Emma Mills: Are employers ready for the individual accountability regime?


From 9 December 2019, the new financial services individual accountability regime will apply to all Financial Conduct Authority (FCA) solo-regulated firms.

The regime, already in force for banks, building societies and insurers, will affect around 50,000 more organisations, including investment firms, asset managers, insurance and mortgage brokers and consumer credit firms.

Affected employers should be preparing in earnest, including reviewing employment practices because the regulatory requirements have ramifications throughout the employment life cycle.

In terms of recruitment, senior managers must be pre-approved by the regulator. For certification staff, there is no regulatory check, but firms must assess fitness and propriety by rigorous interviewing, as well as making criminal record, financial soundness and regulatory reference checks.

Appraisals and performance management processes will have to be updated. As the fitness and propriety of affected staff must be certified annually, this should be included in annual appraisals, with managers trained on assessment criteria. Ensuring consistency across the business and certifying where there are performance concerns will be tricky issues to manage.

Regulatory requirements should be incorporated into disciplinary processes for senior managers, certified persons and conduct rule staff. Issues to address include action where a conduct rule is breached, impact on fitness and propriety, and notification of disciplinary action to the regulator.

Normal employment laws apply to dismissals of regulated staff, but regulatory requirements also impact, for example, notification to the regulator or a full investigation, despite an individual resigning, so that a regulatory reference adequately documenting fitness and propriety can be given.

HR staff should start by identifying senior manager roles and responsibilities. They should incorporate regulatory approval and fitness and propriety checks into recruitment processes, and develop revised contract terms and job descriptions.

As well as designing annual assessments and certification procedures, employers should also train line managers on assessing fitness and propriety.

HR leaders must take the time to review policies, including disciplinary, performance and whistleblowing and, most importantly, train senior managers, certification staff and conduct rule staff on their obligations.

Emma Mills is employment legal director at DLA Piper