FCA checks can be confusing. Here is an explanation of all the essentials, including meeting the “fit and proper test FCA” requirement. Financial services and solo regulated firms use these checks in assessing fitness and propriety, as well as competence and capability in a candidate. When assessing a candidate, they allow authorised firms to confirm certain factors. For example, their previous employers or lack of any criminal offence. The regulatory reference was last updated in December 2019. This is a useful reference point for creation of the senior managers and certification regime.
Last week we explained the BPSS check. This week we’ll be taking a look at the checks for the Financial Conduct Authority (FCA). In order to ensure that the financial markets run fairly, honestly and efficiently, the FCA regulates over 60,000 organisations. As such, the FCA requires anyone in the financial sector who holds a position of authority to become “approved”.
This approved person function isn’t limited to building societies and banks like you might think. It also includes insurance companies, consumer credit firms, retail intermediaries, payment services, financial investment organisations and anyone who supplies a regulated company. In terms of roles the FCA require screening and approved person status for, it’s a long one. However, it includes everyone who accepts deposits, enters into, advises or arranges investments or mortgages, affects or conducts insurance contracts or gives financial advice.
There are a number of controlled checks that employees must go through to obtain approved person status. These checks confirm certain traits of a person. For example, competence, honesty, financial soundness and capability to carry out their duties in accordance with FCA guidelines.
FCA checks are a comprehensive screening test. It includes verification of Right to Work status and complete ID checks, 5 years of validated and analysed employment history, verification of your highest qualification, a DBS criminal record check, a financial check (which includes county court judgements, a credit report and bankruptcy check), a UK directorship and disqualification check and an FCA register verification and disciplinary validation. Phew.
This marks the end of our essentials explanation – now we’ll dive deeper into some trends in the regulation sector.
The FCA is held accountable via reporting to Treasury and Parliament.
Whilst it is far from an original statement, the pandemic is bringing the future forward. The economic impact of the strategies taken to reign in the spread is speeding up some of the longer term trends that are revolutionising work, society and the financial system that is its foundation.
This includes the retreat of business from the high street, fewer secure jobs, the lack of financial balance between generations and the impact of technological advancements.
The pandemic has increased consumer adoption of tech-focused business models. You might think of Amazon as an obvious example of a business that has seen a large increase in internet traffic. However, things such as banking apps are seeing similar increases.
Christopher Wollard, FCA interim chief executive, had this to say:
Consumers’ and businesses’ retreat from cash has immediate implications for the bank branch and ATM network. But while the tech-savvy benefit, a whole range of people, not just the older and poorer, risk being left behind.
During the COVID crisis, we have seen greater co-operation between us as the regulator and industry than I’ve ever known. That, coupled with the extraordinary public-spiritedness of branch and call centre staff, helped ensure people could continue to receive in-person and phone banking, even as the rest of high street switched out the lights.
That co-operation must be the model for ensuring the digitally excluded do not become the cash excluded.
It’s a real challenge to efficiently regulate 60,000 firms and the FCA seems to be making moves to improve this. For example, last year they implemented a new data strategy that aimed to ensure the analytical skills and standard of data understanding was raised for all their staff. These skills are necessary to fully take advantage of the vast amount of data the FCA has. At the beginning of this year, the FCA conducted a review of how effectively they source and receive, asses and prioritise, task and take action in response to the information across the organisation. However, Christopher Wollard said earlier this year:
We know we have more to do.
In the autumn, we will see the results of a number of reviews into potential failures of the regulatory system. I have no doubt there will be painful lessons and the FCA will need to learn from them.
He also gave a speech on regulation in a changing world. It appears the FCA is readying to adapt regulation for the future. Therefore, I think it’s fair to assume we could see the FCA make changes to check requirements.
However, that’s the future. Here at Credence, we have a great deal of experience in the sector. We conduct checks for insurance companies, banks and financial organisations, as well as many others. We also conduct FCA checks for companies that provide products and services into areas regulated by the FCA and Prudential Regulation Authority (PRA). For example, software houses, call centres and recruitment agencies.
The best way forward if you are from within this sector is to contact one of our industry experts who after ascertaining your industry sector, the level of risk you could possibly be exposed to and the type of positions you typically recruit for, will be able to advise you on the best pre-employment FCA checks to suit your needs.