It’s more important than ever that peer-to-peer lending firms comply with their regulatory obligations, as Mark Turner, managing director, compliance and regulatory consulting at Duff & Phelps, explains…
Since December 2019, all financial services firms have had to comply with the Financial Conduct Authority’s (FCA) Senior Managers and Certification Regime (SMCR). For many firms, the onset of the regime didn’t require a fundamental rethinking of existing governance and oversight arrangements. However, senior managers within the peer-to-peer sector, along with other sectors, are now facing a whole new set of challenges.
Now more than ever, it is important that senior managers maintain proper governance arrangements, document key operational decisions and prioritise mission critical work.
Evidencing reasonable steps
In the current climate, where difficult decisions must be made quickly, senior managers still need to ensure that they are complying with their regulatory obligations—in particular the requirements to take “reasonable steps” under the SMCR Conduct Rules. After all, it is senior managers who are accountable to the FCA, both during this crisis and afterwards, when the FCA will have time to take stock and open investigations when it considers appropriate.
As such, senior managers should remember that the actions they take now may be subject to intense scrutiny when the crisis eases.
Senior managers can do several things to comply with their obligations:
- Make sure accountabilities between senior managers and teams are clear and well documented—ambiguity is risky and should be called out and resolved.
- Where major decisions are needed, senior managers should seek support and advice from internal and external networks. Consult the board, including non-executive directors if they have them.
- Encourage staff to speak up even if the news isn’t good. Senior managers need to know what is happening as they are ultimately accountable.
- React to the new environment, adapt governance processes and deprioritise where needed to free up time and resources to focus on the areas that matter most.
- Think about documenting any decisions made and the thought process that led to those decisions. Debate and even disagreement should be seen as positive, as both will provide evidence that reasonable steps have been taken.
During and post crisis, firms and senior managers can and will thrive. We have seen that the principles of accountability can be embraced and used to an organisation’s advantage in the banking sector. Ultimately, the industry will emerge from this crisis. It’s important that senior managers in the sector consider their own reasonable steps at all times, and more so during times of stress.