The Financial Conduct Authority (FCA) Regulatory Review

Recently, the Financial Conduct Authority (FCA) tested the viability of the Authorised Fund Manager (AFM) business model and assessed whether conflicts of interests were being effectively managed. After evaluating their findings against relevant requirements and guidance in the FCA Handbook, the FCA published their review on June 30th. The four key areas were:

  1. Due diligence over delegated third-party investment managers and funds
  2. Oversight of delegated third-party investment managers and funds
  3. Governance and oversight
  4. Financial resources

High level overview of the overall issues:

  • Insufficient information gathering through in due diligence and evidence of poor oversight of delegated third-party investment managers.
  • Informal, undocumented discussions and decision making alongside inconsistent escalation of issues from the product governance committees to the management committee and on to the board.
  • Poor levels of analysis of how the investment manager could achieve their targets.
  • Where follow-up action was needed, there were no records of what steps had been taken to reach the relevant conclusion.
  • Risk and conflicts of interest registers were static, standalone documents, and there was little to no board discussion about them as well no clear risk appetite statements.
  • Errors in regulatory reporting from firms.

How GECKO can help:

  1. Strengthened due diligence — Centralised area to gather and store all relevant documentation to fully understand the funds for which they would have responsibility.
  2. Increased collaboration & communication — Real-time KPI dashboard, build custom reports using KPI filter sets and graphs to easily interpret the data being managed. Votes/approvals can also be easily requested, registered and captured within the system, cutting out follow-up emails and chasing of information.
  3. Documenting decision making — with aggregated data, an automated workflow, centralised dashboard can drive ongoing, continuous improvements of your operations with improved decision making.
  4. Track & Trace — Easily retrieve, verify & timestamp what work was done (or not done). Optional choice of adding details such as comments, policies & procedures and attaching relevant documentation.
  5. Secure, up-to-date document storage — House all relevant documentation such as risk appetite statements with a system that offers real-time, analytical data, giving staff the ability to easily run meaningful, data diagnostic tools, instead of spending a lot of time trying to interpret the data they manage.
  6. Bespoke Report Generation — Create and customise board / management reports.

Having outlined the issues identified by the FCA, the progress of each firm will be reviewed in the next 12–18 months and expect firms to make changes to address these concerns.

To conclude, the key message here is that regulatory processes should not just be tick box exercises. If appropriate technology was used, governance was tracked / managed centrally for the Board / Management team to review and comment, some of the shortfalls identified may have been avoided.

Contact us to hear about how GECKO Governance can free up resources for your organisation — hello@geckogovernance.com

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Providing much needed Transparency, Compliance & Accountability To The Financial Services Industry

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GECKO Governance

GECKO Governance

Providing much needed Transparency, Compliance & Accountability To The Financial Services Industry

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