FCA speaks on importance of culture and conduct

Emily Shepperd, FCA COO and Executive Director of Authorisations stressed that firms must consider how their own cultures can drive better outcomes.

Key highlights of the speech include:

  • How the Consumer Duty has raised the bar on how firms should treat customers, and FCA has already seen firms take significant action as a result, including a wealth manager that overhauled its fee structure – understanding this entailed up front costs, but believing a simpler, more transparent and comparable structure would bring medium to long term better income generation;
  • Diversity and inclusion as the starting point when building a healthy work culture. D&I strategies should aim to deliver better internal governance, decision making and risk management, strengthening the safety and soundness of firms with better outcomes for markets and consumers – FCA research had shown that firms were committed to progress but few had a clear articulation of purpose and actions;
  • Understanding the impact of non-financial misconduct with FCA’s proposal for guidance to make clear that misconduct such as bullying and sexual harassment pose a risk to healthy firm cultures and to ensure firms take decisive action when these behaviours occur. There is a key role for second and third line functions to help SMFs to achieve high standards of conduct throughout organisations, and to hold all leaders to account, not just those whose statement of responsibilities includes it. The speech noted that a recent firm closure originated in non-financial misconduct;
  • FCA is practicing what it preaches and has applied the SMCR and operational resilience internally;
  • FCA is looking at how its metrics interplay with behaviours – and is being open about its challenges and why some things are taking longer than they used to. It is looking at methods to reduce the work that takes up a disproportionate amount of time compared to the value it adds. It has been implementing new initiatives such as digitalising authorisation forms,  which should make it easier for applicants to complete them and ensure that the form can’t be submitted until complete;
  • FCA is now looking to securely adopt large language models and other forms of Generative AI and can see the benefits of coding support, summarisation and deep retrieval search capabilities.

Vida Fatemi