of how a company describes, to itself and others, the essential purpose of the firm, its products and its services, and so its reason for existing, and why the world would be worse off without the value it provides. The FCA is also critically concerned with how far it can see this purpose tangibly driving the decisions made at all levels of the firm.
- It is essential that purpose is not just a slogan on a brochure, or above the head-office reception, but can be seen manifestly in the choices that a firm and its employees make day in, day out, at all levels.
- At the heart of the asset management sector sits a necessary conflict of interest, the agent/principal conflict, or the ‘other people’s money’ conflict, and the FCA would argue that a truly purposeful firm will embed an alertness to this conflict in the DNA of its organisation. This goes further simply than a compliance exercise or putting controls on the side of a firm’s day to day business. The FCA would ask, how far do your people see managing conflicts as inherent to the job, and so as part of their purpose, or how far do they see it as a compliance issue, or simply a process to be followed?