On 26 June 2023, Emily Shepperd, FCA Chief Operating Officer and Executive Director of Authorisations, delivered a speech on how culture must change to meet expectations.
Highlights of the speech include:
- Culture continues to be central to the FCA’s supervisory model. It underpins conduct and therefore business performance, which is why those working in the financial services sector must pass a fitness and proprietary assessment to operate at a senior level. Firms with healthy cultures will be best equipped to adapt to a changing world and to consumers with changing expectations.
- The FCA considers its sustainability and disclosure requirements and investment labelling to be crucial to the market. It expressed a determination to clean up “ESG” and “sustainability” classifications, restoring credibility and confidence to the system before cynicism destroys what is potentially a huge and beneficial market for consumers.
- The Consumer Duty coming into force in just over a month will require firms within the financial services industry to design their products and services with good consumer outcomes from the start. This shift to a customer focused approach will require a significant change in many firms’ cultures. This will include a change in people management policies and practices, including performance management, pay and bonuses. Firms can expect to be asked to demonstrate at every stage of the regulatory life cycle how their business model, the actions they have taken and their culture, work to deliver good customer outcomes.
- As financial services are increasingly looking to rely on AI, the FCA, alongside other regulators and the government, have been looking at how the existing rules will govern AI and how they may need to be adapted to take account of any new risks the technology brings. The approach of the FCA will continue to evolve alongside the technology.
- The FCA has been working to tackle misconduct in wholesale markets. It wants firms to take their regulatory referencing seriously to prevent employees with records of misconduct being able to move from firm to firm too easily. This can include, if necessary, extension of probationary periods or an increase in monitoring or restricting activity. The FCA has found some firms were willing to turn a blind eye to new employees being dismissed for market abuse, expense fraud and sexual harassment. This is not only contrary to the FCA’s expectations but also exposes the firm and its clients to unnecessary risks.
Our expectations of firms are evolving and keeping up with the demands of consumers. They expect us – and firms – to do more, to do better.