SIB and SFA consult on the regulatory responsibilities of senior management of firms doing investment business
| DOI | https://doi.org/10.1108/eb024960 |
| Published date | 01 January 1998 |
| Date | 01 January 1998 |
| Pages | 80-83 |
| Author | Joanna Gray |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 6 Number 1
In
an
industry like financial services where
reputation
and
trust
are
hard gained
and
easily lost,
yet of
vital financial significance,
and employees
are
increasingly less static,
this decision
is of
interest
to
employer
and
employee alike. Joanna Gray
Legal Editor
SIB and SFA consult on the regulatory
responsibilities
of
senior management
of
firms doing investment business
In September
1996 the
Securities
and
Futures Authority (SFA),
the
self-regula-
tory organisation with responsibility under
the Financial Services
Act 1986 for
much
of the brokerage
and
dealing sectors
of
the
financial markets, published
a
provocative
and somewhat controversial consultation
document containing proposals
to
amend
its rules governing
the
responsibilities
of
senior executive officers. This initiative
from
the
SFA was triggered
by the
collapse
of
the
Barings group which, with
the
wisdom
of
hindsight,
was
seen
to be
attri-
butable
as
much
to a
lack
of
quality, effec-
tive internal controls
and
management
systems
as to
Nick Leeson's deception.
Hence,
the SFA
broke
new
ground
in its
proposals
to
include
in its
rules specific
expectations
of a
firm's senior executive
officers
as to
general management controls
and structures within
a
regulated firm
and
a particularly controversial proposal
to
reverse
the
burden
of
proof
in
regulatory
disciplinary proceedings against such offi-
cers where
the
firm
has
suffered
a
serious
financial
or
reputational damage where
SFA suspects that management failure
has
been
a
cause
or
contributing factor.
THE SIB PROPOSALS
The Securities
and
Investments Board
(SIB)
has now
taken
up
that initiative
and
published,
in
July 1997, consultation paper
109
'The
Responsibilities
of
Senior Man-
agement'
to
which
it
invited responses.
In
its consultation paper
SIB
charts
how the
senior management
of
financial services
firms should
put
into practice their man-
agement responsibilities.
The
SIB
paper contains
two
proposals.
The first
is
guidance
to
management stan-
dards expected
of
senior managers within
financial services firms.
The
second
is a
proposal
for a
compulsory 'statement'
to
be compiled within
the
firm. This state-
ment would clearly show
the
structure
of
management
and
contain
an
acknowledge-
ment
and
acceptance
by the
relevant man-
agers
of
their responsibilities within that
structure.
The guidance
on
management standards
is designed
to put
flesh
on the
bones
of
two
of
the SIB's fundamental principles
of
regulation which embody
the
essence
of
all
other rules
and
regulations. These
are SIB
Principle
2
which requires that
a
firm
act
with 'due skill, care
and
diligence'
and SIB
Principle
9.
This provides that
'a
firm
should organise
and
control
its
internal
affairs
in a
responsible manner, keeping
proper records,
and
where
the
firm
employs staff
or is
responsible
for the
con-
duct
of
investment business
by
others,
should have adequate arrangements
to
Journal
of
Financial Regulation
and Compliance, Vol. 6, No.
1,
1998, pp. 80-83
© Henry Stewart Publications,
1358-1988
Page 80
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