Compliance, Culture and Evolving Regulatory Expectations
In his speech to the NYU Law School, Mark Steward, FCA Executive Director of Enforcement and Market Oversight explained how the SM&CR has evolved and how the FCA has been developing a new tool, the 5 conduct questions or 5CQ, expressly to help firms implement more effective change programmes as well as helping the FCA to interrogate progress:
What proactive steps do you take as a firm to identify the conduct risks inherent within your business?
How do you encourage the individuals who work in front, middle, back office, control and support functions to feel and be responsible for managing the conduct of their business?
What support (broadly defined) does the firm put in place to enable those who work for it to improve the conduct of their business or function?
How does the Board (or appropriate senior management) gain oversight of the conduct of business within their organisation and, equally importantly, how does the Board consider the conduct implications of the strategic decisions that they make?
Has the firm assessed whether there are any other activities that it undertakes that could undermine strategies put in place to improve conduct?
The most recent report on progress, using the 5CQ, reflected some new conduct risks triggered by the pandemic. The report also contained an assessment of both an improving recognition of conduct risk among firms and as well as recording significant gaps and areas of improvement.