Sheldon Mills, the FCA's Executive Director (Consumers and Competition) gave a speech to the Investment Association's Culture in Investment Management Forum on Wednesday last week.
He discussed the FCA's approach to measuring and assessing firms' "culture". He was speaking to an investment management association, so his focus was on investment management, but what he said can be applied across the financial services industry in the UK. Much of what he said has been said before, but it is a useful reminder of a number of points:
- Good "culture" is indicative of good "conduct";
- If the FCA believes a firm does not have a good "culture", then there is a presumption (difficult to rebut) that it and its staff do not have good "conduct";
- "Culture" "covers a wide range of areas – to list but a few it could include: significant business model restructures, the approach to remuneration, speak-up culture, Board and ExCo composition, diversity, succession planning, the application of the SMCR, the effectiveness of a firm’s controls environment or its governance structures" and also ESG and D&I; and
- The FCA expects firms (in this case firms in investment management) to be "the force for good" and will set that out in its Handbook.
There was no mention of risk tolerances or the Conduct Questions (although the latter might have been due to his audience rather than the Questions themselves becoming less important).
Mr Mills may have said that the FCA "is not prescriptive about culture". Personally, I am not sure this is borne out in either word or deed, but I hope I am wrong.
The investment management sector has the potential to be a powerful force for good. Firms that embrace that role and make it part of their cultures will be those that prosper in future. And deliver better outcomes for us all.