The Financial Conduct Authority (FCA) has recently shared its expectations for firms on hybrid and remote working, to assist firms in meeting their regulatory responsibilities.
The expectations will evolve as more is understood about how firms intend to operate, and it is noted that international firms should continue to have an established or physical presence in the UK.
According to the guidance, these expectations apply to:
- Existing firms
- Firms applying to be regulated
- Firms proposing to submit further applications
What should firms be doing?
Hybrid working at existing firms will be evaluated on a case-by-case basis. They’ll be required to continually meet conditions for their regulated activities.
The FCA advises that firms should make several considerations around their lack of centralised location. These new working arrangements must:
- Enable the firm to continue to meet, and be able to meet, threshold conditions for the regulated activities it has or will have permission for
- Not prevent the FCA from receiving information about a firm
- Not reduce the accuracy of the Financial Services (FS) Register
- Not cause detriment to consumers
- Not damage the integrity of the market
- Not increase the risk of financial crime
- Not reduce competition
As well as meeting the above requirements, firms must prove there is satisfactory planning in terms of working arrangements, risk management and compliance, control functions, policies and procedure, data management, wellbeing and working abroad.
Engaging with the FCA
The FCA’s writeup indicates that firms should carefully consider whether company changes will require an update on the FS Register.
“For example, if your firm intends to use a private residential address as its principal place of business, it should consider the effect on any individuals and got necessary approvals. This includes those living at the property who aren’t employees”
Firms are also advised to ensure employees understand these requirements, and that the FCA has powers to visit any location where work is performed, business is carried out and employees are based (including residential addresses) for any regulatory purposes. This includes supervisory and enforcement visits.
Notifying the FCA
If you are considering making changes to how your firm operates, you may need to notify the FCA first. SUP 15.3 sets out helpful rules and guidance in relation to when the FCA would expect notice of matters relating to a firm.
What should firms yet to be regulated be doing?
Remote and hybrid working regulations also apply to firms applying to be authorised or registered. They’ll need to continue to meet the threshold conditions in conditions in Schedule 6 Part 1B of FSMA (or equivalent requirements, where these do not apply). Guidance can be found here.
The FCA states that whilst the information they require hasn’t changed, any applications made should cover the following specific details (if applicable):
- Remote working arrangements, and any legal arrangements around them
- How key functions will perform remotely
- Locations of senior managers
- How long remote arrangements are expected to last?
- How the firm will meet complex consumer needs, eg, face-to-face meetings
- The arrangements for customer authentication and vulnerability assessments
- Business continuity plan requirements
- How you will keep information up-to-date
- Where and how FCA supervisory or enforcement visits will be facilitated
- Systems and controls (digitisation, records, security, filing, cyber systems)
- How your firm intends to communicate with staff that FCA visits could take place in their homes?
- Plans for compliance reviews
The above lists are not all-encompassing and will evolve along with the guidance.
