‘Individual accountability’: Fundamental differences between the UK and Australia

Appearing on The ifa Show, experienced financial services executive Tony Beaven discussed differences between Australia and the United Kingdom’s financial services regulators and their funding models.

In 2016, the UK’s financial regulatory body, the Financial Conduct Authority (FCA), launched the Senior Manager Certification Regime (SMCR).

Beaven explained that the regime allows individual people to be held accountable for their misconduct, rather than the business or the wider profession assuming full responsibility and repercussions, unlike Australia.

“The Senior Manager Certification Regime was brought in by the FCA to absolutely increase individual accountability in organisations, that they meet the governance, the improved culture, and protect the market integrity and increase the individual accountability for an organisation,” Beaven said.

“When you actually look at that, the amount of regulation now that the FCA have brought in has been … working. I mean, it started to filter out some of the issues that we’ve just seen in Australia, like Dixon’s.”

While the Australian advice profession continues to question the lack of repercussions for those involved in the Dixon Advisory collapse, Beaven explained that SMCR has allowed for individuals to be fined for misconduct.

“Recently, one of the bank CEOs in Barclays got fined £1.1 million for failing to act with due diligence and governance, etc, and making sure that he actually did the reporting lines and make sure you adhere to the correct reporting provisions in place,” he said.

He noted that while there has been some progress in the governance regulations in Australia in the form of the Financial Accountability Regime (FAR), more is needed to ensure individuals can be held accountable.

“You look at what the FAR has obviously just been doing with banks, super trustees, ADIs, in Australia at the moment. That’s great,” Beaven said.

“But for the financial planning provisions, etc, in the financial planning industry, there feels as though at the moment, there needs to be another piece of governance to actually bring that individual accountability to a next step, and I believe that certainly at the moment, that ASIC is certainly talking to the FCA on what this looks like.”

Beaven explained that another significant point of difference is that in the UK, fines paid to the FCA go towards the funding of the regulator itself, which helps to offset the cost of levies for advisers.

“When I look at the relationship between the FCA and the Financial Services Compensation Scheme, which is like the Compensation Scheme of Last Resort, there seems to be a much more robust recovery process in place from the Financial Services Compensation Scheme,” he said.

“They’re working with administrators to really recover money and that money goes back into either compensating people that need to be compensated over the limits that they’ve got, or it goes back into the pot where then the FCA can start looking at future costing.”

He explained that unlike the Australian Securities and Investments Commission (ASIC), the FCA is very transparent regarding its funding and how it uses the fees and fines paid to it, an area which is something of a pain point for many within the Australian profession.

“The differences that I see is ... the FCA seemed to be proactive in the way that they actually work out the fees, the charges for advisers, and I think they’ve only just put out their regulatory piece on fees and an oversight of that,” Beaven said.

“They’ve gone, ‘Right, these are the fees from the past, this is what we’re looking at. This is the recovery’. So the FCA, £55 million in fines recovered, the Financial Services Compensation Scheme, £53 million in recoveries from that side.

“So they’re really proactive on looking and making sure that that recovery goes back into the pot so that it helps with not just the levies for advisers, but it really does help the whole of the piece when the FCA charge fees, but also that is all incorporated then in the financial compensation scheme levies as well.”