London, United Kingdom, December 21, 2008 --(PR.com
)-- The Financial Services Authority (FSA) has today published a consultation paper (CP) that clarifies the FSA’s expectations of those within firms that perform a ‘significant influence’ functions. The CP proposes several significant amendments to the FSA handbook.
In a move reminiscent of the Sarbanes Oxley legislation in the US, the FSA vows to pursue cases against individuals who breach the FSA’s Principles and the Code of Practice for Approved Persons.
“The FSA has made a strategic decision to investigate more individuals” says Alexandra Kelly, MD of City pre-employment screening company Powerchex, “they (the FSA) believe that this increased scrutiny will discourage questionable individuals from applying for significant management roles within the industry.”
The FSA has already started to interview more applicants for 'significant influence’ posts at high impact firms and is planning enforcement action if an individual is offered a post and subsequently fails to meet the required standards.
“This represents a significant change for financial firms. By introducing fines the FSA is sending a clear sign to companies that they should focus on undertaking proper due diligence.” claims Kelly. “As a further safeguard, firms should keep proper documentation of their vetting process in case they need to justify their decision on a particular applicant. They also need to be aware that this new process will introduce delays to the deployment of senior managers and plan accordingly.”
The other significant amendment proposes to extend the rule obliging firms to provide references for applicants of the CF30 (customer function) to all controlled functions if requested to do so.
“With this amendment the FSA is closing a gap in the referencing for approved persons” states Kelly. “There are no good reasons why the rule should not be extended to significant management functions, in fact, there are very good reasons why it should.
“It is critical, not just for the firm, but for market confidence that our major institutions are soundly run by individuals who have clearly demonstrated that they have the necessary skills, experience and integrity” states Graeme Ashley-Fenn, director of permissions, decisions and reporting division at the FSA. “Our vetting process is not intended to be a substitute for a firm undertaking proper due diligence itself – responsibility for this still lies with a firm’s senior management. These proposals align with a shift in FSA focus: where a significant influence holder shows incompetence or dishonesty, we will consider enforcement action against him or her.”
The consultation period closes on 31 March 2009. The FSA will then finalise the proposals and publish revised rules in a policy statement during the second quarter of 2009.
Notes To Editors:
Powerchex is the UK’s premier pre-employment screening firm for financial institutions. Based in the City of London, Powerchex checks the background, employment history, criminal records and professional qualifications of applicants on behalf of financial institutions. It sets the industry benchmark of 5 days for a background check.