The FCA has today published its final rules for the new accountability framework for individuals working in banks, building societies and credit unions who perform certain wholesale market activities.
Notably, it has extended the rules to include a requirement to register an identified individual for a new significant harm function (SHF) for algorithmic trading, meaning affected firms need to identify the relevant SHF and train them in respect of the conduct rules, before the new regime begins. For the algo trading SHF, firms have until 7 September 2016 to complete the process. For other roles previously identified by the FCA there is an earlier deadline - 7 March 2016.
This is an inevitable reaction on the part of the regulator to establish further accountability for algorithmic trading activities in response to recent market volatility incidents, such as the de-pegging of the Swiss Franc against the Euro, which were likely enhanced by the prevalence of algorithmic activity in the markets and increased regulatory scrutiny of historic electronic trading practices, such as Last Look, and their impact on market integrity. The challenge for a SHF in this space will be to ensure their trading, quantitative analytics and IT teams are sufficiently joined-up to manage risk around algorithms with a single, clear point of oversight and robust reporting of management information to the SHF, particularly of information around client complaints and raising concerns.
The senior managers regime takes effect from 7 March 2016 and is designed by the UK regulators to ensure that, in future, senior managers can be held accountable for any misconduct that falls within their area of responsibility. The regime aims to hold individuals working at all levels in banks and other relevant firms to appropriate standards of conduct.
Today's policy statement will primarily be of interest to firms. Consumers may be interested in how individual accountability is being enhanced within relevant firms, or how staff that they interact with will be required to comply with the conduct rules. More generally, the changes in the FCA's policy statement may be thought of as part of a broader initiative to improve the culture and governance of banks and other relevant firms, which should bring significant benefits to consumers.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com