The UK is introducing Sarbanes-Oxley. Are you ready?

Since 2019, all FCA-regulated firms are required to comply with the Senior Managers and Certification Regime (known as SMCR, or SM&CR) a program designed to raise standards of conduct for everyone working in financial services. Formulated after the financial crisis of 2008, SMCR provides a framework for firms to:

  • Encourage all staff to take personal responsibility for their actions
  • Ensure a clear understanding of the division of responsibilities among senior managers in a firm
  • Improve conduct at all levels

VinciWorks’ new course, SMCR: The Senior Managers and Certification Regime, will provide you with the training you need to comply with SMCR requirements. It includes an in-depth look at each of the five Conduct Rules for general staff and the four Conduct Rules for Senior Managers. 

Topics covered

  • The history of SMCR
  • Exploring the three pillars
  • The Senior Managers Regime
  • The Certification Regime
  • The Conduct Rules in depth
  • Who does this apply to? 
  • SMCR in the organisation
  • How to report a breach

Course features

  • Provides short but comprehensive training 
  • Includes practical examples and real-life case studies from the business world
  • Incorporates short, interactive assessments
  • Fully customisable for specific cases related to your business

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The FCA requires financial firms to follow a formal process for receiving and handling customer complaints. That means that workers must be trained in all the different steps of this process, from recognising complaints to investigating them, responding to, and recording each complaint properly. Failure by employees to comply with the requirements of any of a variety of laws and standards relating to the industry can result in fines or worse. 

VinciWorks’ new FCA Complaint handling course is designed to provide everything service employees need to know to comply with FCA requirements and, hopefully, please even the most dissatisfied customer. 

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A recent report estimated that 27.7m UK adults could be considered to be living in vulnerable circumstances, an increase of 15% in just a few months, with 2021 expected to show a further increase. This equates to 53% of the UK adult population – i.e., more than half.

Who are the vulnerable customers?

A vulnerable customer is someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care. 

The FCA expects firms to demonstrate how they are ensuring vulnerable customers are treated fairly. This includes recording and monitoring to ensure the service provided to vulnerable customers is as good as those provided to other customers.

What is a vulnerable customer example?

Being vulnerable is not necessarily a life-long state: it can be long term, short term, or permanent. Vulnerability drivers could include the following examples:

  • Health – health conditions or illnesses that affect ability to carry out day-to-day tasks.
  • Life events – life events such as bereavement, job loss or relationship breakdown. 
  • Resilience –low ability to withstand financial or emotional shocks. 
  • Capability – low knowledge of financial matters or low confidence in managing money

Who do the FCA consider to be particularly vulnerable?

Certain life events can trigger additional or increasing vulnerabilities. Consumers who already have lower financial literacy or capacity may be even harder hit and unable to manage their finances.

How do you assist vulnerable customers?

You need to understand your customer base and target market so you can correctly identify potentially vulnerable consumers and those who are more likely to require support.

For example, if you advise on pensions or life insurance, your customer base is likely to be older. You must be more alert to signs of illness or disability. 

You must also be aware of how your actions or inactions could increase vulnerability and cause harm. For example, not offering a customer who loses their source of income appropriate forbearance measures could lead to greater stress and anxiety, which in turn leads to the customer taking actions which are more harmful such as borrowing more to cover shortfalls.

The FCA expects your firm to have procedures in place to identify vulnerable customers, including if they access your services digitally, and to know how to respond appropriately.

VinciWorks new course: Vulnerable customers in financial services

Our new course, Vulnerable Clients in Financial Services, teaches users what makes people vulnerable, what the signs and characteristics of vulnerability are in specific target markets and customer bases, and how to provide an appropriate level of care to vulnerable customers.

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The Joint Money Laundering Steering Group has produced guidance on the prevention of money laundering for the UK financial sector.

What is JMLSG Guidance?

JMLSG’s Guidance is aimed at both firms: (i) in sectors represented by its members (comprising a number of UK Trade Associations) and (ii) regulated by the Financial Conduct Authority (FCA). 

There are a plethora of ways the guidance can assist those in the financial sector. However, two key areas are: providing an overview of the requirements for undertaking risk assessments and CDD. 

AML risk assessments 

Chapter 4 of the guidance is entitled the “Risk-based approach”, and sets out an overview on how to comply with certain obligations, such as: 

  • Identifying and assessing the risks of money laundering and terrorist financing which a business is subject to
  • Putting in place appropriate systems and controls to reflect the risks identified 
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Preparing for a new era in financial compliance with Sarbanes-Oxley (SOX)

In March 2021, the UK’s Department for Business, Energy and Strategy (BEIS) launched their much anticipated consultation: “Restoring trust in audit and corporate governance.” This consultation followed three significant reports into the operation of the UK’s financial services industry: the Sir John Kingman’s review, the Sir Donald Brydon review, and the CMA’s statutory audit market study. 

In short, the consultation seeks to introduce a strengthened internal controls regime, similar to the Sarbanes-Oxley rules in the US which require directors to attest to the effectiveness of internal controls over financial reporting.

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The Payment Services Regulations 2017 (the ‘Regulations’) apply to banks, building societies, card issuers, and other firms which provide payment services. These are the services set out in the Regulations and summarised on the FCA’s website, and include payment initiation services, account information services and services which allow cash to be paid into (or withdrawn from) payment accounts, amongst others. One of the requirements for firms governed by the Payment Services Regulations is to “provide to the FCA statistical data on fraud relating to different means of payment”.  

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What is Professional Liability Insurance (PII)?

Professional Indemnity Insurance (PII) covers organisations for compensation claims made by clients or other third parties. The FCA explains

“Professional indemnity insurance (PII) is liability insurance that covers firms when a third party claims to have suffered a loss, usually due to professional negligence.”

In order to obtain insurance, someone with sufficient seniority at an FCA-regulated firm (e.g. a principal, partner or director) would normally begin by completing a form for an insurance broker. The form will then be used by the insurer to calculate the cost of the premium. Some of that information should be readily available to the person submitting the form, such as the type of services the firm provides, as well as its overall income. 

However, there are questions that are used to calculate a firm’s risk profile that a senior manager may not be able to answer immediately. That is because the answers to these questions will be based on information spread throughout the firm, rather than held by any one individual. There are practical challenges in collecting such information from employees, which we will address below. But first, we will look closer at PII as it applies to financial service firms. 

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What is the Senior Managers and Certification Regime? (SMCR) 

The Senior Managers and Certification Regime is intended to strengthen market integrity and reduce harm to consumers by holding people to account. As discussed below, the number of financial service firms to which SMCR applies has been expanded in recent years. The aims of this expansion are to regulate individuals working in financial services by encouraging staff to take responsibility, and to make sure they understand where responsibility lies within their organisation.

Whilst it has applied to the banking sector since 2016, the number of firms governed by SMCR has expanded in recent years. As of late 2019, SMCR now applies to all solo-regulated firms (i.e. those regulated by just the FCA). For firms within the scope of the regime, the precise nature of the obligations that fall on individual members of staff vary according to the nature of their role. 

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