Top tips on how to engage with the FCA and PRA Michael Ruck, - PowerPoint PPT Presentation

Top tips on how to engage with the FCA and PRA Michael Ruck, Partner, TLT LLP 5 May 2020

Your trainer today Michael Ruck | Partner T | 0333 006 0221 M | 07917 466 427 E | michael.ruck@tltsolicitors.com TLT LLP

What is this session about? Achieving the right Seeing into balance the future Managing regulatory Knowing the fights to profile fight TLT LLP

Top tips on regulatory engagement with the FCA and PRA

Agenda – top tips on regulatory engagement    Preparing for and dealing with a A reminder of the current Practical tips on day-to-day supervisory meeting or visit regulatory/legislative regime engagement with the regulators   Supervisory engagement post such a  An overview of the process when Lessons learned from the past considering notifications to the FCA/PRA visit  How to respond to potential supervisory action including variations of permission, imposition of a requirement or a s166 skilled person requirement, including how your Senior Management should be involved in such responses

UK supervisory framework Statutory Supervision Powers Supervisory Principles • Section 1L and 2K of FSMA – • Forward-looking arrangements for supervising firms • Strategy and business model • Principle 11 and Fundamental Rule 7- open • Culture and Governance and cooperative • Firm and Individual accountability • Supervision Manual • Proportionate & risk-based • Enforcement Guide • Firm and FCA/PRA dialogue • DEPP – Decision Procedure and Penalties • FCA/PRA Internal Coordination Manual Proactive Reactive Thematic

Regulatory engagement: day to day Responsive to all PRA/FCA requests Management and governance Timely regulatory reporting Risk Organisational management, requirements systems and Connect/Gabriel management controls FCA / PRA Firm’s Prompt supervisory notifications activities Capital and Conflicts financial Engagement with publications and management resources information dissemination Third party oversight Well managed virtual/actual supervisory relationship

Types of supervisory visit  Actual visit  Virtual visit  Surgery  Announced or unannounced  Normally 6 weeks notice prior to a  Invited to a suitable venue for a 1.5 or 2 hour conference call meeting on a specific topic

Proactive planning for visits/meetings Risk management What are industry ‘hot Review FCA strategy to reduce topics’? publications business impact of visit/outcome “ We expect the LIBOR panels to dwindle or disappear after end 2021 – firms must be able to Review and Consider possible Your business plan update any run their business without LIBOR from this date, areas of challenge and progress relevant and reduce the stock of ‘legacy’ LIBOR contracts .” documentation

Supervisory engagement: before the visit/meeting Managing document Senior management Scope and requests engagement • Version control, purpose annotations etc • Master set “ We expect the LIBOR panels to dwindle or Logistical disappear after end 2021 – firms must be able to arrangements Interview preparation Insights from peers, • Clean and empty run their business without LIBOR from this date, • Candidate selection AFM, FCA/PRA meeting room, and preparation themes refreshments, internal and reduce the stock of ‘legacy’ LIBOR contracts .” communications

Supervisory powers  S165, FSMA - Regulators power to require information: authorised persons etc.   (4) This section applies   (3) An officer who has  (1) Either (2) The information or (5) The regulator in only to: written authorisation regulator may, by documents must be question may require from the regulator to provided or produced: notice in writing any information  (a) information and do so may require an given to an documents reasonably provided under this  (a) before the end of authorised person required in connection authorised person, section to be such reasonable with the exercise by either without delay: require him: provided in such regulator of functions period as may be form as it may conferred on it by or specified; and  (a) to provide the  (a) to provide under this Act, and reasonably require . officer with specified specified information  (b) at such place as information or  (b) in relation to the or information of a may be specified. information of a exercise by the PRA of specified description; the powers conferred by specified description; or subsections (1) and (3), or information and documents reasonably  (b) to produce  (b) to produce to him required by the Bank of specified documents specified documents England in connection or documents of a with the exercise by the or documents of a Bank of its functions in specified description. specified description. pursuance of its financial stability objective.

Supervisory engagement: during the visit/meeting Senior FCA/PRA management movements on Interviews Scope creep involvement the day Line of questions, FCA/PRA SWAT Limit access in the Push back firmly themes, correcting team building but politely errors Shadow as much Information sharing as possible by interviewees Open and co- Document Attestations and operative and management confirmations more

Supervisory engagement: post-visit/meeting  Contingency planning  Debrief  FCA/PRA response  Privileged legal advice?  Identify areas of concern of focus  Clarify misunderstanding  Additional supporting by FCA/PRA, follow up documentation  Narrow scope of remedial actions

What lies ahead?  Supervision will be:  Forward-looking and  Focused on judgement, not  Focused on business model interventionist processes and culture   Robust when things go Greater focus on individual accountability/SMCR wrong  Be at the coal face  Use of attestations

How to deal with unannounced visits Policy/response Other addresses / Powers to take / strategy locations copy documents FCA rights of Legal support Closing visit / raid access “Open and co - “Controlled Penalties for operative” compliance” failing to comply Content of Dawn raid / warrant and ID of search warrant those attending

FCA/PRA notifications

SUP 15.3  SUP 15.3.1 – A firm must notify the FCA immediately it becomes aware, or has information which reasonably suggests , that any of the following has occurred, may have occurred or may occur in the foreseeable future :  (2) any matter which could have a significant adverse impact on the firm's reputation; or  (3) any matter which could affect the firm's ability to continue to provide adequate services to its customers and which could result in serious detriment to a customer of the firm; or  SUP 15.3.2 - consider all potential consequences of events  SUP 15.3.3 – consider both the probability of the event happening and the severity of the outcome should it happen

Examples of notifications  A significant breach of  Civil proceedings are  Disciplinary measures  Entering into, or a rule brought against the firm or sanctions have been significantly changing, a and the amount of the imposed on the firm by material outsourcing claim is significant in any statutory or arrangement relation to the firm's regulatory authority, financial resources or its competition authority, reputation professional organisation or trade body (other than the FCA) or the firm becomes aware that one of those bodies has started an investigation into its affairs

Responses to FCA/PRA directions to take action Variation of Imposition of a Voluntary permission requirement or own initiative (s55H or (s55L and s55N s55J FSMA) FSMA)

Own initiative variation of permission  S55J – variation or cancellation on regulator’s initiative – “if it appears to the regulator” :  (a) A is failing, or is  (b) A has failed, during  (c) It is desirable to  (d) In the case of the FCA, A has failed to comply with likely to fail, to satisfy a period of at least 12 exercise the power in a requirement in Part 5 of the threshold months, to carry on a order to advance: the Alternative Investment conditions for which regulated activity to Fund Managers  (i) in the case of the the regulator is which the Part 4A Regulations 2013 (AIFs responsible; permission relates; FCA, one or more of which acquire control of its operational non-listed companies and objectives issuers), or it is for some other reason desirable to  (ii) in the case of the exercise the power for the PRA, any of its purposes of ensuring objectives , or; compliance with such a requirement”