Welcome to the July edition of the Corterum newsletter. This month marks a key milestone as we reach the first anniversary of the Consumer Duty. In this issue, we’ll cover the key developments you need to know, including the FCA’s plans for the year ahead and a recent SM&CR breach at Goldman Sachs.
Wrapping up the first year of Consumer Duty
The 31st of July marks the anniversary of the first year of the Consumer Duty, and with it the deadline for the completion of the initial Consumer Duty Directors report. By this date, affected firms must have reviewed and approved all relevant products that are subject to the Duty, and have this report ready for submission to the FCA upon request. The FCA will then review a selection of these reports, publishing their insights to promote good practice. While the FCA have confirmed that there is no prescribed format for this report, they do expect firms to self-determine when it comes to what is required.
To commemorate this milestone, the FCA is hosting a live-streamed event to discuss the impact of the Consumer Duty, where they will be highlighting examples of good practice, and outline their priorities for the coming year. This looks like it will provide some very interesting insights into their plans and how their initiative with the consumer Duty has been shaping up.
If you are interested in joining their event, we have provided the following link to their homepage where you can register your interest. Click here to visit the Registration page. See you there!
Closed Product Implementation deadline
The 31st July also sees the deadline for when closed products will become subject to the duty. Closed products may represent a more difficult challenge for firms as they may include situations where customers have ‘gone away’ or may simply find themselves in a situation where gaps in their data (due to the age of the product) do not provide a full story. In these situations, the duty will still stand, and firms are expected to demonstrate proportionate steps to review and approve those products with the greatest impact.
This has resulted in a number of Dear CEO letters that have been issued recently, detailing these requirements. Emphasis has been placed on the need for boards to challenge their businesses on non-compliance with the Duty. The FCA would like to ensure that firms have appropriately prepared for implementation of these new requirements.
Areas of focus for closed products include closing gaps in their customer data, confirming that appropriate treatment of vulnerable customers is occurring; that any disengaged customers are identified, and that action is taken in relation to them, making sure that these close products are providing fair value and that good outcomes are being delivered to consumers in situations where firms have vested contractual rights.
SMCR Breach at Goldman Sachs
A Goldman Sachs banker remained employed despite a sexual assault conviction. Ronan O’Grady concealed his conviction from his employer, deliberately withholding this information despite multiple disclosure requirements. Upon discovering the truth, Goldman Sachs took action terminating his employment.
(Read the article here: Sex offender worked at Goldman Sachs months after conviction).
This case highlights the challenges of managing the Senior Managers and Certification Regime (SMCR) when a Senior Manager or Certification Employee lies during their Fit and Proper Test. Although Goldman Sachs are responsible for annually determining whether Mr. O’Grady was ‘fit and proper’ to perform his role, the responsibility ultimately lies with the individual to disclose any convictions. In this instance, Mr. O’Grady chose to conceal his conviction.
In situations like this, where certain factors are beyond control, it is essential to concentrate on areas where you can make a difference. One of the most effective ways to do this is by establishing and maintaining robust processes. Ensure that your systems are designed to be thorough and reliable, minimizing the risk of oversight. Wherever possible, integrate automation to streamline these processes, reducing the chance for human error and increasing efficiency.
Demonstrating to regulators that you are committed to the SM&CR is crucial. This commitment should be evident in every aspect of your operations. It’s not just about compliance; it’s about showing that you are proactive and dedicated to upholding the highest standards of conduct and accountability.
If you are motivated by a desire to enhance your SM&CR compliance, or if you are simply looking to manage reputational risk more effectively, we encourage you to get in touch. Drop us a line at [email protected]. Our team can provide you with tailored strategies to upgrade your SM&CR and Consumer Duty compliance. This not only saves you time and money but also helps protect your firm from potential regulatory scrutiny and reputational damage.
SM&CR Concepts – Training Requirements
The SM&CR (Senior Managers and Certification Regime) is a comprehensive framework designed to ensure accountability and ethical conduct within financial institutions. However, its effectiveness hinges not solely on the efforts of a compliance officer or an outsourced compliance consultant but on the understanding and adherence of all Conduct Rules staff. It is imperative that these individuals receive training that is both relevant to their roles and comprehensively explains the implications of the Conduct Rules.
Ensuring your staff is adequately trained is not optional; it is a critical requirement under the SM&CR. Failing to provide sufficient training can result in significant breaches of the regime. To prevent this, your training program should encompass several key elements:
- Regular and Integrated Training
- Interactive and Realistic Scenarios
- Assessment of Training
- Link to Fit and Proper (F&P) and Performance
- Involvement of Relevant Senior Management Functions (SMF)
- Engagement of Line Managers
By incorporating these elements into your training program, you not only comply with the SM&CR requirements but also foster a culture of compliance and ethical conduct within your organization. This proactive approach can help mitigate risks, enhance organizational integrity, and build trust with regulators and stakeholders alike.
If you need assistance in developing or enhancing your SM&CR training programs, reach out to us. Our team can provide expert guidance and practical solutions tailored to your needs, ensuring your firm meets regulatory expectations and maintains the highest standards of conduct.
The Corterum Team Resources and Assistance
- Unsure of your SM&CR implementation? Take our questionnaire to assess your knowledge.
- Looking for compliance resources? Check out our:
That wraps up our July newsletter. Should you have any inquiries or require assistance, don’t hesitate to reach out. We’re here to support you in navigating the complexities of compliance.
