With the new Accountability Regulatory Regime shortly upon us, what is apparent is that Retail Investment Adviser (RIA) firms, no matter how small they are need to ensure they have Human Resource Development (HRD) strategies and resources in place. We are currently running our SM&CR CPD accredited workshops for Intelliflo Regional Users Groups across the UK and the feedback is that some firm’s really need help and support around HRD and its new compliance functionality given the SM&CR.
The HR function now plays a central role in managing systems, controls and processes that under-pin long term compliance with this all-encompassing regime. So, a focus for firms on staff lifecycle processes can help them understand both what they need to do and how to implement HRD strategy. This can be done by focusing on tracking processes across:
Employ Core HR Processes
Record keeping and Technology needs to be robust with systems and processes to track your staff journey through each of the 3 tiers of the regime. If you're outsourcing this then ensure your research and due diligence and ongoing relationships are robust.
Senior Managers Regime and Senior Manager Functions
This involves ensuring you have six year referencing for all new Senior management hires and ensures firms keep an audit trail of actions taken if a breach of the conduct rules occurs i.e. Reasonable steps plus trace any disciplinary processes, outcome and actions, all fitness and propriety assessments and any training delivered around the regime.
If a breach were to occur it is HR’s responsibility to demonstrate that appropriate record-keeping processes and tools are in place to flag any misconduct. Information needs to be shared in a timely manner with the team such as audit and compliance (whether in-house or outsourced) and the regulator. So, it’s an evidence-based practice that needs to be adopted which currently is sketchy across the industry. Regulation Technology - RegTech can help with this In offering:
- Mapping for roles and responsibilities
- Guides and evidence for Statements of Responsibilities and Prescribed Responsibilities
- Responsibility Handover guides and reasonable steps and conduct rule log
- Aligning performance management and development with the business plan
- Ensuring all relevant staff have the right training and competence standards
- All legal requirements (e.g. disciplinary/exit are covered
RegTech can also help define the firm’s culture by:
- Auditing holistically across the business operations and systems to ensure staff Competence (Knowledge) and Conduct (Behaviour) are constructive and aligned
- Risk management and following the FCA 5 conduct risk questions:
- Method for identifying risk
- Staff accountability for risk management
- Tools to track, monitor and manage risk
- Board oversite strategy
- Areas identified and managed that could undermine the above
Certification Functions - CFs
Here you really should know who is in and who is out, design an annual programme, identify conduct concerns, training and competency aligns with conduct rules, breaches logged and acted upon and have the legal and business process in place for those leaving CFs.
Certification Functions assessment process
Conduct Rules
Clear on-going procedures and monitoring is required across Human Resource strategy to ensure the conduct rules are understood by all and apply to their roles. Breach logs need to be monitored and acted upon with Senior Managers knowing the 3 reasonable steps rules.
Conduct Rule assessment process
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