Context
Mark Steward the Executive Director of Enforcement and Market Oversight gave a speech at NYU Law School.
Key points to note
- 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 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.
- 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.
Next actions
None – for information only. However, firms should note that SMR is a key ongoing issue for the FCA.