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ATTESTATIONS: THE FCA IS TURNING THE SPOTLIGHT ON INDIVIDUALS. ARE YOUR EMPLOYEES SAFE?

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Attestations: the FCA is turning the spotlight on individuals. Are your employees safe?

By Jacqui Hatfield, Partner, Reed Smith and Melanie Shone, Trainee, Reed Smith

What is an “attestation” and when might we be asked by the FCA to give one?

Jacqui Hatfield

Jacqui Hatfield

Attestations are part of the FCA supervisory toolkit used to ensure accountability from senior management in all regulated firms. They commonly require an approved individual to take responsibility for confirming that the company has, for example, delivered customer redress, or has the appropriate governance arrangements or systems and controls in place.

They are essentially a means by which the FCA can gain personal commitment from an approved person that specific action has been taken or will be taken, often without requiring ongoing regulatory involvement. The FCA’s aim is to ensure that there is clear accountability and senior management focus towards making any necessary changes.

We have seen attestations commonly used in conjunction with other FCA supervisory powers, such as following the conclusion of a Skilled Person Review under Section 166 Financial Services and Markets Act 2000.

Who should not be giving an attestation?

An attestation should ‎be given by the most relevant significant influence function holder (for example, the significant influence function holder who is responsible for the area of the firm at which the issue has arisen or who is responsible for addressing the issue).

However, while attestations were originally intended for the most senior management, we have seen these being directed towards compliance officers for whom it may not be appropriate to take on the personal liability attestations bring without at least the CEO or a Board member attesting alongside them.

Ultimately, the question of appropriateness of the individual is for the regulator to decide, in (we would hope) dialogue with the firm, individual(s) concerned and their respective advisers. The most appropriate person (or persons) to make an attestation will very much depend on the situation of the firm, the objectives of the attestation and the particular factual circumstances surrounding the FCA’s request. There are no “right” or “wrong” individuals. However, we would generally expect most attestations that undertake to take future actions to be made by the most senior individual(s) in the firm who has/have both the necessary authority and responsibility to initiate the changes required.

What if the attestation turns out to be false or the terms of an attestation are breached?

Melanie Shone

Melanie Shone

Attestations are an enforcement tool. It is important to remember that in seeking an attestation, the FCA is trying to ensure both personal accountability and senior management focus for implementing any future action required by the regulator. The FCA’s stance on enforcement action more generally is clear; it intends to pursue more cases against individuals and hold members of senior management accountable for their actions. This of course, echoes the forthcoming introduction of the Senior Managers Regime and Senior Insurance Managers Regime, and extension of the Senior Managers and Certification Regime across the regulated financial services sector.

Ultimately those providing an attestation, and also potentially the firm itself, remain exposed to the full suite of enforcement measures open to the FCA to take for regulatory breaches (this may include, for example, public censure, financial penalties or suspension/withdrawal of permissions).

There are several key issues to consider if, after having made the attestation, it turns out to have been untrue or any of its terms not complied with.
Enforcement action under the terms of the attestation.

Firstly, the firm and individual should consider the potential for any action to be taken under the terms of the attestation itself. At a very high level, a failure to act with integrity could result in enforcement action against an individual for breach of Statement 1 of the Statement of Principles for Approved Persons. In addition, approved persons are required to act with due care, skill and diligence in performing their accountable functions and managing the business for which they are responsible (including taking reasonable steps to adequately inform him about the affairs of the business). If the individual made the attestation as to a statement of affairs without exercising such care and reasonableness, there could be a question over their compliance with Statement 2 and Statement 6 (amongst others) of the Statement of Principles for Approved Persons.

The Supervision (SUP) Manual of the FCA Handbook requires that a firm must take reasonable steps to ensure that all information it gives to the appropriate regulator is factually accurate or, in the case of estimates and judgments, fairly and properly based after appropriate enquiries have been made by the firm.

An attestation given as to a particular state of affairs or future action, combined with a failure to have (i) taken reasonable steps or (ii) carried out appropriate enquiries as to that state of affairs could leave both the attester and firm exposed to enforcement action.

Should we notify the regulator that the attestation is/may be false, misleading, inaccurate etc.?

Secondly, the firm and its approved persons have an obligation to deal openly and cooperatively with the FCA (Principle 4 of the Principles of Business and Principle 11 of the Statement of Principles for Approved Persons). Firms are also subject to rules that require them to notify the regulator in the event that any information it has provided to it is or may have been false, misleading or inaccurate or information that has changed in a material particular. Consequently, there is also a related question of whether the individual/firm should notify the regulator that the attestation turned out to be (or may be) false, misleading or inaccurate.

This is a highly sensitive area on which we would suggest that firms seek specialist advice at the earliest opportunity.

Action for underlying regulatory breaches

There will undoubtedly be an underlying question of regulatory compliance that motivates the FCA towards requesting an attestation is given.  For example, consider that an attestation was given to the effect that the firm has adequate systems and controls in place in relation to a specific area of concern to the FCA, and that it then materialises that the firm’s systems and controls were in fact inadequate. Subsequent enforcement action by the FCA could be both in respect of the false attestation and also for any underlying systems and controls breaches themselves.

Points to consider when faced with a request for an attestation

We have set out some points for consideration in the rest of this article. In summary, it is of crucial importance for any individual receiving a request for an attestation to remain cautious, not rush into providing an attestation to the FCA and to carefully consider all the relevant facts and circumstances of the situation.

The scope, content and timing of the proposed attestation should be given careful consideration, alongside the objectives the FCA is thereby attempting to achieve. Independent legal advice can help individuals to evaluate and consider the potential consequences and personal risks, and to help them (and the firm) to put together a tailored strategy in order to mitigate these.

The FCA has publically stated that attestations should be clear and realistic: i.e. specific, achievable and have realistic (but demanding) timelines. Depending on the circumstances, it may also be necessary to engage in constructive dialogue and negotiation with the FCA on the proposed terms of the attestation.

Business

How fintech companies can facilitate continued growth

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Fintech M&A: the terrible teens?

By Jackson Lee, VP Corporate Development from Colt Data Centre Services

The fintech industry is rapidly growing and, in the first half of 2020, fintechs have secured more than $25 billion in investment globally, despite the huge uncertainty caused by COVID-19. As fintechs and their customer base expand, it is important to recognise that the success of these companies is predicated on the ability to use data effectively in providing a personalised experience to their customers.

To ensure these companies do not become victim of their own success, they must ensure they have the ability to scale up their operations and data storage as quickly and cost-efficiently as possible, especially in these challenging times.

So what must fintech companies do if they are to facilitate this growth without bursting at the seams?

Big fish in a small pond

Fintech companies are growing exponentially, and for many, even the current uncertainty around the pandemic has not decelerated the pace of their growth. However, having started small – with only having access to limited tools at the beginning of their journey, many fintech companies can’t keep up with their own rapid growth. When it comes to data infrastructures, they are facing a real risk of becoming a big fish in a small pond.

In order to achieve widespread innovation, and to keep their advantage over traditional financial institutions, fintech companies need the necessary playground space to experiment in.

When the pandemic and its consequent disruptions started to take hold, most businesses weren’t prepared for the types of challenges that they would have to face. Although the suggestion of investing in data infrastructure might seem counter intuitive at the moment, a lifeline for fintech companies going forward will be flexibility and the ability to scale.

Risky business? 

As the uncertainty around the pandemic continues, fintech companies, like other industries are finding it difficult to commit to long-term business plans. Despite their continued growth, fintech companies continue to be cautious to invest in expanding their operations during an unpredictable economic climate, especially when they are doing well enough as it is.

Even before the pandemic, fintech companies exhibited slower rates of the adoption of digitalisation and advanced IT infrastructures than other industries. It’s clear the future is digital and for fintechs to effectively compete in today’s volatile market, they need to be proactive and invest in the value of data and digital transformation.

One area that fintech companies must be proactive in is their IT infrastructure, especially their data storage and connectivity, in order to allow them to act faster than big, established competitors.

Limitless scalability

Due to the continuous growth of fintech companies, with no sign for it to slow down, these companies will have to continually scale their operations up to manage increased demand. Ordinarily, this would have very high costs as they would have to continually alter their IT infrastructure and solutions.

When it comes to flexibility, data is a crucial aspect for fintechs. In today’s world, companies store masses of data, and its amount is growing fast. This makes the storing of the data a juggling act, and the costs keep growing with it. In periods of economic uncertainty, such as the one we are experiencing now, this constant increase in data can quickly turn into a challenge. Therefore, fintechs must ensure that scalability is at the heart of everything they do. When it comes to scalability, however, the key factor is not just growth or the ability to scale up. A vital, but often overlooked opportunity in scalability lies in scaling down, when needed. For fintechs aiming at this level of scalability, hyperscale is the only way forward.

The answer is hyperscale

Hyperscale data centres provide businesses with a one-stop shop for all their data and capacity requirements. These centres, which are built in a campus-style design, allow companies to build out further data centres quickly within the same location, or if needed, downsize. In an environment of ever-fluctuating demand, hyperscale enables scalability of data and storage swiftly. This presents many benefits. The sheer size of these facilities allows for large-scale cloud adoption, which is more streamlined, flexible and cost-effective than ever before. This will help fintechs to get a better handle on their data and reduce costs as much as possible.

With this level of scalability, companies can operate like an elastic band, expanding or retracting when necessary and at a moment’s notice. For example, imagine this year’s Christmas. With the uncertainty of the pandemic and constantly changing restrictions, people’s online activity will be even higher than in previous years. Fintechs will have to scale up their operations to cope with the high demand of online services. Meanwhile, when demand goes down in January, it might be beneficial to scale down and reduce costs until demand increases again.

Hyperscale will also help fintech companies to future-proof their operations, which has become a key consideration as the economy looks to recover from the pandemic. By having the level of flexibility that hyperscale provides, businesses will always have the ability to lean or expand. Being able to adjust quickly within the hyperscale environment, with no added costs, makes fintechs more resilient and flexible to disruptions.

While cutting costs will continue to be a priority in today’s business environment, it is important that fintech companies look beyond this and focus on innovation and technology. The issues that the pandemic unearthed already existed and needed to be addressed by businesses. Therefore, they need to take the current situation as an opportunity to reconsider and improve their business models. Flexibility, scalability and cost efficiency must be top priorities in this new era. Hyperscale can provide this trinity of success.

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Business

2021 Predictions: Operational Resilience Takes Center Stage

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Managing Operational Resilience And Safeguarding Data Are Core To Sustainable Digital Financial Services

Breaking down barriers between Risk and Business Continuity

By Brian Molk, Fusion Risk Management

What a year! Simply put, the global shocks of 2020 were unmatched by any time in recent history. Not only did the COVID-19 pandemic reach a scale and longevity that rippled through the way organizations operate, communicate, and safeguard against future disruptions, we simultaneously experienced civil unrest, wildfires, hurricanes and more. This unprecedented time exposed weaknesses in organizations and demonstrated that historically siloed approaches to resiliency put organizations in grave danger. No one had a plan robust enough for 2020. Those that emerged from this year stronger were those that took an agile, collaborative, and, above all, data-led approach to resilience.

Driven by these changes, the industry will see several trends in 2021:  operational resilience that blurs the lines between multiple disciplines, real-time decision-making based on data instead of plans,  industry collaboration and product suites,  a new executive buyer, often in the C-suite, and  regulators taking greater interest in resilience across critical industries.

Operational Resilience Goes Multi-Disciplinary

2020 prompted volatile and unpredictable market conditions. The pandemic not only demonstrated the interdependence of multiple areas of risk, but showed organizations that they must be hyper vigilant about all disciplines simultaneously and holistically. Organizations recognized they had resources and processes siloed, and that communication and coordination cross-organization is necessary to prove resilience to leadership, regulators and stakeholders. This demonstrated that solution areas (business continuity, risk management, disaster recovery, and more) with their specific expertise and training each have a role to play – and a strength to bring – in an operational resilience strategy.

As organizations recognize the importance of multiple-discipline focus, the barriers between these practices will break down and come together under operational resilience. Operational resilience will become the overarching school of thought in the industry. As a result, products and services will evolve to serve this need.

Data Instead of Plans

If 2020 demonstrated one thing, it’s that organizations simply cannot plan for everything – and instead must be ready to resolve problems as they arise. However, those that emerged most successful from disruption were those with good data at their fingertips, ensuring that leaders can make informed decisions quickly.

Gone are the days in which meticulous planning and tabletop exercises were the best approaches to resilience. In 2021, organizations will recognize the value of identifying their data and dependencies, maintaining them in software and leaning on the technology to simulate the multitude of outcomes possible. When unplanned events do arise, organizations will depend on technology to play out the plans, understand where they will fail and propose the right changes proactively.

Brian Molk

Brian Molk

Industry Collaboration and Product Suites

Industry collaboration is already underway and will continue into next year. As resilience continues to become a highly visible and critical business operation, the industry will realize the benefit of products that span disciplines to better deliver on organizations’ needs. As organizations break down silos between business continuity, incident and crisis management, disaster recovery and various risk disciplines to become one broader resilience practice, industry players will consolidate their respective offerings and increasingly integrate product suites for greater collaboration – and ultimately, greater resilience.

C-Suite Involvement in Risk and Resilience

In 2021, we will see resilience become a priority at every level of an organization – especially with executive leadership. Prior to this year, many companies viewed resilience as an esoteric activity focused on placating leadership and regulators. They relied on a few employees to own all resilience programs, not intimately involving themselves or their operating executives with the details. 2020 took resilience out of the back room and placed it firmly into the boardroom.

The C-suite will be increasingly committed to knowing whether their organization is ready to tackle and recover from disruptions. This means a resilience program needs to span all the appropriate departments and disciplines, speak the language of business instead of practitioners and answer the highest-level questions of readiness in a single executive experience.

Operational Resilience in Every Critical Industry

Undoubtedly, operational resilience will begin to take center stage in all critical industries. Over the past several years, the Bank of England, the Fed, and the European Central Bank among others have begun a push for regulation not only in financial resilience but in the resilience of operations for financial services. These bodies recognized the critical impact that their industry has on the wellbeing of individuals, businesses, and the economy as a whole – and are taking seriously their role in making a more resilient economy.

Other critical industries, including energy, power, agriculture and others (possibly based on the 16 critical industries defined by the department of homeland security) are similarly positioned. We expect to see regulators taking a greater interest in the organizations in these spaces, to ensure our national and global systems are resilient enough to recover from future events.

2020 was a challenging year, and many people are likely relieved it’s over. But don’t rest on your laurels. Whether it’s climate change, political unrest or even pandemics, the world is more interdependent and more exposed than ever. Ensure your organization has learned the lessons of 2020 and is first to take advantage of these trends in 2021, before it’s too late.

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Five Workplace Culture Trends of 2021

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Five Workplace Culture Trends of 2021 1

5 January 2021 – 2020 – a year like no other – is responsible for driving organisational change, especially workplace culture, which has witnessed considerable upheaval over the past 10 months. Workplace culture expert, O.C. Tanner Europe, foresees that the pandemic and its fallout will accelerate further changes on a scale never before witnessed. Here are its top five workplace culture trends of 2021:

  1. 2021 will see a big focus on organisational culture – COVID has altered priorities. Perhaps for the first time, the importance of a thriving workplace culture has been driven home, with leaders realising that culture isn’t just about the physical perks such as the table tennis table and massage chair, but is about connecting people to purpose, accomplishment and each other.  After months of remote working, furlough and general workplace flux which has caused mass anxiety and financial strain, many organisational cultures need healing and fixing. Leaders will need to find ways to bring people back together, even if it means doing this remotely , and some leaders may even need to strip everything back and re-build a more positive, connected and purpose-driven culture from the ground-up.
  2. How we work has changed for good – Research by the O.C. Tanner Institute found 77 per cent of employees say their workplace culture will never return to pre-Covid-19 normal. Remote working will continue well into 2021 and as employees have proven that remote working can be as efficient and productive as being in the office, many organisations will allow employees to work remotely permanently. On top of this,  with many organisations having had to adapt to virtual working, many normal work processes have changed for good. Companies have already adopted new recruiting and hiring processes, including virtual interviews and even the benefits that appeal to employees right now are shifting. Rather than unlimited holidays, paid parental leave has become important. There’s also a renewed focus on mental and emotional wellbeing.
  3. A greater emphasis on diversity and inclusion (D&I) – Organisations can no longer remain silent on social issues. Employees expect their companies to be vocal on issues of injustice and inequity and this includes a greater emphasis on D&I. And instead of focusing on how to avoid exclusion which is an approach initially driven by legal experts to avoid litigation, the key is to concentrate on inclusivity. This means companies should look past categories such as race, gender, or sexual orientation and nurture each person as an individual. With just 44 per cent of employees saying their company’s diversity and inclusion approach feels sincere, there is a huge opportunity for organisations to improve their efforts.
  4. Generation Z needs to be connected to purpose – Employees in this generation are entering the workplace and more than any previous generation, they are highly connected to social issues and want to make a difference in their jobs. This generation isn’t about climbing the corporate ladder but want to feel that they belong and that their company has an inspiring and relatable purpose. In order to attract and engage Gen Z employees, companies must connect their work to purpose, practice modern leadership and focus on wellbeing.
  5. Real digital transformation is happening – Covid-19 has forced true digital transformation that companies may have had on their ‘to do’ lists for years. Technology has been used to connect us together and keep us working during times of social distancing and remote working, and technological innovation is not stopping any time soon. Mobile tools are more important than ever, as well as strong data security and robust internet capabilities. We will continue to see more technological developments this year, with a focus on bringing people together despite many employees still working apart.

Robert Ordever, Managing Director of O.C. Tanner Europe says, “Leaders and HR professionals need to be prepared for the challenges ahead as they tackle the fallout from the pandemic. There must be a concerted effort to heal broken and damaged workplace cultures while building on the positive developments as a result of COVID-19. Inclusive, connected and purpose-driven workplaces must be prioritised and it’s time to drive technological advancements to bring people together. 2021 needs to be a year of deliberate and positive transformation.”

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