Finance Monthly March 2020 Edition

33 www.finance-monthly.com BUSINESS & ECONOMY - SM&CR 2. Falling victim to pension and investment scams; 3. Not receiving redress as a result of the non-payment of FOS awards and/or failing firms being unable to compensate consumers; 4. Paying excessive fees or charges for products and services. Whilst the letter talks about the specific actions it expects firms to take to mitigate each area of concern, e.g. starting with the presumption that a pension transfer is not suitable for a client, it also stresses that SM&CR was introduced to ‘set a new standard of personal conduct for everyone working in financial services’ and that firms should work hard to implement SM&CR and consider its implications for people processes and governance within firms. Therefore, although focusing on different sectors and starting with different initial concerns, both letters highlight the risks poor culture can have on consumers, market participants, employees and markets and both emphasise that SM&CR (with its focus on high standards of personal conduct, individual accountability and strong governance) should be the catalyst for this change in culture. Digging into statements from the FCA over the last year, there are many comments from different senior managers within the Regulator that reinforce the tone and direction of the messages in the ‘Dear CEO...’ letters, so it is clear that this is a message that should not be taken lightly. The regulator’s position on this is further underlined in its 19/20 Business Plan in which the FCA states that they will be “working with firms to promote and embed healthy culture, focusing on the four drivers of behaviour”. They he first ‘Dear CEO…’ letter was issued to general insurers on 6th January 2020. The letter was sent as a response to the findings of a Lloyd’s of London survey of 6,000 of its members. In response to the survey John Neal, Lloyd’s CEO, described the level of sexual harassment in the market as ‘shocking’. In the survey, 8% of respondents said they had witnessed sexual harassment in the last 12 months, 45% said they felt comfortable raising a complaint and only 41% of those who had raised concerns said they felt they were listened to. The letter states: “Poor culture in financial services can lead directly to harm for consumers, market participants, employees and markets. It was a key root cause of recentmajor conduct failingswithin the industry”. It goes on to say: “We expect firms, and senior managers to embed healthy cultures by identifying and modifying the key drivers of their culture”. “The Senior Managers and Certification Regime (SM&CR) provides an opportunity and is intended to be the catalyst to transform culture in financial services”, the letter states. The second ‘Dear CEO…’ letter was issued to firms in the ‘financial advisers’ portfolio. The FCA issued the letter as a response to what it identified as an increasing number of cases where the actions of firms had caused ‘significant harm to consumers’ financial well-being’. The FCA noted four areas of concern to consumers: 1. Receiving unsuitable advice for their needs and objectives (with particular reference to defined benefit pension transfers); ‘Both letters highlight the risks poor culture can have on consumers, market participants, employees and markets and both emphasise that SM&CR (with its focus on high standards of personal conduct, individual accountability and strong governance) should be the catalyst for this change in culture.’