Industry raises concerns over abolition of FCA's Approved Persons Register

"A register, accessible to the general public, could help build trust and enable the identification of “bad apples”."

The FCA is replacing the Approved Persons Regime with the Senior Managers and Certification Regime in almost all financial services firms.

The regulator says its new accountability system is more focused on senior managers and individual responsibility.

The CISI responded to a question posed by the FCA on whether the identity of people performing Certification Functions, whose role means it is possible for them to cause significant harm to the firm or customers, should be made public by the firms who employ them.

In its response, the CISI points out that firms being asked to supply this information are relying on the applicant to provide accurate and complete information on which firms they have worked for, but more importantly, the public/consumers will have no official, central, source where they can check that they are dealing with an individual who has the appropriate authority in his or her firm.

The abolition of the Approved Person’s Register was flagged up in the Treasury’s SMCR Statement in March 2016. Many firms expressed their concerns that they would no longer be able to check the applicant’s statements about where they worked, and in what role, against an official source.

The CISI says itself and others were willing to provide the channel for making this information publicly available. However, some firms made it clear that they would only provide the necessary information under regulatory requirement, which was not forthcoming.

The CISI also condemns the FCA for proposing that the existing Fit and Proper test for Approved Persons and training and competence rules are sufficient for firms to assess the fitness and propriety of certified persons, with little change.

Indicating it was “puzzled” by this approach, the CISI commented: “One of the main purposes of the SMCR is to raise the standards of individual personal behaviour and for firms to make a much more diligent assessment of senior managers and certified persons. How can this be done if essentially the same rules remain (which the Parliamentary Banking Commission considered were ineffective) apart from requiring criminal record checks?"

Simon Culhane, Chartered FCSI and CISI Chief Executive, said: “We are pleased to have the opportunity to feedback on behalf of our members to this important consultation paper. We do believe, however, that the FCA has been particularly slow to understand the full implications of the abolition of the Approved Persons Register, on both firms and consumers. We flagged this up back in April 2016. We concur with the June 2017 IOSCO Task Force Report on Wholesale Market Conduct which made the case that a register, accessible to the general public, could help build trust and enable the identification of “bad apples”.

“The Banking Standards Board has invited us to share our research and thoughts with them following our response to their Consultation on Certification and Risk.

“This issue, coupled with the lack of initiative on the part of the FCA to update the FIT and T&C rules within the Fit and Proper Requirements indicate there should be a more considered approach all round regarding these important elements of CP17/25.”