Remote Control: How to keep the FCA happy in the new world

The COVID pandemic, and subsequent lockdowns, has meant that many firms have been forced to reassess their way of working, with employees working from home all or part of the time becoming a common feature.  Many firms have already moved, or are considering moving, to this as a “new normal” way of working. Recognising this, on 11 October the Financial Conduct Authority (FCA) issued an update on its expectations for firms using remote or hybrid working, ‘Remote or hybrid working expectations for firms | FCA’.

Housekeeping

The threshold conditions for authorisation or registration in most sectors include a requirement that a firm is incorporated and has its head office in the UK.  In its update, the FCA made it clear that with any new arrangements the firm must be able to prove that the lack of a central location or remote working does not, or is unlikely to, “affect the firm’s location in the UK, or its ability to meet its threshold conditions.”

As always, this means being able to show that the firm’s senior management have properly considered the risks and how the firm will be able to remain compliant.  Firms should therefore ensure that any decision to move to this way of working has been discussed, a proper plan is in place and that the risks have been considered and addressed, and most importantly, that this has been evidenced in writing.

As regards “location in the UK” the updated threshold conditions say that the FCA will consider this on a case by case basis, but that the physical location of directors and other senior managers will be a key factor, as will the location of central administration and compliance functions.

Preparing for guests

The FCA  makes the point that to effectively supervise a firm, it needs to be able to visit any location where work is performed, business is carried out and employees are based. This includes employees’ home addresses (if this is where they are working) and would be the case for both supervisory and enforcement visits. Firms should ensure that they make their employees aware of this.

Moving in

Finally, for existing firms, the FCA has issued a reminder of the Principle 11 requirement to disclose to the FCA any material changes in its business model. For firms applying to be authorised or registered with the FCA, the elements set out in the notice will need to be taken into account within their applications. This means that the appropriate systems and controls will need to be put in place to enable the FCA to understand not only how the conditions are met but also that it will be able to effectively supervise the firm.

In summary, it is important that all firms supervised by, or seeking authorisation or registration with the FCA read this notice and consider how it affects their own arrangements, and consequently document how they are complying in our changed circumstances.

If you would like assistance with this, or to discuss how it affects you, please contact your consultant or use the form below to arrange an initial call.

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