Which Senior Manager is responsible for the Covid-19 response?

The FCA has stated that no single Senior Manager is required to be responsible for a regulated firm’s response to the virus. Firms should be allocating the responsibilities in the way they judge best to enable the business to manage the risks they face. It is acknowledged that as the pandemic progresses flexibility is likely to be required in the management of a firm’s response.

Do the normal rules still apply?

The FCA has said that their normal rules continue to apply, but has noted that with much of the workforce working remotely, flexibility will be required in relation to some operational obligations such as the recording of voice calls and deadlines for submitting regulatory data. The FCA has asked firms to communicate with them to discuss how they plan to mitigate risks caused by operational changes and indicated their willingness to work with firms to address these issues.

The responsibilities of Senior Managers while much of the workforce is sick or unable to work

The FCA has pointed out that Senior Managers are responsible for ensuring their firm’s financial resilience and must take reasonable steps to ensure that the business of the firm is controlled effectively. It will be reviewing the contingency plans of a significant number of firms which will “include assessments of operational risks, the ability of firms to continue to operate effectively and the steps firms are taking to service and support their customers”. 

The SMCR requires the organisation of the business and the responsibilities of those working within it to be clearly defined, with clear reporting lines and delegation arrangements. However, if much of the workforce, including Senior Managers, are sick or unable to work for other reasons, many key people who have been given clear responsibilities may not be able to discharge them. This could affect the normal delineation of responsibilities and reporting/delegation lines.

Those Senior Managers who remain in post should keep under review and record who at any given moment is able to work.If a significant number of the workforce are unable to work due to the virus, Senior Managers should consider what temporary changes in responsibilities are needed for key areas of the business and notify staff of this. If reporting lines and responsibilities are changed, Senior Managers should ensure they are delegated to individuals with the appropriate skills and experience for the roles in question.

Firms’ HR functions should monitor the availability of skilled people within the organisation. They should inform the FCA if they do not have enough (healthy) people, with the right skills, to run the business in a compliant way in order that the FCA can work with them to address this issue.

Should Senior Managers attend the office?

Senior Managers fall within the FCA’s list of key workers who can potentially be required to work from the office to ensure the effective oversight of financial firms. Their children are still allowed to attend school.

Does a financial services firm need people in the office?

The FCA and PRA have issued guidance as to who they consider to be key financial workers who can be required by a firm to continue working in the office. (But, see our comments above about vulnerable people).

The FCA makes clear that there will be very few key financial workers at any one firm; they will be individuals filling roles required to provide essential daily financial services to consumers or to ensure the continued functioning of markets, and financial stability.

The FCA has indicated that it is the responsibility of the Chief Executive Officer Senior Management Function (SMF1) (or another relevant member of the senior management team) to designate key financial workers. Senior management (acting with the HR function) is responsible for deciding whether a role can be performed from a worker’s home without causing disruption to customers or the market.

How does a firm deal with a suspected fraud during the national lock down?

With the best will in the world, it is possible that not all of the firm’s usual compliance and control procedures will be working properly, and that any such weaknesses could be exploited by unscrupulous members of staff to commit frauds.

If a firm suspects this has happened, it will need to investigate the incident and potentially discipline the individual whilst they (and the people conducting the investigation and the disciplinary process) are working from home. 

This will necessitate novel approaches to:

  • investigatory meetings
  • how to suspend employees (presumably lock down from electronic systems)
  • how the investigation team or investigator will carry out their work
  • different ways of supporting individuals involved in the process
  • the conduct of disciplinary meetings.

If any firm finds itself in this position the team at Fox Williams will be pleased to advise on how to run modified, but compliant, processes suitable for the current conditions.

Articles and commentary by our legal experts on the impact of Covid-19 are all available here.

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