THE FCA INTERVIEW: A NEW WEALTH MANAGEMENT POLICY

Chris Hamblin

Compliance Matters

9 September 2013

Recently CM interviewed Clive Adamson, the genial head of the British FCA’s supervision department and the creator of its new department for monitoring wealth management firms. He told us how well firms were responding to the retail distribution review (RDR), explained his reasons for forming the new department, and ranged over a wealth of compliance topics from technology and record-keeping to the eternal conflict (which he largely dismissed as non-existent) between the relationship manager’s compliance role and his naked need to make a profit. His fascinating take on the revelations of the Parliamentary Banking Standards Commission – he implied that the old Financial Services Authority mishandled the 2008 banking crisis because it lacked the right legislation to discipline CEOs – are to be found at the end.

CM: What led to the setting-up of a separate department to supervise wealth management?

CA: The wealth manager’s always been within our remit. What we haven’t done historically is essentially separate them out from other broad IFA companies at one end or the banks at the other end. The idea is to have a new department to cover the broad wealth management private banking industry, partly because...there was a desire to be recognised in essence as a sector in their own right and partly, from our point of view, so we can better focus on that sector. I think the key point from our point of view was that we recognised that wealth management private banking is a large sector. It’s important in its own right. It does contribute quite significantly to the UK economy. We want to properly reflect that in how we supervise.

CM: Was that your idea from start to finish?

CA: Essentially, yes. I think a key point to make is that it’s quite a disparate sector the Arch cru section 404 scheme. Through a combination of that and the Arch cru payment scheme, we felt that that was the most effective way to supervise redress.

CM: The Parliamentary Commission for Banking Standards criticised the FSA for (a) allowing bank senior managers to hide behind an ‘accountability firewall’ by giving responsibility for major jobs to people without ‘approved person’ status and for (b) accepting the ‘Murder on the Orient Express’ defence (‘everybody was doing it’) as grounds for not taking enforcement action against senior management. What is the FCA going to do to avoid that charge?

CA: It’s for the Treasury to replace make any changes in the legislation that come from the parliamentary commission, so we’re in the process of responding to the Treasury and we’ll see what the Treasury wants to do in terms of legislation. We are very keen to emphasise the importance of senior management responsibility. It’s complex how one does that, so we’re working out the practical bits of that.