FCA 11 Principles for Business

As we are all aware the FSMA requirements have been translated into the FCA’s Handbook of principles, rules and guidance. In recent years the regulators had moved towards more principle based approaches to regulation which has been the content of debate for a number of years.

In the UK we have been used to working with a rules-based supervisory regime since 1988 however times are now changing and firms are encouraged to ensure their business is conducted appropriately with the relevant management information showing the business principles a complete picture of measured activity.

Due to the 2008 global banking debacle the movement towards MPBR has slowed but nobody knows how the future will pan out and after the new regime of the Senior Managers and Certification Regime (SMCR) was introduced in 2019 for the majority of the industry. This is in addition to and incorporated the TCF expectation.

Combined with the SYSC rules on Conflicts of Interest, there is a requirement under the Companies Act to manage conflicts of interest within the firm. Other training is also expected and compliance training can be found HERE.

Having high-level principles a role to play in regulation is not new to the UK. The Securities and Investment Board (SIB) introduced 10 high-level statements of principle in 1990 and these were often cited in disciplinary actions. The FSMA saw the introduction of statutory objectives mentioned above, which serve as the FCA’s guiding principles in terms of framework and definition. The FSMA also saw the introduction of the seven principles of good regulation that the FCA must comply with and the regulated firm’s 11 FCA principles for business and the parallel implementation of the seven statements of principle for approved persons.

To remind you of the 11 FCA Principles for Business, they are as follows;

1. Integrity – A firm must conduct its business with integrity.
2. Skill, care and diligence – A firm must conduct its business with due skill, care and diligence.
3. Management and control – A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
4. Financial prudence – A firm must maintain adequate financial resources.
5. Market conduct – A firm must observe proper standards of market conduct.
6. Customers’ interests – A firm must pay due regard to the interests of its customers and treat them fairly.
7. Communications – A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.
8. Conflicts of interest – A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.
9.  Customers: relationships – A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.
10. Client’s assets – A firm must arrange adequate protection for client’s assets when it is responsible for them.
11. Relations with regulators – A firm must deal with its regulators in an open and cooperative way, and must disclose to the FCA appropriately anything relating to the firm of which the FCA would reasonably expect notice.

The Principles are cited in Final Notices, predominantly 3, 6 & 9 in many cases.

Many firms breach rules and are therefore required to complete a FCA Principle 11 notification. We can assist your firm in making a PRIN 11 Notification as we understand what the regulator needs to see and what they require to be told. Sending the wrong or incomplete message can get the regulator asking all sorts of questions. Ask us for details on 0800 689 0190.