Out-Law / Your Daily Need-To-Know

Steep fall in compliance commitments requested by financial regulator

13 Aug 2015, 1:53 pm

Only seven attestations, or personal commitments to regulatory compliance, were agreed between the Financial Conduct Authority (FCA) and individuals at regulated firms in the first three months of this financial year.

The latest FCA figures show a dramatic drop from the 38 attestations agreed during the last three months of 2014/15. However financial regulation expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com, said that the latest figures were more in line with the regulator's historical use of attestations as a supervisory tool.

"This does highlight the extent to which attestations were relied upon by the FCA at the end of 2014 and beginning of 2015," he said.

"It is almost inevitable that such a large number of attestations [38] provided in one quarter will result in further enquiry in due course and potentially enforcement action should one or more of this number later be considered inaccurate by the FCA," he said.

Attestations enable regulators to formally obtain a personal commitment from a named senior individual at a regulated firm that their firm is complying with some aspect or other of the regulatory rules. These commitments will usually be made by senior managers, compliance officers or other supervisors, but will usually be requested of the most relevant significant influence function holder.

The FCA usually requests attestations as a commitment that a particular course of action has been or will be carried out within a specified time period, as confirmation that specified risks have been mitigated or resolved or as verification that issues identified in a regulatory notice have been resolved. They can also be used to commit the individual to notifying the regulator if an emerging risk changes in nature, magnitude or extent.

In August 2014, the FCA committed to "substantial and important" changes to its use of attestations, including revised internal guidance and stronger governance requirements. It also committed to publishing better data about its use of attestations on a quarterly basis.

The FCA requested attestations of three retail firms, three wholesale and investment management firms and one general insurance and protection firm between April and July 2015, according to the latest figures. It did not request any attestations of long term savings and pensions firms, or mortgage and consumer lending firms.