FCA publishes remote or hybrid working expectations

The Financial Conduct Authority (FCA) has published new guidance setting out its expectations for financial services firms that are planning to adopt or continue operating remote or hybrid working. The FCA recognises that due to Covid-19 firms are already familiar with remote working and adapting their systems and controls. The guidance is intended to help firms who wish to continue with such arrangements to plan for it and continue to meet their regulatory responsibilities.

This is an important note for all regulated firms and those applying to be regulated, particularly given that the FCA warns it could make supervisory and enforcement visits wherever employees are based, including individuals’ residential addresses.  

The details have been published on the FCA’s website. So, in terms of their scope, the expectations apply to existing firms, firms applying to be regulated, and firms proposing to submit further applications with regard to issues such as change of control. The FCA says existing firms considering remote or hybrid working will be evaluated on a ‘case-by-case’ basis. 

The FCA’s says its expectations will evolve over time as more is understood about how firms intend to operate. That means it’s important, going forward, that firms keep on top of any changes.

So let’s hear more about this. Anne Sammon works closely with a number of clients in the FS sector and she joined me by video-link to discuss what this means for firms. Given most firms have lived with this pandemic since early last year I started by asking Anne what’s new here? 

Anne Sammon: “I don't think there's anything particularly new in what the FCA has said here. I think it's all the things that we would have expected firms to have been doing as a result of employees shifting to work from a different location. So making sure that firms could comply with their regulatory obligations, whether that's in relation to insider dealing, and making sure that they have appropriate records to document what their processes and controls are around those types of issues, to destroying confidential client information. So don't think there's anything particularly new, or novel, or unexpected in the FCA web page. But I think what it really does underline is the need for firms to have properly thought through these issues and documented what their processes and practices are. Also, for their senior managers who are responsible for the business areas where people are working on a hybrid or remote model, to have actually thought through how that implicates them, and the reasonable steps that they need to take, in order to ensure regulatory compliance. I think the other thing that may come as a surprise to some firms, or to some individuals, is the fact that the FCA is making a very clear statement on that web page that they can go and look at places where work is carried out and that includes residential addresses so anyone who is carrying out a regulated function for a firm needs to be aware that they could, potentially, have a visit from the FCA in their home if they're working from home part of the time.”
Joe Glavina: “The FCA says it wants firms to be ready to demonstrate their ongoing compliance with their obligations not just in terms of their documentary records of the steps taken to address the issues presented by remote and hybrid working, but also in their practical implementation. So there are two elements to this?”

Anne Sammon: “Yes, and I suppose what we always say when we're looking at policies is that policies are brilliant but you need to ensure that they're practically complied with and so there are lots of different routes for that. Some of that might be what training are you providing managers with on this? How much do your managers actually understand their obligations and have you upskilled them for this new hybrid model of work? Also, what records are you keeping? What happens where there's a disciplinary about these types of issues? What action do you take? It’s all of those kind of logs to show that you take this all very seriously and that there are consequences where those processes aren't followed”
Joe Glavina: “The FCA says in its guidance that the lack of a centralised location could be an issue and it wants reassurances that firms will continue to be able to meet their regulatory responsibilities. I would have thought most firms will continue to have an office in the city so what’s the problem?
Anne Sammon: “I think it's different for different firms and what we've seen for the larger organisations is that all of the ones that I'm working with at the moment still have that central hub, a central location where people are predominantly working. I suspect what the FCA is worried about is: is your hybrid model three days a week in the office, is it two days a week in the office? What's your justification for that? How have you got comfortable, from a regulatory compliance side, that spending more time at home than in the office actually meets all your regulatory obligations and I think that's what they're trying to get at here. So in thinking about hybrid working, we need to take an approach where we look not just at all the employment side of this, but also the regulatory side which sometimes can get lost because one of the challenges that we saw with the Senior Managers & Certification Regime was the need for the HR team, and the compliance team, and often the legal team, to all talk together to work out how this was going to work in practice to avoid that situation where the HR team do something that undermines some of the compliance processes that might be in place.”
All the details around the FCA’s expectations are set out in full on their website. The relevant page is called ‘Remote or hybrid working expectations for firms’ and we have put a link to that page in the transcript of this programme.

LINKS 
- Link to FCA’s guidance on its expectations for remote/hybrid working