Imagine working as an administrator for an insurance company. One day, you're asked to attend a training session in which you're told that you could be liable to face action from the FCA for any misdeeds. How would you react?
We unpack what a change in personal accountability means and how to ensure training doesn't do more harm than good.
Are we all Senior Managers now?
A key requirement of SMCR is that the FCA's Individual Conduct Rules apply to all staff, save for those in ancillary functions. These rules state that you must:
- Act with integrity
- Act with due care, skill and diligence
- Be open & cooperative with the FCA, PRA & other regulators
- Pay due regard to the interests of customers & treat them fairly
- Observe proper standards of market conduct
In addition to the above rules, training your staff is a regulatory requirement. This training aims to help staff understand their responsibilities and the potential consequences of breaching any rules. Companies need to notify the FCA of any such action, and regulators could follow up by investigating further.
The message of staff training for all is difficult to get across. However, it is part of the FCA's desire to see strong cultures and good behaviours embedded within all firms. The FCA believe firms can achieve this culture through greater levels of accountability across the board.
A lack of individual accountability in evidence during the banking crisis is a driving factor behind the FCA's desire for a strong regulation culture. At the end of the day, the FCA lays down the rules, but firms have to deliver the training - which is where the problems could start.
The bare minimum
The initial temptation is to do what the rules state and tell your staff about the requirements. After all, factual training is easy to deliver - just put together some brief PowerPoint slides, copy and paste in the rules, and the job is done.
Except it isn't because this approach brings many risks, the biggest being demotivated and disillusioned staff. Here are some of the potential outcomes:
- Your staff are disgruntled that they have more accountability. After all, why should someone who's paid a relatively modest salary be accountable to the regulator in the same way as those highly paid bankers? "Are we all senior managers now?" could be the rallying cry. This is an understandable outcome and is highly likely to arise.
- Your staff don't have to worry because you, their employer, will protect them. People who are not in senior positions may believe that any misdemeanours will be dealt with internally, and the employer will bear the brunt of any regulatory action. However, that's not how the regime works. Insurance against the cost of regulatory fines isn't permitted under the rules.
- Staff worry that they'll have to work much harder to keep their jobs and not be fined. This is a big risk, as people may believe that how they perform now won't be good enough and they'll have to work harder – again, understandable.
- Your staff have to look after number one to ensure they're not in the firing line. A greater level of personal risk is hardly conducive to building great teams. This mentality threatens to eliminate team spirit.
Given that the training is aimed at people, many of whom have had little exposure to regulation and compliance before, this will be a big, difficult and scary message if not handled properly. In the rush to ensure regulatory requirements are met, you could end up opening up a whole hornet's nest of problems by damaging staff motivation. So, what's the solution?
Prevention rather than cure
The answer is to ensure that you get your training right, anticipating some of the problems that could come your way.
Here's what you need to make sure of:
- Training is accessible – at the very least, it must be in a language that the staff can understand, and it must show them how the Conduct Rules relate to their roles in your business. Staff will feel empowered and more motivated with this knowledge.
- Specific concerns are addressed – for example, how can administrators ensure they're doing enough to treat customers fairly in the new regime? How can back-office staff at asset managers ensure standards of market conduct are met? Information on how these staff members can meet the requirements must be proportionate and allay any irrational fears.
- Understanding is confirmed – be sure to test your staff. This will allow staff to demonstrate their understanding of the expectations and Conduct Rules. Don't let them leave the training without proving that they know what's coming.
Specialist e-learning can be an effective way of getting the technical detail and key messages across to the satisfaction of staff and the regulator. A specific training package on this subject may be just the ticket for many. While a tailored arrangement may be more appropriate for those who want to go deeper into key messages or give special attention to certain roles.
Combining either of these packages with training in related areas, such as whistleblowing, is beneficial to be repeated annually or more frequently. It is essential to make sure your staff don't forget their obligations.
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