The Financial Conduct Authority (FCA) recently published the final rules confirming their approach to improving individual accountability for those carrying out wholesale activities, such as algorithmic and high-frequency trading, in banks, building societies, and Prudential Regulation Authority (PRA) designated investment firms. The rules also provide clarity on aspects of the Regime’s territorial application.
These rules form part of the accountability framework introduced by the FCA and the PRA to strengthen individual accountability in the banking sector. The new measures will mean that the certification regime will now be extended to those performing two new functions – the “client-dealing” function and the “algorithmic trading” function. Firms will have until 7 September 2016 to apply these rules.
Tracey McDermott, Acting Chief Executive at the Financial Conduct Authority, said: “Today we made rules that will extend the certification regime to more fully capture people carrying out certain wholesale activities. We are determined to embed a culture of personal responsibility within the banking sector. Clear individual accountability should focus minds, drive up standards, and make firms easier to run and to supervise. And if things go wrong, it will allow senior managers to be held to account for misconduct that falls within their area of responsibility. “
This publication follows the final rules, published in July 2015 for UK RAPs and December 2015 for Foreign Branches, which set out the FCA and PRA’s approach to strengthening accountability in the banking sector. The rules come into effect on 7 March 2016. The Conduct Rules will also apply to individuals outside the Senior Managers and Certification Regimes from 7 March 2017. This wide package of accountability reforms also includes proposals for regulatory references for candidates applying for senior manager and significant harm functions under the certification regime in banks, building societies, credit unions, PRA-designated investment firms and insurers.
The responses to the regulatory references consultation paper CP15/31 raised a number of complex issues which require further deliberation before final rules are made. Accordingly the FCA has, as an interim measure, continued the current referencing requirements under the Approved Persons Regime for pre-approved roles. The FCA remains committed to implementing a more comprehensive framework for regulatory references later in the year. The final rules will be accompanied by a transition period to allow firms time to implement any changes.