In a week when the Financial Conduct Authority (FCA) has been in the news for its own working practices, it has launched a webpage detailing its expectations for firms who continue to utilise remote or hybrid working.
The expectations are aimed at:
- Existing firms
- Firms applying to be regulated
- Firms proposing to submit further applications (variations of permission, change of control etc)
This is at a time when the FCA is processing a large number of applications from, for example, funeral plan providers, who are soon to be regulated, and will soon be processing applications from Buy Now Pay Later Providers.
There is a list on the webpage for firms applying to be authorised, setting out what should be included on the application in the context of remote and hybrid working. Any firms undertaking or about to undertake this process should familiarise themselves with this list.
What exactly will the FCA be evaluating?
Among the FCA’s concerns is the potential for a lack of a centralised location, or remote working, to hinder a firm’s ability to meet the threshold conditions and oversee certain functions (i.e. outsourcing). The FCA is also worried that remote or hybrid working could cause detriment to consumers and damage the integrity of the market.
The FCA wants to see “satisfactory planning” from firms. Helpfully, it has produced an extensive, non-exhaustive list on the webpage specifying what firms can do to demonstrate satisfactory planning. Some examples are:
- There being a plan in place to be reviewed both before making any temporary arrangements and periodically thereafter
- Appropriate governance and oversight by Senior Managers
- Control functions such as risk, compliance and audit being unaffected
- Robust systems and controls in place to support any new working arrangements
- That data, cyber and security risks have been considered
- An appropriate culture can be put in place and maintained in a remote working environment (it will be particularly interesting to see how this ties in to the FCA's ongoing consultation on the Consumer Duty)
- That staff wellbeing, training and diversity and inclusion has been considered
Who’s that knocking at my door?
The webpage includes a reminder for firms that the FCA has the power to attend any location where “work is performed, business carried out and employees are based (including residential addresses) for any regulatory purposes”. Most firms will likely maintain a principal office location, which is still the place most likely to be frequented by the FCA if exercising this power. Nevertheless, staff should be made aware of the potential for the FCA to turn up at their homes.
For any firm taking the bold step of dispensing with office space altogether, it will need to notify the FCA of this under Principle 11 as it would represent a significant change to the way the firm operates.
Despite the webpage launch, it is still very much a case of “watch this space” as the FCA acknowledges that its expectations will evolve as more is understood about how firms intend to operate. However, the FCA states on the webpage that “firms considering remote or hybrid working will be evaluated by us on a case-by-case basis”.
Of course, almost 18 months after the first lockdown, many firms have already established their “new normal” and provided they have adequately planned for ongoing compliance in respect of their regulatory obligations (which most will have done), there should be little to worry about.
"Due to the coronavirus (Covid-19) pandemic, firms are already familiar with working in a remote environment and adapting their systems and controls. It is likely many firms will continue these new ways of working. We set out our expectations so firms can plan and continue to meet their regulatory responsibilities." https://www.fca.org.uk/firms/remote-hybrid-working-expectations