On 26 April 2021, the FCA published a speech by Mark Steward (Executive Director of Enforcement and Market Oversight, FCA) entitled Compliance, Culture and Evolving Regulatory Expectations.
Highlights in the speech include:
- The Senior Managers Regime (SMR) has changed the way firms allocate responsibilities, align those responsibilities to relevant controls and ensure oversight as to how these controls operate down the line.
- The FCA’s 5 Conduct Questions (5CQ), which start with ‘tone from the top’, are increasingly focussing on ‘tone from within’ which requires every person in an organisation to be personally accountable and engaged.
- The FCA is considering a sixth question in its future work which will interrogate firms on diversity and inclusion, another telling indicator of culture.
- Every employee of a regulated firm is subject to individual conduct rules, which impose broad obligations.
- The SMR and 5CQ questions require firms to think about how a system or function might fail because of non-compliance, and they inject a sharper focus on conduct risk into the fabric of an organisation.
- As demonstrated by enforcement cases, failures are not necessarily failures of compliance, but the consequence of choices made by individuals.