Regulatory Unwrapped: Breaking down the FCA’s NFM framework
Join us for a deeper dive into the biggest regulatory trends and challenges firms are facing as we chat with experts and understand how organizations can keep pace with fast-paced compliance changes.
Written by a human
In this episode of Regulatory Unwrapped, we sit down with Nathan Willmott, Partner at Ashurst, and Global Relay’s Director of Regulatory Intelligence, Rob Mason, to dissect the Financial Conduct Authority’s (FCA) non-financial misconduct (NFM) consultation.
Tune in for answers to big industry questions, including:
What are the key takeaways from the FCA’s NFM consultation?
- Questions remain around who is responsible for “policing” NFM obligations. There is a need for clear evidential rules, not just guidance that is open to interpretation and may be inadmissible at tribunal.
- NFM does not compromise growth but may encourage firms and overseas investors to feel safer investing in the U.K. knowing there are rules such as fitness and proprietary in place.
- These rules could improve the culture of firms and lead to more positive outcomes, but questions lie in whether firms are motivated by defending their reputation or a real desire to detect misconduct.
Why did the FCA’s NFM consultation take so long?
- The lengthy consultation process could be attributed to a more cautious approach from the FCA after its previous “name and shame” proposals.
- The FCA is navigating a difficult area in demonstrating whether bad conduct equates to bad market conduct.
- NFM rules are being expanded to non-bank firms, which expands the potential application of these rules, such as harassment, outside the scope of carrying out regulated activities, which comes with additional considerations.
- A shift towards expanding NFM rules to non-banks to expand the potential application of the conduct rules, such as harassment, outside of the scope of carrying out regulated activities.
How should firms Identify and escalate misconduct?
- There are potential inconsistencies in approaches to policing NFM, with retail banks potentially applying “the spirit” of the rules while other banks may look to case outcomes or enforcement examples.
- There is debate around whether there is a need for prescriptive or principle-based rules, and how it is incumbent that clear regulations are needed for firms to understand where to draw the line.
- The FCA is acting with “one hand tied behind its back” by not taking disciplinary action and only taking on supervisory cases.
How do Fitness & Proprietary & SM&CR fit into NFM?
- There are questions around whether the regulator and firms should link personal conduct to professional conduct.
- With social media playing an interesting role and blurring lines, will firms look to monitor and capture personal accounts – and is this fair?
- Is there an increasing risk of reputational damage being attached to firms based on individuals’ actions, and can this lead to outcomes that affect the economy?
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