A key tool the Financial Conduct Authority (FCA) is using to ensure senior management accountability is self-attestation.
Self-attestation is causing senior managers in FCA regulated firms concerns in the sense that by signing the attestation they feel that they are moving outside the corporate veil and are exposing themselves to potential personal enforcement action by the regulator. In this blog we briefly highlight some of the key issues that arise when a senior manager is asked to sign a self-attestation by the FCA.
Can self-attestation simply be ignored?
The answer to this is “no”. Why? Because firms need to be mindful of their duty under Principle 11 of the Principles for Businesses. This principle provides that a firm must deal with its regulators in an open and cooperative way and disclose anything relating to the firm of which that regulator would reasonably expect notice. In addition, Part XI of the Financial Services and Markets Act 2000 adds a further layer in that it gives the FCA extensive information gathering powers including the power to require information (section 165) and reports by skilled persons (section 166).
The dilemma
The dilemma that self-attestation often brings to senior management is that by signing the attestation without complete certainty that their firm complies with the applicable regulatory requirements potentially opens them up to enforcement action by the regulator. However, on the other hand seeking to negotiate caveats to put into the attestation may frustrate the regulator and lead to enforcement action.
Options
Sometimes when senior managers and firms are confronted by self-attestation there seems to be few options. However, the following points may help:
- an attestation request will usually accompany the results of an FCA review or consultation so it is important to pay close attention to the specific findings of the FCA study;
- consider carefully current procedures, systems and controls as to whether they would be open to criticism by the regulator;
- do not under estimate how much time and effort is involved in conducting a thorough self-assessment;
- bear in mind that the regulators are in a strong position to compare and contrast good and poor practice between regulated firms so consider conducting a gap analysis from an external perspective; and
- consider how you mitigate individual exposure.
