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CISI slams FCA plan to scrap Approved Persons Register

CISI slams FCA plan to scrap Approved Persons Register

The Chartered Institute for Securities & Investment (CISI) has criticised the Financial Conduct Authority’s (FCA) plans to limit the scope of the Financial Services Register, saying it will have a negative impact on both consumers and the wealth management profession.

In its response to the FCA’s consultation on extending the Senior Managers and Certification Regime (SMCR) last week, the CISI said the proposal to scrap the requirement for all approved persons to have their details listed flies in the face of improving transparency.

Under the new rules, which are due to come into effect next year, only a company’s most senior staff, who will fall under the SCMR, will be obliged to have their details on the register. This means swathes of wealth managers and financial advisers will drop off it.

The CISI said it was ‘puzzled’ by this approach. The fact that all practitioners must have their particulars, including their regulatory permissions, career history and any disciplinary action they’ve faced, listed on the register reassures the public.

‘One of the main purposes of the SMCR is to raise the standards of individual personal behaviour and for firms to make a much more diligent assessment of senior managers and certified persons,’ the CISI said.

‘Many firms [also] expressed their concerns that they would no longer be able to check the applicant’s statements about where they worked, and in what role, against an official source.’

The trade body said the issue was flagged by both the industry and the Treasury back in March 2016 when SMCR came into effect for the banking sector. A number of organisations had been willing to take on the responsibility of running the register if the FCA would not, but the idea did not get off the ground, with many firms unwilling to share this sensitive information with any organisation other than the regulator.

The hope is that the FCA will change tack and reconsider its approach to the register. The consultation into broadening SMCR closed on 3 November, with the FCA due to issue a policy statement next summer. The regulations are then expected to come into force later in 2018.

The regulator has so far been seemingly unwilling to listen to concerns about the register, with even the International Organisation of Securities Commissions (Iosco) stressing its importance in identifying and monitoring ‘bad apples’ in June.

CISI chief executive Simon Culhane (pictured) said: ‘We are pleased to have the opportunity to feedback on behalf of our members to this important consultation paper. We do believe, however, that the FCA has been particularly slow to understand the full implications of the abolition of the Financial Services Register, on both firms and consumers. We flagged this up back in April 2016.

'We concur with the June 2017 Iosco Task Force report on wholesale market conduct which made the case that a register, accessible to the general public, could help build trust and enable the identification of “bad apples”.’

The CISI has broad support in the industry, with private client firm bosses keen for the progress made in professionalising wealth management and improving transparency not to be damaged.

‘I sympathise with the CISI’s view on this,’ said Jason Hollands, managing director of Tilney. ‘Although I suspect relatively few members of the public will check the register, it does strike me as disappointing that they – and perhaps more importantly firms who are recruiting – may no longer be able to get such easy access to background information on regulated individuals, especially given the big improvements in overall transparency within the financial services sector in recent years.’

Candidate checks

The recruitment issue is significant, with the FCA itself saying in the annex of the paper that ‘a firm should also check the Financial Services Register as part of its assessment of whether a candidate is fit and proper and to verify the information contained in the application for approval’.

Gavin Haynes, managing director of Whitechurch Securities, said his company will use the register when hiring advisers to check their level of permissions and disciplinary history.

‘I think that the change is bad news for consumers, who should be able to use the FCA register to provide peace of mind that their adviser or wealth manager is a regulated individual,’ he said.

‘I can see no good reason why this change is better for consumers. From a management perspective, it also makes things more difficult when carrying out due diligence on potential employees.’

Although Hawksmoor Investment Management chief executive John Crowley agrees that the register is useful when it comes to recruitment, his main problem is with the damage this decision would do to people’s perception of the industry.

‘What’s more important is that members of the public should be able to explore the regulatory history of whoever is looking after their money. I’m sure you can still do that for solicitors and accountants,’ he said.

‘Through qualification and CPD requirements, the FCA demands increasing professionalisation from the financial services sector. If the regulator wants the public to regard advisers and managers as holding similar status to the traditional professions, then that sort of transparency is essential.’


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